Question

The auditors obtain audit evidence for accounts receivable by using positive or negative confirmation requests. Under which of the following circumstances might the negative form of the accounts receivable confirmation be useful?A. A substantial number of accounts are in disputes.B. The combination of inherent risk and control risk is high.C. Client records include a large number of relatively small balances.D. The auditors believe that recipients of the requests are unlikely to give them consideration.

Answer 1

Answer:

C

Explanation:

A. Substantial number of accounts does not specify if these are large or small amounts, and large amounts would need to have a positive confirmation.

B. If these risks are high, there needs to be postivie confirmation from the clients of the company since there is high risk involved.

D. If the clients are not going to give them consideration, and the point of a negative confirmation is that it is a valid receivable, there is no way of knowing if they didn't reply if its correct or if they just didn't reply.