Title

A Summary of Research and Enforcement Release Evidence on Confirmation Use and Effectiveness

Document Type

Article

Publication Date

11-2008

Abstract

Confirmations are extensively used and are often perceived by practitioners to be one of the most persuasive forms of audit evidence. Yet academic research has found limitations that restrict confirmation effectiveness for many management assertions. In addition, a number of problems with false and forged confirmations are identified in Accounting and Auditing Enforcement Releases (AAERs). The Public Company Accounting Oversight Board (PCAOB) and the International Auditing and Assurance Standards Board (IAASB) have put confirmation evidence on their respective agendas. Academic research indicates that receivable confirmations can be effective evidence for the existence assertion. Low response rates, as well as respondent errors and directional bias in detecting errors, are key barriers to confirmation effectiveness. Our review of AAERs identified failure to authenticate responses, collusion between auditee management and customers, and concealed side agreements and special terms as specific problem areas. We also identify a number of research questions for future research.

Comments

Copyright 2008 American Accounting Association

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Publication Title

Auditing: A journal of practice and theory

Published Citation

Caster, Paul, Randy J. Elder and Diane J. Janvrin. “A Summary of Research and Enforcement Release Evidence on Confirmation Use and Effectiveness” Auditing: A Journal of Practice and Theory (November 2008), pp. 253 – 279. http://dx.doi.org/10.2308/aud.2008.27.2.253

DOI

10.2308/aud.2008.27.2.253