ACCA Audit and Assurance (F8) Practice Exam

What is a characteristic of positive confirmation stating the amount?

1. Less work involved

2. Creates retrievable customer agreements

3. More likely to obtain a quick response

4. Useful for reconciliation

The correct answer is: Useful for reconciliation

Positive confirmation is a procedure used in auditing where the auditor sends a request to a third party, often a customer or supplier, to confirm the details of a balance or transaction. This method specifically requires the recipient to respond directly, indicating whether they agree with the stated figures. The characteristic that makes positive confirmation useful for reconciliation is that it provides a level of assurance regarding the accuracy of the financial records. When a third party confirms an amount, it reduces the risk of misstatements due to error or fraud, allowing auditors to reconcile the balance effectively. This contributes to a more reliable assessment of the company's financial position. In contrast, the other options do not accurately reflect the main characteristic of positive confirmations. While less work might be involved for certain types of confirmations or agreements, the comprehensive nature of positive confirmations typically requires more effort both from the auditor and the responding party. Creating retrievable customer agreements has more to do with record-keeping systems than with the confirmation process itself. Lastly, obtaining a quick response is not a guarantee with positive confirmations since the recipients may take their time to verify and respond to the request, especially if they need to check records before replying. Therefore, the usefulness of positive confirmation in supporting reconciliation stands out as its primary characteristic.