How a Negative Confirmation Is Used in Business.

A negative confirmation is an accounting method used to reconcile accounts receivable. In a negative confirmation, the recipient of the invoice (the customer) is asked to respond to the creditor (the company that sent the invoice) to verify that the invoice is correct and that the customer does not dispute the charges.

Negative confirmations are used to reduce the risk of fraud and error in accounts receivable. By requiring the customer to confirm that the charges are correct, businesses can be sure that they are not overcharging customers or billing for products or services that were not received. Negative confirmations can also help businesses to identify errors in their invoicing process, such as incorrect prices or quantities. What are the two types of confirmation requests? The two types of confirmation requests are account and transaction confirmations. Account confirmations request account information, such as account balances and transactions, from the customer's financial institution. Transaction confirmations request specific details about a customer's transactions, such as the date, amount, and payee. What are the two assertions for which confirmation of accounts receivable balances? There are two assertions for which confirmation of accounts receivable balances is important: existence and collectability.

Confirmation of accounts receivable balances is important for assertions of existence and collectability. Existence assertions relate to whether or not the receivables exist as of a certain date. Collectability assertions relate to whether or not the receivables will be collected.

What is a negative assurance letter?

A negative assurance letter is a type of letter used in business to provide assurance that there is no problem or issue with a particular situation. This type of letter is often used to provide assurance to a potential lender or investor that the business is in good financial health and that there are no outstanding issues that could negatively impact the investment.

Which of the following is the best argument against the use of negative accounts?

Many businesses choose not to use negative accounts because they feel it is not an accurate portrayal of their business. Negative accounts can give the false impression that a business is not doing well when in reality they may be doing quite well. Additionally, negative accounts can make it more difficult for a business to get loans or other forms of financing.

Why do CPA firms frequently use a combination of positive and negative confirmations on the same audit?

There are a few reasons for this. First, positive confirmations can provide more reliable information than negative confirmations. This is because the former require the recipient to respond affirmatively to the request, while the latter only require the recipient to respond if they disagree with the statement. Second, positive confirmations can be more effective in detecting errors and fraud than negative confirmations. This is because they require the recipient to take action, which may prompt them to scrutinize the request more carefully. Finally, positive confirmations may be more efficient than negative confirmations. This is because they can be sent electronically, which eliminates the need for follow-up phone calls or letters.