CA X is contemplating the use of negative confirmation requests as the sole substantive audit procedure to verify certain accounts payable balances…

In accordance with SA 505, “External Confirmations”, the auditor shall not use negative confirmation requests as the sole substantive audit procedure to address an assessed risk of material misstatement at the assertion level unless all of the following are present: (i) The auditor has assessed the risk of material misstatement as low and has obtained sufficient appropriate audit evidence regarding the operating effectiveness of controls relevant to the assertion. (ii) The population of items subject to negative confirmation procedures comprises a large number of small, homogeneous, account balances, transactions or conditions. (iii) A very low exception rate is expected and (iv) The auditor is not aware of circumstances or conditions that would cause recipients of negative confirmation requests to disregard such requests. The failure to receive a response to a negative confirmation request does not explicitly indicate receipt by the intended confirming party of the confirmation request or verification of the accuracy of the information contained in the request. Accordingly, a failure of a confirming party to respond to a negative confirmation request provides significantly less persuasive audit evidence than does a response to a positive confirmation request. Therefore, view of CA X is not correct.