Question

Confirmations were emphasized in tests of accounts receivable, but are rarely used in tests of accounts payable. What factors account for this difference? When would confirmation of accounts payable be appropriate?

Answer 1

Two primary reasons for the difference in treatment is as given below.

To start with, Fraud are generally done to either overstate the assets or understate the liabilities. Affirmation is commonly progressively viable for trial of presence (overstatement) than completeness (understatement).

Furthermore, the proof supporting accounts receivable isn't accessible in house so outside affirmation is required though the proof supporting accounts payable, for example, vendors' invoices and statements, is delivered by outside sources however is accessible in house for approval.

Affirmation of account payable is suitable to guarantee that all the costs and liabilities for the period are reserved in the fiscal summary for the period.