The Positive (As Opposed to the Negative) Form of Receivables

question 109

Multiple Choice

The positive (as opposed to the negative) form of receivables confirmation may be preferred when

• A) internal control surrounding accounts receivable is considered to be effective.
• B) there is reason to believe that a substantial number of accounts may be in dispute.
• C) a large number of small balances are involved.
• D) the auditor believes that the recipients of the confirmations will give the requests adequate consideration.

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Definitions:

Patent Amortization

The process of gradually expensing the cost of a patent (an intangible asset) over its useful life to reflect its consumption or expiration.

Equipment Exchanges

Transactions where businesses trade equipment with each other, often to update or upgrade their operational assets without significant cash outflows.

Commercial Substance

Transactions that cause a significant change in the future cash flows of a company.

Carrying Amount

The book value of assets and liabilities as recorded in an entity's financial statements, minus any accumulated depreciation or amortization.