Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Audit of Various Items of Financial Statements

An auditor sends positive confirmation requests to trade receivables and receives no reply from a customer with a balance of Rs 2,40,000. What is the most appropriate next step?

The auditor should perform alternative procedures, such as checking post-year-end receipts, invoices and delivery evidence. Non-response to a positive confirmation provides no audit evidence, so it cannot be treated as agreement, and nothing justifies an automatic write-off.

  1. ATreat the balance as confirmed because silence implies agreement
  2. BPerform alternative procedures such as examining subsequent receipts and dispatch documentsCorrect
  3. CImmediately write off the balance as a bad debt
  4. DWithdraw from the engagement

Explanation

A positive confirmation requires a reply; non-response gives no evidence. Silence implying agreement applies only to negative confirmation. The auditor should use alternative procedures like checking cash received after year-end, invoices and shipping records.

Did you get it right without looking?

One question tells you little. A timed set on Audit of Various Items of Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise Audit of Various Items of Financial StatementsFree diagnostic mock

More Audit of Various Items of Financial Statements questions