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) Notes Receivable - Confirmations should be obtained from borrowers, validating the accuracy of outstanding balances, terms, and the existence of any collateral.
b) Mortgages Payable - Confirmations should be obtained from lending institutions, verifying the accuracy of outstanding balances, interest rates, and terms of repayment.
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 accounts require confirmation from outside sources, such as borrowers for Notes Receivable, lending institutions for Mortgages Payable, and creditors for Accrued Liabilities.

Step-by-step explanation:

Accounts that should be confirmed with outside sources include:

• Notes Receivable: Confirmation should be obtained from the borrowers, verifying the accuracy of outstanding balances, terms, and the existence of any collateral.
• Mortgages Payable: Confirmation should be obtained from lending institutions, ensuring the accuracy of outstanding balances, interest rates, and terms of repayment.
• Property, Plant, and Equipment: While not commonly confirmed with outside parties, appraisers could be used to verify fair market value of tangible assets, though this is generally not required for annual audits.
• Accrued Liabilities: Confirmation should be obtained from creditors, double-checking the accuracy of the obligations and the payment terms.