ACC403 - Auditing 1 "Testing Methods" Please respond to the following (two paragraphs only): · ...

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ACC403 - Auditing 1 "Testing Methods" Please respond to the following (two paragraphs only) : · According to the text, to minimize the risk of material misstatement, auditors seek third- party...

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ACC403 - Auditing 1

"Testing Methods" Please respond to the following (two paragraphs only):

· According to the text, to minimize the risk of material misstatement, auditors seek third- party verification of account balances by mailing customers their statements. Discuss the advantages of positive and negative confirmations, and ascertain whether or not email and oral confirmations are acceptable to increase customer response rates. Support your position.

· Discuss the difference between substantive test of transactions and substantive test of balances, and identify at least two (2) situations when an auditor should test account balances. Support your rationale with related examples of such circumstances.

Answered Same Day Dec 26, 2021

David · Accepted Answer

ANSWER 1. 
 External confirmation refers to an audit evidence received directly by the auditor from a third 
party known as confirming party. There are two kinds of External confirmation requests 
1. Positive confirmation request- Whereby confirming party is requested to confirm whether 
it agrees or disagrees with the information given in the request. 
2. Negative confirmation request- whereby confirming is expected to respond only if it 
disagrees with the information provided in the request. 
Advantages of Positive Confirmation  
1. Audit evidence is more persuasive 
2. Audit documentation is more reliable 
3. Risk of ignoring the request by confirming party is reduced 
4. Misunderstandings are reduced. 
Advantages of Negative Confirmation  
1. Auditor will not need to handle a large number of replies 
2.

ACC403 - Auditing 1 "Testing Methods" Please respond to the following (two paragraphs only) : · According to the text, to minimize the risk of material misstatement, auditors seek third- party...

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