Negative Confirmations of Accounts Receivable Is Less Effective Than Positive

question 93

Multiple Choice

Negative confirmations of accounts receivable is less effective than positive confirmations of accounts receivable because

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

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Definitions:

Asset Balances

The values of all the assets that a company has listed on its balance sheet, these values are assessed at the end of a reporting period.

Net Income

The profit a company has after deducting all its expenses from its total revenues, also known as the bottom line.

Paid Dividends

Cash or other assets distributed to shareholders out of the company's earnings.

Asset Balances

The valuation of an organization's resources, such as cash, investments, property, and equipment, reflected in its financial statements at a specific point in time.