In auditing accounts receivable, the negative form of confirmation request most likely would be used when:
A)recipients are likely to return positive confirmation requests without verifying the accuracy of the information.
B)the combined assessed level of inherent and control risk relative to accounts receivable is low.
C)a small number of accounts receivable are involved but a relatively large number of errors are expected.
D)the auditor performs a dual purpose test that assesses control risk and obtains substantive evidence.

Question

Quizplus · Accepted Answer

The negative form of confirmation is typically used when the assessed level of inherent and control risk relative to accounts receivable is low. This is because the recipient is not asked to respond unless they disagree with the information provided, which is less intrusive than the positive form of confirmation. When the risks are low, the auditor can rely on other substantive procedures to obtain evidence, such as analytical procedures or vouching transactions. Choices A, C, and D do not reflect the typical circumstances in which the negative form of confirmation would be used.

In Auditing Accounts Receivable, the Negative Form of Confirmation Request