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A Summary of Research and Enforcement Release Evidence on Confirmation Use an Effectiveness
Paul Caster,
Fairfield University
Randy Elder, Syracuse University
Diane Janvrin, Iowa State University
ABSTRACT. This paper provides a synthesis of academic and practitioner research, as well as Accounting and Auditing Enforcement Release (AAER) evidence, on confirmation use and effectiveness. Academic research indicates that receivable confirmations can be effective evidence for the existence assertion and somewhat effective as evidence for the valuation assertion. This research also identifies low response rates, as well as respondent errors and directional bias in detecting errors as 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. This study suggests that confirming special terms and side agreements, authenticating responses, and considering the possibility of collusion may improve the effectiveness of confirmations.
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