Auditor-to-Auditor Confirmations: A New Approach in Obtaining Accounts Receivable Confirmation and Its Empirical Investigation

Abstract

This paper discusses the evolution of the accounts receivable confirmations from the early 20th century to the present, followed by types of confirmation and why the format and process of obtaining accounts receivable confirmations cannot minimize problems associated with them. This paper offers a new approach, Auditor-to-Auditor Confirmations (ATAC) and discusses how the process of obtaining accounts receivable confirmations can be strengthened using this new approach. This technique would have auditor confirm balances with the client customer’s auditor if the customer employs an independent auditor. This new approach will reduce management manipulation and other problems associated with obtaining accounts receivable confirmations under current format. An investigation of perception of senior accounting students indicate that they believe the new ATAC is more effective and reliable than other methods of accounts receivable confirmations. Types of accounts receivable fraud and how ATAC can reduce such frauds are also discussed in the paper.