FMGT 4310 - Chapter 10 Part 2
Auditor will use confirmations unless the following are true: - ANS-- A/R is immaterial
- Auditor believing confirmations are useless due to response rate will be inadequate
- IR and CR is low, and other substantive evidence can provide evidence
Breakdown the potential errors for Negative Confirmation: - ANS-- May assume a non-response
signifies debtor's agreement
- Impossible to determine whether a lack of response indicate agreement with the balance or
simply a failure to reply
Positive Confirmations are more effective when: - ANS-- There are individual balances of
relatively large amounts
- There are few debtors or account balances
- There is evidence or suspicion of fraud or major error
Test of details of balances included: - ANS-- A/R confirmations
- Evaluate the adequacy of AFDA
What are the decisions when regarding confirmations? - ANS-1. Type of confirmation to use
2. timing of the procedure
What are the important notes for A/R Confirmations - ANS-- CAS does not require the use of
confirmations and leaves the use of confirmations up to the auditor
- Confirmations may be more relevant to certain assertions
What are the sequences when it comes to confirmation control? - ANS-1. Obtain A/R aged S/L
and perform initial procedures
2. Select Specific A/R for confirmation
3. Prepare confirmations/mail confirmation
4. Analyze results/investigate difference
5. Perform alternate procedures on non-responses
6. Conclude
What are the underlying assumptions with accepting confirmations? - ANS-1. Person returning
the confirmation is independent of the company
2. Person returning the confirmation has knowledge of the account and the intent of the
confirmation and has completed the confirmation after performing due diligence
Auditor will use confirmations unless the following are true: - ANS-- A/R is immaterial
- Auditor believing confirmations are useless due to response rate will be inadequate
- IR and CR is low, and other substantive evidence can provide evidence
Breakdown the potential errors for Negative Confirmation: - ANS-- May assume a non-response
signifies debtor's agreement
- Impossible to determine whether a lack of response indicate agreement with the balance or
simply a failure to reply
Positive Confirmations are more effective when: - ANS-- There are individual balances of
relatively large amounts
- There are few debtors or account balances
- There is evidence or suspicion of fraud or major error
Test of details of balances included: - ANS-- A/R confirmations
- Evaluate the adequacy of AFDA
What are the decisions when regarding confirmations? - ANS-1. Type of confirmation to use
2. timing of the procedure
What are the important notes for A/R Confirmations - ANS-- CAS does not require the use of
confirmations and leaves the use of confirmations up to the auditor
- Confirmations may be more relevant to certain assertions
What are the sequences when it comes to confirmation control? - ANS-1. Obtain A/R aged S/L
and perform initial procedures
2. Select Specific A/R for confirmation
3. Prepare confirmations/mail confirmation
4. Analyze results/investigate difference
5. Perform alternate procedures on non-responses
6. Conclude
What are the underlying assumptions with accepting confirmations? - ANS-1. Person returning
the confirmation is independent of the company
2. Person returning the confirmation has knowledge of the account and the intent of the
confirmation and has completed the confirmation after performing due diligence
