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)Management can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to the auditor 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 D
H)Both A and C

Question

Quizplus · Accepted Answer

The auditor gathers evidence through the confirmation process by sending a confirmation letter to the selected customer asking to confirm whether the balance is correct or incorrect. This process can either be positive (where confirmation is sent directly to the auditor) or negative (where confirmation is sent to management only if the balance is incorrect). Therefore, the best choice is G, as it includes both the step of selecting a sample of balances from the accounts receivable subsidiary ledger (A) and sending the confirmation letter to customers (B, D). Choice C is incorrect as it does not mention the difference between positive and negative confirmations.

How Does the Auditor Gather Evidence Using the Confirmation Process