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

In a situation where internal control is effective and balances are small, negative confirmations are more efficient as they require a response only if the customer disagrees with the stated balance.

Smith Is Engaged in the Audit of a Cable TV