A client has a separate sales group for its largest "preferred" customers. This is a select group of customers that normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?
A)Prepare a schedule of purchases and payments for these customers.
B)Send out negative confirmations on a large sample of these customers.
C)Inquire of the sales manager regarding the accounts receivable terms.
D)Send out positive confirmations on a large sample of these customers.

Question

Quizplus · Accepted Answer

Given the high value of transactions and accounts receivable balances involved with these preferred customers, sending out positive confirmations is a direct and effective method for verifying the amounts owed to the client. Positive confirmations, where the customer is asked to confirm the balance directly, are particularly useful in situations where there are significant balances or where the risk of material misstatement is higher.

A Client Has a Separate Sales Group for Its Largest