ACCA Audit and Assurance (F8) Practice Exam

What type of confirmation may auditors seek from suppliers regarding payables?

1. Verbal affirmations from management

2. Written confirmations from suppliers

3. Third-party financial statements

4. Social media confirmations

The correct answer is: Written confirmations from suppliers

Written confirmations from suppliers are a vital source of evidence for auditors when assessing accounts payable. This process involves sending a request to suppliers asking them to confirm the amount the client owes them. The significance of these confirmations lies in their ability to provide direct, reliable, and objective evidence of the existence and accuracy of the recorded payables. These confirmations help auditors verify not only the balances but also the terms of payments and other relevant details. Written responses from suppliers can highlight discrepancies or issues that may not be evident from internal records, allowing auditors to gain assurance over the completeness and accuracy of the client’s financial statements. The reliance on written confirmations secures a level of independence and objectivity that is crucial in the audit process, as they are directly obtained from external parties. This can help mitigate risks associated with management override or internal misstatements. In contrast, other types of confirmations such as verbal affirmations from management lack sufficient reliability and independence, while third-party financial statements would not typically be used specifically for verifying payables. Social media confirmations do not provide credible or formal evidence regarding financial transactions. Hence, written confirmations from suppliers stand out as the most appropriate and robust method for verifying accounts payable in the audit context.