ACCA Audit and Assurance (F8) Practice Exam

What type of circularisation confirms the accuracy of a balance?

1. Negative circularisation

2. Random circularisation

3. Positive circularisation

4. Statistical circularisation

The correct answer is: Positive circularisation

Positive circularisation is a method used to confirm the accuracy of a balance in audit practice. This approach involves sending confirmation requests directly to the debtor or creditor and requires them to respond directly to the auditor with either a confirmation of the balance or a notification of the actual balance if it differs from the one stated in the request. This method is particularly effective because it provides direct evidence from an independent source, which is essential for validating the accuracy of financial data. Auditors often prefer positive circularisation, especially in cases where the account balances are significant or when there are concerns about the reliability of input data. The responses are more straightforward as they affirmatively confirm or contest the balance, eliminating ambiguity and enhancing the reliability of the evidence collected. In contrast, negative circularisation does not require a response unless the recipient disagrees with the stated balance, which can result in a lack of confirmation in some cases. Random and statistical circularisation techniques do not specifically focus on confirming individual balances with definitive responses, making them less effective for confirming accuracy compared to positive circularisation.