Question

In the confirmation of accounts receivable, the auditor would most likely?

1) randomly select a representative sample of accounts for confirmation.
2) seek to obtain positive confirmations for at least 50 receivables.
3) require confirmation of all receivables from agencies of the federal government.
4) require that confirmation requests be sent within one month of the fiscal year-end.

Answer 1

In confirming accounts receivable, an auditor would likely randomly select a representative sample of accounts, as generally accepted auditing standards recommend using sampling methods to select the accounts for confirmation.

Step-by-step explanation:

In the confirmation of accounts receivable, an auditor would most likely randomly select a representative sample of accounts for confirmation. This approach is aligned with generally accepted auditing standards, which recommend using statistical or non-statistical sampling methods to determine the sample size and selection of accounts for confirmation. The goal is to obtain sufficient audit evidence regarding the existence, accuracy, and completeness of the accounts receivable. Confirming every account or a strict number, such as 50 receivables, is typically not feasible or necessary, unless there are heightened risks that warrant such actions. Moreover, while confirmations may be sent relatively close to the fiscal year-end, there's no hard rule that it must be within one month; the timing depends on the nature and timing of the transactions and the auditor's assessment of the risk of material misstatement.