Question

Cooper, CPA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent real estate taxes. Internal control at the municipality is weak. To determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely:

a) Send positive confirmation requestsb) Send negative confirmation requestsc) Examine evidence of subsequent cash receiptsd) Inspect the internal records, such as copies of the tax invoices that were mailed to the residents

Answer 1

A) Send positive confirmation requests

Step-by-step explanation:

A positive confirmation request is a document sent by an auditor to a third party involved in the financial transactions of an organization that requires a response. The auditor will try to determine if the financial records of the organization match the third party's records.

In this case, since the municipality doesn't have a very good internal control system, the auditor will send positive confirmation requests to alleged delinquent taxpayers to determine if they actually owe taxes (and an approximate amount) to the municipality or not.