The Confirmation of Customers' Accounts Receivable Rarely Provides Reliable Evidence

question 60

Multiple Choice

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because:

• A)many customers merely sign and return the confirmation without verifying its details.
• B)recipients usually respond only if they disagree with the information on the request.
• C)customers may not be inclined to report understatement errors in their accounts.
• D)auditors typically select many accounts with low recorded balances to be confirmed.

---

Definitions:

Accounts Payable

Financial obligations or debts that a company owes to its suppliers or creditors for goods and services received but not yet paid for.

Owners' Equity

Represents the residual interest in the assets of an entity after deducting liabilities, often referred to as shareholder equity.

Ending Inventory

Represents the final stock of goods available for sale by a firm at the close of an accounting period.

Beginning Inventory

The value of a company’s inventory at the start of an accounting period, carried over from the end of the previous period.