You are doing the audit of a small loan company with extensive loans receivable from customers.

You are doing the audit of a small loan company with extensive loans receivable from customers. Controls over granting loans, collections, and loans outstanding are considered effective, and there is extensive follow-up of all outstanding loans weekly. You have recommended a new computer system for the past two years, but management believes the cost is too great, given their low profitability. Collections are an ongoing problem because many of the customers have severe financial problems. Because of adverse economic conditions, loans receivable have significantly increased and collections are less than normal. In previous years, you have had relatively few adjusting entries.

Recommend an evidence mix for the audit of outstanding loans. Justify your answer.