How Does the Auditor Gather Evidence Using the Confirmation Process

question 72

Multiple Choice

How does the auditor gather evidence using the confirmation process?

• A)The auditor 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 is owed by 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 D
• G)Both A and E

---

Definitions:

Perfectly Inelastic

A situation where demand does not change at all in response to changes in price.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a certain price over a specified period.

Price Effect

The impact on consumer demand and company revenue as the cost of a good or service changes.

Quantity Effect

The impact on total revenue that results from changing the quantity of goods or services sold, holding all else constant.