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:

Mass Production

The manufacturing of large quantities of standardized products, often using assembly lines or automated technology, which benefits from economies of scale.

Suburbanization

The process by which populations move from urban areas to suburbs, often leading to the growth of residential areas on the outskirts of cities.

Farms

Land and the buildings on it, used for growing crops and/or raising animals as a primary source of income.

Protective Tariffs

Taxes imposed on imported goods to protect domestic industries from foreign competition by making imports more expensive.