In Auditing Accounts Receivable the Negative Form of Confirmation Request

question 74

Multiple Choice

In auditing accounts receivable the negative form of confirmation request most likely would be used when:

• A)recipients are likely to return positive confirmation requests without verifying the accuracy of the information.
• B)the combined assessed level of inherent and control risk relative to accounts receivable is low.
• C)a small number of accounts receivable is involved but a relatively large number of errors are expected.
• D)the auditor performs a dual purpose test that assesses control risk and obtains substantive evidence.

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Definitions:

Subchapter S Corporation

A type of corporation that meets specific Internal Revenue Code requirements, offering the benefits of limited liability of a corporation but is taxed as a pass-through entity.

Taxed

Subject to taxation by governmental authority, involving the imposition of financial charges on individual or corporate income, property, goods, services, or transactions.

Partnership

A business organization where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Agreement.

Parent-Subsidiary Corporations

A relationship between two companies where one, the parent, controls the other, the subsidiary.