A client's accounts receivable consists of 200,000 accounts. The auditor has concluded that all but 75 of the accounts have an extremely low likelihood of being misstated. As a result, the auditor decides to perform a positive confirmation procedure with those 75 accounts. In regards to the other 199,275 accounts, the professional standards currently

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BlackTom AI · Accepted Answer

The question asks about the auditing standard guidance when an auditor uses positive confirmations for a subset of accounts receivable and must consider the remaining accounts.
Option A: 'require that the auditor perform additional testing on a sample of these accounts' — This would imply a specific directive to test a sample of the remaining accounts, but the scenario notes that professional standards currently provide no guidance on how to gauge the level of evidence provided by the confirmation procedure for those accounts. Therefore, this option is not accurate because it imposes a requirement that the standards do not specify.
Option B: 'conclude that no additional evidence testing is needed for these accounts' — This option asserts that the auditor can simply forego any further testing for the remaining accounts. In reality, the absence of guidance on evidence level does not justify ending testing; auditors must exercise professional judgment and often require additional procedures or alternative evidence to corroborate receivables, especially given the large number of accounts and the mixed reliability of confirmations. Hence, this is misleading and incorrect.
Option C: 'provide no guidance in determining the level of evidence this confirmation procedure will provide' — This aligns with the fact pattern stating that professional standards currently do not offer guidance on the evidential value of this mixed approach (positive confirmations for 75 accounts and the rest left with unclear guidance). It correctly reflects that the standard does not prescribe how to assess the effectiveness or sufficiency of this procedure for the remaining accounts, leaving the auditor to rely on judgment and alternative procedures.
In summary, option C accurately states the current state of professional standards regarding the level of evidence provided by the described confirmation approach, while options A and B assign specific guidance or conclusions that the standards do not provide. The reasoning hinges on recognizing the absence of explicit guidance in this particular scenario and the need for the auditor to exercise professional judgment for the non-confirmed accounts.

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