Evaluating the quality of receivables

(a.) The 2015 annual report of Modern Books, a publicly traded corporation, reports accounts receivable (net of allowance for doubtful accounts), of $190,714 as of February 28, 2015. What assurance do readers of Modern Books ' annual report have that these receivables really exist and are not fictitious assets recorded to make the balance sheet "look good"?
(b.) The accounts receivable turnover rate is frequently used in evaluating the liquidity of accounts receivable. How is the accounts receivable turnover rate computed? What type of information does the accounts receivable turnover rate provide?
What will be an ideal response?

(a) The financial statements of publicly traded corporations, such as Modern Books, are audited by CPA firms. In the annual audit of a company by a CPA firm, the independent auditors will verify, or confirm, receivables by communicating directly with the customers of the company. This confirmation process is designed to provide evidence that the customers actually exist, and that they acknowledge owing the amount of the receivable to Modern Books. The CPA firms frequently verify the credit ratings of those customers owing significant amounts.
(b) The accounts receivable turnover rate is computed by dividing annual net sales (ideally net credit sales) by average accounts receivable. This accounts receivable turnover rate indicates how many times the receivables were converted into cash during the year, i.e., how many times they were collected.