21. Should the written request for confirmation be from the auditors or the clie

Question

21. Should the written request for confirmation be from the auditors or the client? Should the return envelope be addressed to the auditors, to the client or to the auditors in care of the client?

22. If a client’s customer’s account is selected for positive confirmation and the customer fails to respond to the confirmation, what alternative procedures are available to the auditor?

23. (c) What is the difference between a positive and negative request?
(d) When should the CPA use a negative request?

Explanation / Answer

1. Confirmation req should be from the auditors side . and same sh

2. When customers fail to respond to positive confirmation requests, the CPA maynot assume with confidence that these customers checked the request,found no disagreement, and therefore did not reply. Some busycustomers will not take the time to check confirmation requests and willnot respond, hence obvious exceptions may exist without being reported tothe CPA. In the case of fraud or embezzlement, the perpetrators couldperhaps prevent exceptions from being reported and prevent lettersaddressed to nonexistent customers from being returned from the postoffice as undeliverable. Confirmations returned as undeliverable by thepost office will require appropriate action to obtain better addresses.Follow-up is necessary when customers do not reply because the CPA hasselected the positive confirmation route for certain receivables, and themost logical step to follow first is to mail second requests. 3. positive confirmation = correct or incorrect, the recipient is requested to reply/ confirm with the stated amount/ information negative confirmation = the recipient is requested to reply only when the recipient disagrees with the stated amount. For example, there could be a negative request to a car manufacturer on the sale of 200 cars, which were sold to a dealership for $6 million. If this was the correct transaction, the manufacturer would not reply; if the cost price was only $5 million, the manufacturer would notify the accountant of the discrepancy in the dealership's books.

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