The financial records of the Movitz Company show that Mr. Dennis owes $4,100 on an account receivable. An independent audit is being carried out and the auditors send a positive confirmation to Mr. Dennis. What is the most likely reason as to why a positive confirmation rather than a negative confirmation was used here?
A)Control risk was particularly low for accounts receivable.
B)Inherent risk was particularly high for accounts receivable.
C)Mr. Dennis's account was not yet due.
D)Mr. Dennis's account was not with a related party.

Question

Quizplus · Accepted Answer

A positive confirmation is sent when inherent risk is high and there is a greater likelihood of errors or misstatements. In this case, the auditors may have wanted to confirm the accuracy of the receivable since there is already an outstanding balance. A negative confirmation would only be used if control risk was low and there was a lower risk of errors or misstatements.

The Financial Records of the Movitz Company Show That Mr