Question

To be considered reliable evidence, confirmations must be controlled by:

A) a client employee responsible for accounts receivable.
B) a financial statement auditor.
C) a client's internal audit department.
D) a client's controller or CFO.

Answer 1

Reliable evidence in the form of confirmations must be controlled by a financial statement auditor to ensure independence and accuracy. Client employees, including those in accounts receivable, internal audit departments, or CFOs, cannot provide the impartial control needed for audit confirmations.

Step-by-step explanation:

To be considered reliable evidence, confirmations must be controlled by a financial statement auditor (B). This control is crucial because the independence of the auditor provides assurance that the evidence has not been influenced or altered by the client. Auditors are responsible for confirming account balances and transactions directly with third parties to validate the amounts recorded in the client's financial statements. When dealing with accounts receivable, auditors often send confirmation requests to the clients’ creditors to verify that the balances the client has recorded for those accounts are accurate.

It is important to note that a client employee, internal audit department, or CFO/controller, cannot provide the level of impartial oversight necessary for evidence to be considered reliable in the context of financial statement auditing. Such individuals might be part of the internal control system within the client's organization, but for external audit purposes, the auditor must maintain control over the confirmation process to ensure independence and reliability in accordance with auditing standards.