Question

Which of the following statements is true as it relates to accounts receivable confirmations?

Confirmation responses are likely to be free of bias

Replies are more likely to provide evidence as to completeness instead of existence

If a customer returns a confirmation and disagrees with the balance, the auditor needs to identify the reason for the difference

If a customer does not return a confirmation, the auditor will simply send a confirmation to a different customer

If a customer does not return a confirmation, the auditor will perform alternative procedures to verify the balance

When a client makes an error in the recording of receivables, the auditor will need to reconsider the assessment of control risk

Answer 1

In case of accounts receivable confirmationsthe following statement is true-

If a customer does not return a confirmation, the auditor will perform alternative procedures to verify the balance.

The alternative procedure may include investigating subsequent cash receipts, to see if customers have paid for those invoices that were not confirmed. This is a strong secondary form of evidence that the accounts receivable outstanding at the end of the reporting period being audited were in existence at that time.