How does the auditor gather evidence using the confirmation process?
A)The client selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he owes the audit client at year-end
C)The auditor can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to management if the balance is correct or incorrect
E)Negative confirmations request the customer to return the confirmation directly to management only if the balance is incorrect
F)Both A and B
G)Both B and C
H)Both D and E

Question

Quizplus · Accepted Answer

The confirmation process involves selecting a sample of customer balances from the year-end accounts receivable subsidiary ledger and sending a letter to each selected customer asking them to confirm the balance owed to the audit client at year-end. The auditor can choose to send either positive or negative confirmations based on the assessed level of control risk. Positive confirmations request the customer to return the confirmation directly to management if the balance is correct or incorrect, while negative confirmations request the customer to return the confirmation directly to management only if the balance is incorrect. Therefore, choice G is the best choice as it correctly describes the confirmation process and the options available to the auditor.

How Does the Auditor Gather Evidence Using the Confirmation Process