Chapter 11 Slides.pptx-Chapter 11 Accoun...
Chapter_11_Slides.pptx-Chapter 11 Accounts Receivable, Notes Receivable,
Showing 21-25 out of 31
Chapter 11 Slides.pptx-Chapter 11 Accounts Receiva...
Chapter_11_Slides.pptx-Chapter 11 Accounts Receivable, Notes Receivable,
Chapter 11 Slides.pptx-Chapter 11 A...
Chapter_11_Slides.pptx-Chapter 11 Accounts Receivable, Notes Receivable,
Page 21
Confirmation of Receivables
Receivables should be confirmed, unless:
Accounts receivable are immaterial,
The use of confirmations would be
ineffective, or
The auditors’ combined assessment of
inherent and control risk is low, and
audit risk can be reduced to
acceptably low level with substantive
©McGraw-Hill Education.

Page 22
Confirmation of Receivables—
Overall Process Figure 11.7
©McGraw-Hill Education.

Page 23
Types of Confirmations
Two methods of confirmation of receivables:
Positive confirmations – request addressed to
the debtor asking for a reply
Ordinarily sent with balances due on them
Blank forms – leave amount blank (used less
Negative confirmations – ask debtor to advise
the auditors only if the balance shown is
Low level of assessed risk of material
Large number of small balances
A low error rate is expected
No reason to believe the respondent will ignore the
©McGraw-Hill Education.

Page 24
Flowchart of the Confirmation Sequence
Prepare and Mail
the Requests
Send 2nd requests for
positive confirmations
Perform alternative
procedures for
Resolve exceptions
Document the
procedures and
Develop Audit Objectives
Choose Appropriate
Confirmation Form
Determine the timing
and extent
Identify the information
to be confirmed
Select the accounts
for confirmation
©McGraw-Hill Education.

Page 25
Data Analytics
Identify possible fictitious revenue by searching for unusual or large entries in revenue
Identify possible fictitious revenue by searching for entries into revenue accounts from
unusual sources.
Identify possible revenue cutoff errors by examining unusual revenue transactions around
Identify related party transactions in the sales journal by selecting unusual transactions
throughout the entire year.
Identify possible duplicate billings by reviewing the sales journal for sales of identical
amounts to the same customers over a short period of time.
Identify possible unauthorized sales discounts by comparing discounts to individual
customers in total and as a percentage of total sales.
Identify possible uncollectible amounts by identifying credit sales that exceed the amounts of
customers’ credit authorization amounts.
Identify misstatements of accounts receivable by identifying large credits to accounts
receivable from unusual sources.
©McGraw-Hill Education.

Ace your assessments! Get Better Grades
Browse thousands of Study Materials & Solutions from your Favorite Schools
California State Universi...
Great resource for chem class. Had all the past labs and assignments
Leland P.
Santa Clara University
Introducing Study Plan
Using AI Tools to Help you understand and remember your course concepts better and faster than any other resource.
Find the best videos to learn every concept in that course from Youtube and Tiktok without searching.
Save All Relavent Videos & Materials and access anytime and anywhere
Prepare Smart and Guarantee better grades

Students also viewed documents