Smith is engaged in the audit of a cable TV firm that services a rural community. All receivable balances are small, customers are billed monthly, and internal control is effective. To determine the existence of the accounts receivable balances at the balance sheet date, Smith would most likely:
A)send positive confirmation requests.
B)send negative confirmation requests.
C)examine evidence of subsequent cash receipts instead of sending confirmation requests.
D)use statistical sampling instead of sending confirmation requests.

Question

Quizplus · Accepted Answer

Negative confirmation requests are more efficient when individual balances are small, internal control is effective, and the risk of material misstatement is low.

Smith Is Engaged in the Audit of a Cable TV