What is meant by alternative procedures in the confirmation of accounts receivable

By William Howard April 03, 2026

In the examination of accounts receivable, for ex- ample, alternative procedures may include examination of subsequent cash receipts (including matching such receipts with the actual items being paid), shipping documents, or other client documentation to provide evidence for the existence assertion.

What are alternative procedures?

Alternative procedures are those additional audit tests used when the original set of planned audit procedures cannot be performed or prove to be ineffective. After alternative procedures have been performed, the auditor must determine whether sufficient additional audit evidence has been collected.

When should an auditor perform alternative procedures as evidence for the existence of accounts receivable?

An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when: no reply to a positive confirmation request is received. A customer reply on a positive confirmation says “We dispute the $250 charge.

What is alternative confirmation?

Auditors evaluating financial statements routinely ask audited companies to confirm the truth of items in the statement. If the auditor can’t get an answer, then alternative confirmation methods — such as comparing accounts receivable to shipping documents — reduce the audit risk.

What are the audit procedures for accounts receivable?

Trace receivable report to general ledger. …
Calculate the receivable report total. …
Investigate reconciling items. …
Test invoices listed in receivable report. …
Match invoices to shipping log. …
Confirm accounts receivable. …
Review cash receipts. …
Assess the allowance for doubtful accounts.

How do you audit accounts payable procedures?

An effective AP audit procedure includes: A cross-check of every payment process transaction by contacting every vendor providing goods and/or services to verify transaction data during the period in question. Use cut-off tests to confirm that transaction dates and payments match, and identify any unmatched documents.

What are alternatives to auditing?

Review Engagements. A review engagement can be a cost effective alternative for business and not-for-profits that are not required by either law, or their constitution, to have an audit. …
Special Purpose Engagements. …
Agreed upon procedures. …
Audit Outcomes.

What is audit confirmation process?

Audit confirmations are used when: Before finishing audit procedures, a letter is sent to your attorney, confirming whether the information provided about any pending legal actions are both accurate and complete.

What is the recommended procedure for verifying the existence assertion of accounts receivable?

The most common audit procedure involving the accounts receivable balance is confirmation. To test that accounts receivable exist, the auditor will send letters to a sample of the client’s customers asking to verify the amount that is owed to the company being audited.

What is audit confirmation?

What is a Confirmation in Auditing? A confirmation is a letter sent by an outside auditor to the suppliers and customers of a client, asking them to verify the payable and receivable balances associated with them in the client’s financial records.

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Which of the following procedures would an auditor most likely perform?

Explanation: Auditor most likely perform the procedure in searching for unrecorded liabilities is vouch a sample of cash…

What is the difference between negative and positive confirmations?

Positive vs. While positive confirmation requires supporting information despite the accuracy of the original records, negative confirmation requires a response only if there is a discrepancy.

What is positive and negative confirmation in auditing?

A positive confirmation is one in which the customer is required to send back a document, either confirming or disputing the account information sent to it by the auditor. … A negative confirmation is rarely used with a lender, since auditors want to be very sure about the ending debt balances reported by their clients.

What procedure you would perform to test the existence of receivables?

What primary audit objectives will be achieved when confirming receivables with debtors?

In the audit of accounts receivable, we can achieve two objectives in performing the receivable confirmation. First, we can verify the existence of the customer’s balances; second, we can ensure the correctness of those balances.

What audit objectives are key for accounts receivable?

The main objective of an accounts receivable audit is to determine whether there are adequate controls and procedures to ensure the proper recording of accounts receivable. The overall objective of the accounts receivable audit is to ensure they are presented fairly in the financial statements.

When the auditor does not get a response to a confirmation request what sort of alternative procedure should he she perform?

31. When the auditor has not received replies to positive confirmation requests, he or she should apply alternative procedures to the nonresponses to obtain the evidence necessary to reduce audit risk to an acceptably low level.

What is fixed asset verification?

Verification of fixed assets consists of examination of related records and physical verification. The auditor should normally verify the records with reference to the documentary evidence and by evaluation of internal controls. Physical verification of fixed assets is primarily the responsibility of the management.

How do auditors confirm their client's bank balance?

Normally, auditors review the bank’s balance and select some important accounts to be confirmed during the interim audit. Auditors draft the confirmation and send it to the client to review and get the confirmation signed. Once the confirmation signed, auditors are the one who proceeds the confirmation to banks.

What is the process of auditing accounts payable using confirmations?

Account payable confirmation is the confirmation prepared and processed by auditors to cross-check the amount and information between the client’s records and the client’s supplier’s records. Those could be included in the outstanding balances and transactions.

What is cut off procedure?

Quick Summary of Cut-Off Procedures Procedures applied to the accounting records at the end of an accounting period to ensure that all transactions for the period are recorded and any transactions not relevant to the period are excluded.

What is the most important objective when auditing for accounts payable discuss audit procedures an auditor can perform to test that objective?

The main objectives of accounts payable audit are as follow: To ensure completeness of the accounts payable. To ensure the existence of the accounts payable reported in the Balance Sheet. To ensure that there is enforceable rights and obligations for the accounts payable.

Which of the following is the best audit procedure for the detection of lapping?

A practical and effective audit procedure for the detection of lapping is: Comparing recorded cash receipts in detail against items making up the bank deposit as shown on duplicate deposit slips validated by the bank. Which of the following is not a control that generally is established over cash transactions?

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Which of the following audit procedures is best for identifying unrecorded trade accounts payable? Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period.

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

Examining selected cash disbursements in the period subsequent to the year-end is the best audit procedure for determining the existence of unrecorded liabilities.

What are the circumstances under which confirmation of accounts receivable is not required?

RECEIVABLE CONFIRMATIONS ARE NOT ALWAYS required if accounts receivable are immaterial, the use of confirmations would be ineffective or combined inherent risk and control risk are low and analytics or other substantive tests would detect misstatements.

Which of the following risks is the confirmation of accounts receivable is most closely associated with?

The confirmation of accounts receivable is most closely associated with: Detection risk. Analytical procedures performed during an audit indicate that accounts receivable doubled since the end of the prior year.

What are the characteristics of a confirmation?

Receipt.
Written or oral response.
From independent third party.
Requested by the auditor.

What are analytical procedures in accounting?

Analytical procedures are a type of evidence used during an audit. … Analytical procedures involve comparisons of different sets of financial and operational information, to see if historical relationships are continuing forward into the period under review.

What are the two types of confirmation requests explain their difference?

There are two types of confirmations: A positive confirmation requests that the recipient complete a form confirming account balances (for example, how much a customer owes the company). A negative confirmation requests that the recipient respond only if the balance is inaccurate.

Which of the following procedures would an auditor most likely rely on to Verifymanagement's assertion of completeness?

Which of the following procedures would an auditor most likely rely on to verify management’s assertion of completeness? – Observing the entity’s distribution of payroll checks.