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Part $1$

State the relationship between the confirmation of accounts receivable and the results of the tests of controls and substantive tests of transactions.

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Part $1$

A$.$

The primary objective of the tests of controls and substantive tests of transactions for sales and cash receipts is to determine whether or not the auditor may rely on the balance sheet to produce accurate information. If it is determined through tests of controls and substantive tests of transactions that the system provides reliable information as to accounts receivable$$ balances, the auditor may reduce the sample size for the confirmation and timing of the tests.

B$.$

The primary objective of the tests of controls and substantive tests of transactions for sales and cash receipts is to determine whether or not the auditor may rely on internal controls to produce accurate information. If it is determined through tests of controls and substantive tests of transactions that the system provides reliable information as to accounts receivable$$ balances, the auditor may reduce the sample size for the confirmation and timing of the tests.

C$.$

If the system is not considered effective because of deficiencies in internal$$ control, the sample size must be$$ increased, positive confirmation will probably be$$ necessary, and the confirmations will most likely be as of the balance sheet date.

D$.$

Both B and C are correct.