If an auditor has determined that inherent risk for accounts receivable is high and wishes to verify the balance as accurate, the best corroborating evidence would be ________.
A)a phone call to the client
B)a negative confirmation sent to the entity in question
C)a positive confirmation sent to the entity in question
D)inspection of supporting documents relating to the receivables transactions

Question

Quizplus · Accepted Answer

A positive confirmation sent directly to the entity in question would be the best way to obtain reliable, third-party corroborating evidence to verify the accuracy of the accounts receivable balance. This method obtains a response from the debtor that confirms or denies the balance owed as stated by the client. Option A, a phone call to the client, is not reliable enough and lacks independence. Option B, negative confirmation, is not as reliable as a positive confirmation because there is a risk that debtors who owe money might not respond truthfully, which could lead to an underestimation of the accounts receivable balance. Option D, inspection of supporting documents relating to the receivables transactions, might help identify any errors or misstatements, but it does not directly provide third-party confirmation of the balance owed.

If an Auditor Has Determined That Inherent Risk for Accounts