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Answered Same Day Aug 09, 2021 Torrens University Australia

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Khushboo answered on Aug 15 2021

148 Votes

A) Strength and weakness of the debtor confirmation as audit evidence for MSHG:
ISA 500 describes the reliability of the audit evidence is affected by its source and by its nature and relies on the individual circumstances under that are obtained. Moreover audit evidence is taken into account as reliable only when it is obtained from independent sources that are external from organization. Debtor confirmation would give substantial evidence on the existence of assertion for the accounts receivable of the company MSHG. But the data associated with the valuation and allocation assertion is probably going to be unreliable since the debtor does not give an assurance that they are willing to pay the account due, in spite of noticing e
ors in the account balance. Shady Oaks’ receivable balance is material. Despite payment terms being 14 days, the smaller accounts are more than 60 days overdue, which describes that the Shady Oaks’ systems for approval of credit and collection of debts are ineffective. When the debtor replies with the appropriate and positive answer then it is considered that the debtor is providing external confirmation that they owe MSHG for the service rendered by the company. Debtor confirmation also gives the evidence about the rights and obligation assertions as the...

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