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.

Question

Quizplus · Accepted Answer

The negative form of the accounts receivable confirmation request might be useful when the client records include a large number of relatively small balances. This is because sending a positive confirmation request for each of those small balances would be time-consuming and expensive. Instead, the auditor can send a negative confirmation request asking the recipient to respond only if they disagree with the balance stated. This reduces the number of responses required, hence reducing the workload and cost.

The Auditors Obtain Audit Evidence for Accounts Receivable by Using