Confirmations that are sent to select customers asking them to (1) review the current balance due the client as shown on the client's statement and (2) return the letters directly to the auditor, indicating whether they agree with the indicated balance, are known by which of the following terms?

The correct answer is positive confirmations.

Explanation:

One of the most effective procedures that the auditor can use to ensure the integrity, existence, accuracy, presentation and disclosure of the figures in the financial statements are positive confirmations with third parties.

ISA 505 defines positive confirmation as a request that the confirming party respond directly to the auditor indicating whether the confirming party agrees or disagrees with the information in the request, or providing the requested information.

If the auditor concludes that management's refusal to allow the submission of a confirmation request is unreasonable, or cannot obtain relevant and reliable audit evidence with supplementary audit procedures, it should contact the corporate government officials or its equivalent, and indicate the implications that this fact has on the audit and its opinion.