The Negative Form of Accounts Receivable Confirmation Request Is Useful

question 79

Multiple Choice

The negative form of accounts receivable confirmation request is useful except when:

• A) a large number of small balances are involved.
• B) the internal control structure surrounding accounts receivable is considered to be effective.
• C) individual account balances are relatively large and few in number.
• D) the auditor has reason to believe the persons receiving the requests are likely to give them consideration.

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the surplus generated beyond the normal profit expected in a competitive market.

Total Costs

The complete sum of expenses incurred in the production of goods or services, including both fixed and variable costs.

Perfectly Competitive

A market structure where there are many buyers and sellers, products are identical, and there is free entry and exit in the market.

Production Technology

The quantitative relationship between inputs and outputs.