AA – L2 – SA – Q4.9 – Receivables Circularization

Feature not associated with receivables circularization.

Question

What will NEVER be a feature of receivables circularization?

A Using client headed paper to send letters out

B Asking the client if the replies have come back

C A positive circularization

D A negative circularization

Answer

Explanation:
Receivables circularization involves the auditor directly contacting debtors to confirm balances, using either positive or negative circularization methods, and is typically sent on the auditor’s letterhead, not the clients. Asking the client if replies have come back undermines the independence of the procedure, as the auditor must control the process and receive replies directly. Option B is the correct answer, as it is never a feature of circularization.

Tags: Audit Evidence, Audit Procedures, ICAG, Receivables Circularisation
Level: Level 2

Topic: Audit and Assurance Evidence

Uploader: Salamat Hamid