Confirmation

Question 1

Why would a blank form of confirmation be more preferable than positive confirmation?

Answer 1

Blank provides greater assurance that the recipient verified that the information was correct. It is used when the auditor is concerned that the recipient will not devote proper attention to the confirmation

BUT more non responses to the requests are likely to occur with blank requests causing inefficiency due to lower response rates

Question 2

Why don’t the confirmation of accounts receivable provide evidence about the completeness assertion?

Answer 2

Provides evidence of existence and valuation but not completeness bc customers are happy to confirm an amount that is less than what they owe. (understatements) So they are not inclined to report errors on accounts which violates the completeness assertion

Question 2

What are the requirements to use a negative form of accounts receivable confirmation?

Answer 2

• a low risk of material misstatement
• large number of small balances
• expected low exception rate
• no reason to believe that the recipient are unlikely to give them consideration

Question 3

What are the requirements to use a negative form of accounts receivable confirmation?

Answer 3

• a low risk of material misstatement
• large number of small balances (many customers with small balances)
• control risk is low
• expected low exception rate
• no reason to believe that the recipient are unlikely to give them consideration

Question 4

Negative Confimations

Answer 4

dont provide explicit evidence because when they are unreturned that means everything was correct thus providing IMPLIED evidence