Final answer:
Confirmation is a key piece of evidence for an auditor concerning the existence of accounts receivable. Direct verification is a straightforward process for tangible claims but may involve subjective interpretation for abstract claims. Borrowers can reassure banks regarding loans by providing collateral, guarantees, or demonstrating financial stability.
Step-by-step explanation:
Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the existence of those receivables.
When auditors want to verify whether the receivables are genuine and belong to the company, they seek external confirmation directly from the debtors. This enhances the reliability of the audit and reduces the risk of falsified or nonexistent receivables being reported on the financial statements.
In the context of verification and evidence in auditing, certain claims, such as the presence of a container of milk in the refrigerator, can be directly verified through observation.
This process, however, may include subjective interpretation based on the exact nature of the claim, such as whether a wax container of parmalat equates to a container of milk. Other claims, especially those pertaining to very large or very small phenomena, require expert testimony and consensus among experts, which should be devoid of bias to be considered reliable.
To provide reassurance to banks about loan repayment, a borrower may provide collateral, obtain a guarantee, or present a strong credit history and financial statements that demonstrate the ability to repay the loan.
Therefore, the correct answer is 3) existence.