Confirmation is most likely a relevant form of evidence with regard to accounts receivable when the auditor has concern about the receivables

Confirmation is most likely a relevant form of evidence with regard to accounts receivable when the auditor has concern about the receivables

• A. Valuation
• B. Classification
• C. Existence
• D. Completeness

Answer: (C)

Confirmation is most useful when there’s concern about whether the receivables truly exist. By obtaining a direct, external response from the customer, the auditor gains evidence that the amount shown as owed is real and that the debtor acknowledges owing that balance. This makes confirmation a strong tool for the existence assertion, helping to detect fictitious or inflated receivables. While confirmations can also inform valuation if a debtor replies with a different amount, their primary strength in this context is verifying existence. They’re less effective for completeness (ensuring every receivable is recorded) and for classification (ensuring amounts are posted to the correct accounts), which rely more on other procedures like tracing transactions, reviewing schedules, and testing allowances for doubtful accounts.

Confirmation is most useful when there’s concern about whether the receivables truly exist. By obtaining a direct, external response from the customer, the auditor gains evidence that the amount shown as owed is real and that the debtor acknowledges owing that balance. This makes confirmation a strong tool for the existence assertion, helping to detect fictitious or inflated receivables.

While confirmations can also inform valuation if a debtor replies with a different amount, their primary strength in this context is verifying existence. They’re less effective for completeness (ensuring every receivable is recorded) and for classification (ensuring amounts are posted to the correct accounts), which rely more on other procedures like tracing transactions, reviewing schedules, and testing allowances for doubtful accounts.