CA Inter P5 · Chapter 4 · Question 6 of 14
SA 505 permits negative confirmation requests as the sole substantive procedure for an assertion only when certain conditions are all present. Which of the following is one of those conditions?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The population consists of a large number of small, homogeneous account balances
Explanation
Negative confirmations provide less persuasive evidence than positive ones. SA 505 allows them as the sole substantive procedure only where the risk of material misstatement is low and controls are tested, the population is a large number of small homogeneous balances, a very low exception rate is expected, and there is no reason to believe recipients will disregard them.
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