Accounts Receivable

Question 1

When are negative confirmations recommended for use?

Answer 1

The negative form of confirmation can only be used when four conditions are met: 1) the risk of material misstatement, i.e., the combined assessed level of inherent and control risk, is low; 2) a large number of small balances is involved; 3) a very low exception rate is expected AND 4) the auditor has no reason to believe that the recipients of the requests are unlikely to give them consideration. Thus, this is the correct answer.

Question 2

What affects Detection Risk- (three things)

Answer 2

Nature , timing and extent