Why is audit confirmation important?

Why is audit confirmation important?

Why is audit confirmation important?

Confirmation letters are important because they provide an independent verification of your organization’s finances. If your accounts receivable shows that you owe money to a particular vendor, your auditor might send that vendor a confirmation letter asking them if that amount is accurate.

What factors would the auditor consider in determining whether to use the negative or positive confirmation method for accounts receivable?

The primary factors affecting the confirmation decision are:

  • Materiality of receivables.
  • The number and size of individual accounts.
  • Control risk.
  • Inherent risk.
  • Effectiveness of confirmation technique.
  • Availability of corroborative audit evidence.

    Under what circumstances would positive confirmations be more appropriate than negative confirmations?

    A negative confirmation requests that the customer respond only when it disagrees with the amount due to the client. Positive confirmations are generally used when an account contains large individual balances or if errors are anticipated because control risk was judged to be high.

    What procedures should you apply in the event of no reply to a request for positive confirmation?

    What procedures should you apply in the event of no reply to a request for positive confirmation? In the event of no reply for a positive confirmation, we would resend the confirmations and consider calling the customer to encourage them to reply.

    What are the characteristics of a confirmation?

    The four characteristics of the definition of a confirmation are:

    • Receipt.
    • Written or oral response.
    • From independent third party.
    • Requested by the auditor.

      What is a positive confirmation?

      Positive confirmation is an auditing inquiry that requires the customer to respond, confirming the accuracy of an item. Positive confirmation requires proof of accuracy by affirming that the original information was correct or by providing the correct information if incorrect.

      Why the negative confirmation is considered to be less reliable?

      Negative confirmations provide less reliable evidence than positive confirmations because nonresponses are assumed to contain accurate information. The auditor does not know if the intended recipient considered the form or even received it.

      What are the characteristics of a confirmation distinguish between a confirmation and external documentation the characteristics of a confirmation are?

      A confirmation is the direct response from a 3rd party to an auditor’s request. External documentation is documentation that comes from outside the company and isn’t a response to the auditor.

      What is the most reliable type of evidence?

      The variety of physical evidence is virtually unlimited, as is the uniqueness of the crime. Physical evidence is generally much more reliable than testimonial evidence.

      What is positive and negative confirmation?

      While positive confirmation requires supporting information despite the accuracy of the original records, negative confirmation requires a response only if there is a discrepancy.

      What should the auditor do if a confirmation response is not received?

      When the auditor has not received replies to positive confirmation requests, he or she should apply alternative procedures to the nonresponses to obtain the evidence necessary to reduce audit risk to an acceptably low level.

      What evidence is not admissible in court?

      Evidence that can not be presented to the jury or decision maker for any of a variety of reasons: it was improperly obtained, it is prejudicial (the prejudicial value outweighs the probative value), it is hearsay, it is not relevant to the case, etc.

      What evidence is good evidence?

      Evidence-based interventions or programmes are those which have been proven effective in multiple, high-quality randomised controlled trials (RCTs).

      What type of evidence is most reliable?

      Physical evidence is generally much more reliable than testimonial evidence.

      What makes court evidence admissible?

      To be admissible in court, the evidence must be relevant (i.e., material and having probative value) and not outweighed by countervailing considerations (e.g., the evidence is unfairly prejudicial, confusing, a waste of time, privileged, or based on hearsay).

      What is considered lack of evidence?

      Evidence which fails to meet the burden of proof. In a trial, if the prosecution finishes presenting their case and the judge finds they have not met their burden of proof, the judge may dismiss the case (even before the defense presents their side) for insufficient evidence.