Get premium membership and access questions with answers, video lessons as well as revision papers.
1. Negative circularization
The debtor is expected to respond to the circular if they do not agree with the contents of the
circular. The major drawbacks of this method of circularization is that should the debtor fail to
receive the circular and therefore not reply, the auditor may wrongly assume that the debtor is
in agreement with the contacts of the circular. Therefore unless the client has a very effective
system of internal control or there exists other evidence to enable the auditor satisfies themselves
with regard to the purposes of circularization the negative method should not be used.
2. Positive circularization
The debtor is required to respond to the circular whether they agree or do not agree with the contents
of the circular. Accordingly the positive method if the preferred method of circularization.
The approach for circularization is as follows:
i. Obtain the client’s consent to send the requests to the debtors.
ii. Select the date at which you desire to perform the circularization.
iii. Select the debtors you wish to circularize and confirm management’s acceptance of those debtors.
iv. Draft a circular, which should be from the client to the debtor with the request that the debtor should reply direct to the auditors.
v. Send reminders to non-repliers.
vi. Evaluate the replies. This involves comparing the amount acknowledged in the reply
with what appears in the clients’ ledger and investigating any differences.
vii. Perform alternative test to non-repliers.
viii. Conclude on whether the objectives of the debtors’ circularization have been achieved.
Wilfykil answered the question on April 12, 2019 at 06:21
- What is the problem encountered in the verification of stock during auditing?(Solved)
What is the problem encountered in the verification of stock during auditing?
Date posted: April 12, 2019. Answers (1)
- Discuss on verification of Cash in hand and Cash in bank during auditing(Solved)
Discuss on verification of Cash in hand and Cash in bank during auditing
Date posted: April 12, 2019. Answers (1)
- Discuss Verification of non-current assets during auditing(Solved)
Discuss Verification of non-current assets during auditing
Date posted: April 12, 2019. Answers (1)
- List the Audit tests for salaries and wages(Solved)
List the Audit tests for salaries and wages
Date posted: April 12, 2019. Answers (1)
- Define Vouching Audit and it's usage(Solved)
Define Vouching Audit and it's usage
Date posted: April 12, 2019. Answers (1)
- Which balance sheet ratios are usually considered during auditing?(Solved)
Which balance sheet ratios are usually considered during auditing?
Date posted: April 12, 2019. Answers (1)
- Define the term Cut-off tests(Solved)
Define the term Cut-off tests
Date posted: April 12, 2019. Answers (1)
- Which are the disadvantages of monetary unit sampling?(Solved)
Which are the disadvantages of monetary unit sampling?
Date posted: April 12, 2019. Answers (1)
- State and explain audit Sampling methods(Solved)
State and explain audit Sampling methods
Date posted: April 12, 2019. Answers (1)
- Which are the qualities of a good audit sample?(Solved)
Which are the qualities of a good audit sample?
Date posted: April 11, 2019. Answers (1)
- Which are the factors considered before adopting statistical sampling?(Solved)
Which are the factors considered before adopting statistical sampling?
Date posted: April 11, 2019. Answers (1)
- Which are the disadvantages of statistical sampling?(Solved)
Which are the disadvantages of statistical sampling?
Date posted: April 11, 2019. Answers (1)
- Which are the advantages of statistical sampling?(Solved)
Which are the advantages of statistical sampling?
Date posted: April 11, 2019. Answers (1)
- Give the disadvantages of judgmental sampling(Solved)
Give the disadvantages of judgmental sampling
Date posted: April 11, 2019. Answers (1)
- Give advantages of judgmental sampling(Solved)
Give advantages of judgmental sampling
Date posted: April 11, 2019. Answers (1)
- Which are the Main approaches to audit sampling?(Solved)
Which are the Main approaches to audit sampling?
Date posted: April 11, 2019. Answers (1)
- Which are the stages in audit sampling?(Solved)
Which are the stages in audit sampling?
Date posted: April 11, 2019. Answers (1)
- Give cases where sampling is inappropriate(Solved)
Give cases where sampling is inappropriate
Date posted: April 11, 2019. Answers (1)
- Give the reasons for audit sampling(Solved)
Give the reasons for audit sampling
Date posted: April 11, 2019. Answers (1)
- What does the process of performing analytical procedures consist of?(Solved)
What does the process of performing analytical procedures consist of?
Date posted: April 11, 2019. Answers (1)