Case 9.4

Auditing Cases: An Interactive Learning Approach (4th Edition)

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Case 9.4 – Bud’s Big Blue Manufacturing [1] The four factors and auditor should consider when evaluating the results of confirmation procedures are: the reliability of the confirmations and alternative procedures the nature of any exceptions, including the implications, both quantitative and qualitative, of those exceptions the evidence provided by other procedures whether additional evidence is needed The three characteristics of a reliable confirmation are: Designing the Confirmation Request Form of Confirmation Request Nature of Information Being Confirmed [2] The auditor must maintain control of the confirmation requests and responses until they are returned from the customer. When the client assists the auditor by preparing the confirmations, enclosing them in envelopes, or putting stamps on the envelopes, there must be close supervision for the auditor. Since the auditing firm need to maintain control of the confirmations, return addresses on any envelopes must have the firm’s address, not the client’s. This ensures independent communication between the auditor and the customer. If the auditor does not maintain control, the client may be able to manipulate the confirmation requests and responses. [4] A positive confirmation is a communication addressed to the debtor requesting the
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This document was uploaded on 08/23/2010.

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Case 9.4 - Case 9.4 Buds Big Blue Manufacturing [1] The...

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