Negative Confirmations of Accounts Receivable Are Less Effective Than Positive

question 83

Multiple Choice

Negative confirmations of accounts receivable are less effective than positive confirmations of accounts receivable because when using negative confirmations:

• A) a majority of recipients usually lacks the willingness to respond objectively.
• B) the auditor cannot infer that all nonrespondents have verified their account information.
• C) some recipients may report incorrect balances that require extensive follow- up.
• D) they do not produce evidential matter that is statistically quantifiable.

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Definitions:

Capital

Refers to financial resources, assets, or funds a company or individual possesses for pursuing investment opportunities or operational activities.

Isoquants

Isoquants are curves representing combinations of inputs that yield the same level of output in production theory.

MRTS

Marginal Rate of Technical Substitution, the rate at which a firm can substitute one input for another while keeping the level of output constant.

Labor

The human effort, both physical and mental, that is used in the production of goods and services.