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Exam AUD topic 1 question 664 discussion

Actual exam question from AICPA's AUD
Question #: 664
Topic #: 1
[All AUD Questions]

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because:

  • A. Many customers merely sign and return the confirmation without verifying its details.
  • B. Recipients usually respond only if they disagree with the information on the request.
  • C. Customers may not be inclined to report understatement errors in their accounts.
  • D. Auditors typically select many accounts with low recorded balances to be confirmed.
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Suggested Answer: C 🗳️
Choice "C" is correct. The completeness assertion states that all transactions that should be recorded are recorded. Accounts receivable confirmations rarely provide evidence about completeness since the recipients of the confirmations have a vested interest in not reporting understatements (i.e., transactions that have not been recorded).
Choice "A" is incorrect. While some customers may sign and return a confirmation without proper consideration, this is not the reason why confirmations do not provide evidence about the completeness assertion relative to other assertions.
Choice "B" is incorrect. If customers respond whenever they disagree with information printed on the confirmation, they would report both understatements and overstatements, in which case confirmations would provide evidence about completeness. However, this is not what the auditor usually sees -- respondents are less likely to report understatement errors.
Choice "D" is incorrect. The balance of the account is not a relevant factor in determining whether the completeness assertion is tested by sending confirmations.
If there are many accounts with low balances, the auditor may decide to send negative confirmations.
by gemazyni at April 5, 2025, 4:57 p.m.

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