Auditors May Use Positive And/or Negative Forms of Confirmation Requests

question 6

Multiple Choice

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Which of the following statements is true regarding the auditor's use of confirmations?

• A)The positive confirmation form must always be used to confirm all balances regardless of size.
• B)A combination of the two confirmation types can be used, with the positive form used for large balances and the negative form used for small balances.
• C)A combination of the two confirmation types can be used, with the positive form used for trade receivables and the negative form for other receivables.
• D)The positive confirmation form should be used when controls related to receivables are satisfactory and the negative confirmation form should be used when controls related to receivables are unsatisfactory.

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Definitions:

Expenses

Economic costs that a company incurs through its operations to generate revenue, often categorized as operational, selling, and administrative expenses.

Revenue Account

A financial account that tracks the income generated from a company's business activities, such as sales or services provided.

Credited

A term used in double-entry bookkeeping to indicate a recording in the credit column, often signaling an increase in liabilities or a decrease in assets.

Increased

Describes a rise or growth in value, quantity, or some other measure.