Question

Which accounts should be confirmed with outside sources? Briefly describe from whom they should be confirmed and the information that should be confirmed.

a) Trade Accounts Receivable - Confirmations should be obtained from customers, verifying the accuracy of outstanding balances and payment terms.
b) Trade Accounts Payable - Confirmations should be obtained from suppliers, validating the accuracy of outstanding balances and terms of payment.
c) Property, Plant, and Equipment - Confirmations should be obtained from appraisers to verify the fair market value of tangible assets.
d) Accrued Liabilities - Confirmations should be obtained from creditors to verify the accuracy of outstanding obligations and terms of payment.

Answer 1

Certain financial accounts such as Trade Accounts Receivable and Trade Accounts Payable must be confirmed with customers and suppliers, respectively. Confirmations ensure the accuracy of reported balances and terms. Additionally, Accrued Liabilities should be confirmed with creditors.

Step-by-step explanation:

Confirming Financial Information with External Sources

Businesses need to confirm certain accounts with outside sources to ensure the accuracy of their financial statements. The accounts that typically require external confirmation are:

• Trade Accounts Receivable - Confirmed with customers to verify the accuracy of outstanding balances and payment terms.
• Trade Accounts Payable - Confirmed with suppliers to confirm the accuracy of outstanding balances and terms of payment.
• Property, Plant, and Equipment - While not commonly confirmed externally, the fair market value of these assets might be verified by independent appraisers in certain cases.
• Accrued Liabilities - Confirmed with creditors to check the accuracy of outstanding obligations and terms of payment.

These confirmations are necessary to ensure the financial data reflects true economic transactions and obligations, which is especially important for stakeholders relying on this information, such as investors and lenders. The process of confirming these accounts is part of maintaining sources of reliable data, which supports the integrity of financial reporting.