Question

The negative request form of accounts receivable confirmation is useful particularly when the 1. Assessed level of control is (Low/High), 2. the number of small balances is (Low/High), and 3. the correlation by the recipient is (Unlikely/Likely)

A. Low, High, Likely
B. Low, Low, Unikely
C. High, Low, Likely
D. High, High, Likely

Answer 1

The negative request form of accounts receivable confirmation is best used when the control level is High, there are many small balances, and recipient action is likely, corresponding to option D: High, High, likely.

Step-by-step explanation:

The negative request form of accounts receivable confirmation is particularly useful under certain circumstances. The correct answer to the student's question is: The assessed level of control is High, the number of small balances is High, and the correlation by the recipient is likely. Therefore, option D is the correct answer, which is High, High, likely.

This type of confirmation is a cost-effective way to confirm accounts when there is a large volume of accounts with small balances, and when the internal controls over accounts receivable are strong (meaning there is less risk of misstatement). Since recipients are unlikely to respond unless they disagree with the stated amount, it is not useful where errors are expected, as those accounts would probably be omitted from respondents' feedback.