ACCA Audit and Assurance (F8) Practice Exam

Why are follow-up procedures critical in audit confirmations?

1. To increase the number of confirmations sent

2. To ensure clients feel valued

3. To resolve disagreements or lack of response from customers

4. To verify audit fees with clients

The correct answer is: To resolve disagreements or lack of response from customers

Follow-up procedures are critical in audit confirmations primarily to resolve disagreements or lack of response from customers. When auditors send confirmation requests to third parties (such as customers or banks), they rely on the responses to validate the accuracy of account balances and transactions. However, not all parties will respond promptly, and some may provide responses that differ from the client’s records. Implementing follow-up procedures helps ensure that any discrepancies or non-responses are addressed. This process is essential in gathering sufficient and appropriate audit evidence, particularly when it comes to substantiating the completeness and accuracy of financial statements. By actively pursuing confirmations that have not been replied to or clarifying inconsistencies, auditors enhance the reliability of the audit process and reduce the risk of material misstatements. While the other options do touch upon elements of engagement and communication, they do not focus on the audit's core objective of ensuring accurate and truthful reporting. Increasing the number of confirmations sent, making clients feel valued, or verifying audit fees, although important in different contexts, do not address the fundamental need for resolving issues related to the validity of responses in the confirmation process.