Unresolved confirmation differences at termination of field work;

              The Client:
In this discussion, the client is engaged in what is cur­rently
referred to as "old line factoring" as well as com­mercial
financing. In old line factoring, the factor enters
into an agreement with a manufacturer to purchase re­ceivables
arising from the sale of the manufacturer's
product. The receivables are usually purchased at "fac­tor's
risk", which means that the factor has assumed the
credit risk and has no recourse to the manufacturer for
uncollectible accounts. Sometimes, receivables are pur­chased
at "manufacturer's risk", which means that
uncollectible accounts are charged back to the manu­facturer;
in this instance the factor acts primarily as a
collection agent. The factoring fee, of course, is consider­ably
lower than that charged under a "factor's risk"
agreement.
Under a commercial financing agreement, the factor
advances funds to the manufacturer secured by a pledge
of the manufacturer's receivables. The manufacturer per­forms
all of the collection work and remits the actual
checks received from his customers directly to the factor.
In commercial financing the credit risk is assumed by
the manufacturer.
Our client has a strong system of internal control with
periodic internal audits. The internal audit encompasses
UNRESOLVED
CONFIRMATION
DIFFERENCES
at termination of field work
by John Ehling
John Ehling is manager in the New York office. A native
New Yorker, he joined the accounting staff of Touche,
Niven & Co. prior to the merger. His client engagements
include CIT Financial Corporation, Daitch Crystal
Dairies, Seaman's Bank for Savings, and Yardley of
London, Inc.
Mr. Ehling is a graduate of Pace Institute. He is a member
of the American Institute of Certified Public Accountants,
the New York State Society, and the Lawyers Club. He is
married and has four children.
36 THE QUARTERLY