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External confirmations (SA 505) are MOST commonly used for:
AInternal control reviews
BVouching of expenses
CReceivable balances, bank balances, and other balances/terms with third parties
DInventory observations
Answer & Solution
Correct answer: D. Inventory observations
1. SA 505 governs external confirmations for balances/terms with third parties.
2. Positive vs negative confirmations have different reliability.
3. Non-responses require alternative procedures.
_Source: ICAI BoS CA Final Paper 3, Ch 6 "Standards on Auditing and Professional Ethics"_
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