How Does the Auditor Gather Evidence Using the Confirmation Process

question 53

Multiple Choice

How does the auditor gather evidence using the confirmation process?

• A)The client selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
• B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he owes the audit client at year-end
• C)The auditor can choose to send either positive or negative confirmations
• D)Positive confirmations request the customer to return the confirmation directly to management if the balance is correct or incorrect
• E)Negative confirmations request the customer to return the confirmation directly to management only if the balance is incorrect
• F)Both A and B
• G)Both B and C
• H)Both D and E

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Definitions:

Discounted Note

A promissory note that is issued at a price lower than its face value and repaid at its face value at maturity.

Cash Proceeds

The total amount of cash received from transactions, often relating to the sale of assets or products.

Discounted Note

A financial instrument involving a loan document that has been reduced from its face value to reflect current market interest rates.

Journal Entry

A record of a business transaction in an accounting journal that details the financial implications of the transaction.