An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when:

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In evaluating when an auditor should normally perform alternative procedures to substantiate the existence of accounts receivable, we consider what triggers additional procedures.
Option 1: 'collectability of the receivables is in doubt.' While collectability is important, existence procedures are more directly tied to confirming whether receivables exist rather than whether they will be collected. This makes this option less precise for triggering alternative procedures focused on existence.
Option 2: 'no reply to a negative confirmation request is received.' A negative confirmation asks the recipient to respond only if the balance is incorrect or the recipient disagrees. A lack of response to a negative confirmation is not typically a primary trigger for alternative procedures to prove existence; it raises questions about the performance of the confirmation, but it is not the standard driver for existence procedures. Therefore this option is not correct.
Option 3: 'pledging of the receivables is probable.' This concern relates to whether receivables have been used as collateral, which is a disclosure and risk issue rather than a direct existence test. It does not inherently justify alternative procedures to substantiate existence of the receivables themselves.
Option 4: 'no reply to a positive confirmation request is received.' Positive confirmations request the customer to acknowledge the balance. If there is no reply, the auditor typically performs alternative procedures (such as tracing to shipping documents, inspecting invoice copies, or other substantive tests) to substantiate existence. This aligns with standard auditing guidance on responding to nonresponses to positive confirmations. Therefore, this option correctly identifies the triggering condition for alternative procedures aimed at existence.
In summary, the scenario most clearly associated with initiating alternative procedures to substantiate existence is the absence of a reply to a positive confirmation, making option 4 the correct choice. The other options describe issues more related to collectability, response type of confirmations, or collateral considerations rather than the existence assertion.

ACG442_A_2025SPRING Auditing Ch07 Practice Quiz

An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when:

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