The Auditors Obtain Audit Evidence for Accounts Receivable by Using

question 12

Multiple Choice

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)A low exception rate is expected.
• D)The auditors believe that recipients of the requests are unlikely to give them consideration.

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Definitions:

Permanent Accounts

Accounts that carry their ending balances over into the next accounting period, typically including assets, liabilities, and equity accounts.

Current Ratio

This financial indicator quantifies a corporation's ability to satisfy its short-term liabilities with its current assets, based on a comparison calculated by dividing the former by the latter.

Evaluate

To judge or determine the significance, worth, or quality of something through careful examination and analysis.

Accounting Cycle

The series of steps followed by an organization to record financial transactions and prepare financial statements over a specific accounting period.