Page 46 - eBook Audit Of Financial Statement Components

27. Negative confirmations for accounts receivable can be used

when:
A The response rate to positive confirmations in prior years was low
B Accounts receivable is made up of a large number of small
accounts
C Control risk is high
D Inherent risk is high

28. Which of the following is an example of a confirmation that does
not require a customer response to the confirmation unless there
is a problem?
A Invoice
B Blank
C Negative
D Positive

29. If a confirmation is received back from a customer with different
notes on it, the auditor should:
A Investigate the difference
B Use the customers balance as the correct amount
C Ignore the differences
D Use the company's balance as the correct amount

30. A confirmation return address should be that of:
A Company employees
B Board of Directors of the company
C Auditors
D Management of the company

31. Management should develop good controls for accounts
receivable to help maintain good relations with customers.
A True
B False

32. Auditors should conduct the majority of analytical procedures on
accounts receivable prior to the balance sheet date.
A True
B False

33. Cut-off misstatements in accounts receivable occur when current
period transactions are recorded in the current period.
A True
B False

(Adapted from: (Arens, 2021)

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