How Does the Auditor Gather Evidence Using the Confirmation Process

question 89

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)Management can choose to send either positive or negative confirmations
• D)Positive confirmations request the customer to return the confirmation directly to the auditor 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 D
• H)Both A and C

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Definitions:

Operating Costs

The expenses associated with the day-to-day functions of a business, including costs for rent, utilities, maintenance, and administration.

Discount Rate

The interest rate used to discount future cash flows to their present values, reflecting the opportunity cost of capital.

Project Profitability Index

A measure used to evaluate the attractiveness of an investment or project, calculated as the present value of future cash flows divided by the initial investment cost.

Initial Investments

The upfront money used to fund a new project, purchase a company, or make an investment, typically associated with starting costs.