Question

When positive confirmations are used, auditing standards require alternative procedures for confirmations not returned by the customer. Which of the following would not be considered an alternative procedure?

1) Send a second confirmation request.
2) Examine subsequent cash receipts to determine if the receivable has been paid.
3) Examine shipping documents to verify that the merchandise was shipped.
4) Examine sales invoice to verify the actual issuance of a sales invoice and the actual date of the billing.

Answer 1

Alternative procedures in auditing for non-returned confirmations include sending a second request, examining cash receipts, and verifying shipped merchandise, but not inspecting sales invoices.

Step-by-step explanation:

The question is related to auditing practices, specifically the use of positive confirmation and the procedures to follow when confirmations are not returned by the customer. When auditing, if a customer does not return a positive confirmation, auditors must perform alternative procedures to gather sufficient evidence regarding the receivables. These alternative procedures could include sending a second confirmation request, examining subsequent cash receipts to check for payment of the receivable, or verifying that the merchandise was indeed shipped by looking at shipping documents. However, inspecting sales invoices to verify the issuance and billing date would not be considered an alternative procedure for non-returned confirmations as it does not provide evidence that the client has validated the outstanding balance.