You are auditing the receivables and the companys bank accounts for XYZ Ltd, a small manufacturer of high quality furniture. XYZ makes cabinets to order for local contractors and home renovators, and some stock items for local furniture stores. XYZ Ltd has several bank accounts. Customers pay by cheque. All suppliers are paid by cheque. Salaries are paid by cheque or via bank transfer.

As part of the audit, you have:

1. conducted some confirmations by telephone because in previous years, the response rate to written request has been extremely low.

2. spoken by telephone with the accounts payable clerk of ABC Co. to verify account balance. The clerk does not understand the importance of confirmations.

3. gained confirmation from TDH. There has been either a receivable to TDH., or a payable to TDH. TDH is a subsidiary of XYZ Ltd.

Required:

(a)Explain how each of the notes above affects the reliability of the evidence obtained by confirmation?