The Simply Soups Inc. case study focuses on the confirmation of cash balances, using an electronic platform. An auditor obtains the greatest assurance over management's assertion of the existence of cash by confirming the reported balances directly with an external third party—the bank. Confirmation of the cash balance is important because management may have incentives or motives to misstate the cash balance in order to achieve a strong balance sheet, hide inflated revenues, or improve financial ratios. The PCAOB proposed standard includes a requirement for the auditor to perform confirmation procedures for cash with financial institutions, such as banks, brokerage firms, trust companies, and other similar entities (PCAOB 2010). It is important to remind students that numerous confirmation-related frauds have been perpetrated on public company audits worldwide.1

Confirmations are used extensively on audits for various accounts such as cash, receivables, inventory, investment securities, payables, lines of credit,...

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