Negative Confirmation of Accounts Receivable Is Less Effective Than Positive

question 81

Multiple Choice

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

• A) A majority of recipients usually lacks the willingness to respond objectively.
• B) Some recipients may report incorrect balances that require extensive follow up.
• C) The auditor cannot infer that all nonrespondents have verified their account information.
• D) Negative confirmations do not produce evidential matter that is statistically quantifiable.

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Definitions:

Fewer Substitutes

A market condition where there are limited alternative products or services available, potentially leading to higher prices or less choice for consumers.

Unit Elastic

Describes a scenario where a change in the price of a good results in a proportional change in the quantity demanded or supplied.

Total Revenue

The total amount of money a firm receives by selling goods or services.

Price Elastic

Describes the responsiveness of the quantity demanded or supplied of a good to a change in its price; high elasticity indicates a significant response to price changes.