Which one of the following circumstances would indicate that negative confirmations should NOT be used on an engagement?
A) A significant portion of the total accounts receivable is represented by a small number of accounts with large balances.
B) The auditor is unaware of disputed or inaccurate accounts.
C) The internal control over receivables is good.
D) The recipients are mostly businesses rather than individuals.

Question

Quizplus · Accepted Answer

Negative confirmations are less effective when a significant portion of the total accounts receivable is represented by a small number of accounts with large balances because the non-response to a negative confirmation does not provide explicit evidence that the customer agrees with the stated account balance. In such cases, positive confirmations, where a response is required to confirm the balance, are more appropriate to ensure accuracy and validity.

Which One of the Following Circumstances Would Indicate That Negative