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Exam AUD topic 1 question 658 discussion

Actual exam question from AICPA's AUD
Question #: 658
Topic #: 1
[All AUD Questions]

In auditing accounts receivable, the negative form of confirmation request most likely would be used when:

  • A. The total recorded amount of accounts receivable is immaterial to the financial statements taken as a whole.
  • B. Response rates in prior years to properly designed positive confirmation requests were inadequate.
  • C. Recipients are likely to return positive confirmation requests without verifying the accuracy of the information.
  • D. The combined assessed level of inherent risk and control risk relative to accounts receivable is low.
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Suggested Answer: D 🗳️
Choice "D" is correct. Negative confirmations are most likely to be used when the assessed level of audit risk, including inherent and control risk, is low.
Choice "A" is incorrect. If the total amount of accounts receivable is immaterial, the auditor is not likely to send any confirmations.
Choice "B" is incorrect. If prior year response rates were low, negative confirmations would not be used since the auditor would be concerned that the negative confirmations would not receive adequate attention from the recipients.
Choice "C" is incorrect. An auditor would need to feel comfortable that the confirmations would receive adequate attention from the recipients before deciding to send negative confirmations.
by gemazyni at April 5, 2025, 4:57 p.m.

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