Question

Which of the following is true?

A. It is acceptable to confirm a large individual transaction, as opposed to a customer's entire accounts receivable balance.

B. An auditor does not have to follow up on accounts receivable confirmations that are returned as "undeliverable."

C. Auditors are not allowed to use an secure electronic confirmation process as an alternative to confirmations sent through the mail.

D. Examining documentation for sales transactions is the most effective alternative procedure when accounts receivable confirmations are not returned.

Answer 1

Answer is D. Examining documentation for sales transactions is the most effective alternative procedure when accounts receivable confirmation are not returned.

Explanation:

The Audit of accounts receivables is best done through confirmations from the customer concerned. however, when the confirmations are not available, the auditor must reconcile the sales transactions with the accounts receivables balance as reduced by cash received. The sales transactions must be supportive of additional documentation.