What alternative procedures can internal audit perform when a confirmation is not returned?

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AcadiFi · Accepted Answer

When a confirmation is not returned, alternative procedures should address the same assertion the confirmation was meant to support. The...

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Suppose fictional Crestview Supply is testing accounts payable completeness for a key vendor, but the vendor does not respond. Alternative procedures could include reviewing subsequent cash disbursements, matching payments to vendor invoices, inspecting receiving reports, comparing purchase orders to goods received, and reviewing unmatched receiving records near period-end.

```mermaid
flowchart TD
  A[No confirmation response] --> B[Identify assertion]
  B --> C[Select substitute evidence]
  C --> D[Inspect source documents]
  D --> E[Evaluate sufficiency]
```

If the assertion is existence of a receivable, subsequent cash collection may be persuasive. If the assertion is completeness of payables, subsequent payments and receiving records may be more relevant. The direction of testing matters. Looking only at recorded invoices may not reveal unrecorded liabilities.

The auditor should document why the alternative procedure is appropriate, what evidence was inspected, and whether limitations remain. If alternative evidence is weak or contradictory, the auditor may need to expand testing, escalate the limitation, or qualify the conclusion depending on the engagement type.

For CIA exam questions, choose procedures that connect directly to the risk and assertion. More documents are not always better; better-targeted documents are. Practice more in our CIA question bank.

What alternative procedures can internal audit perform when a confirmation is not returned?

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