L13 Notes_Part_11 - Confirmation Technique Confirmations...

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© W.R. Knechel Confirmation Technique Confirmations definition: a receipt of a written or oral response from an independent third party responding to questions about the client raised by the auditor. The proper mix of tests: Sales Test of Transactions vs. Detailed Tests of Balances (confirmations) strong IC, large # of AR small in size > Sales TT weak IC, small # of AR with large individual items > conf. AR A. Objectives satisfied does it achieve the completeness objective? valuation, existence, cutoff B. History - McKessons Robbins, Ultramares C. GAAS requirement Confirmation of A/R must be performed on all GAAS audits unless one of the following occurs (Exceptions SAS #67) a. A/R are not material to the financial statements’ b. The use of confirmations would be ineffective based on experience, response rate is low or unrealiable b. satisfied through alternative procedures (e.g., ARP, Other substantive tests of detail, Subsequent CR, BOL) given the CR and IR are both low for A/R.
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L13 Notes_Part_11 - Confirmation Technique Confirmations...

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