You are the auditor of Badapoo Bank for the year 2018. Badapoo has a large number of customers with consumer loan accounts. The loan accounts have balances averaging $900 in a homogeneous population and the customers usually pay close attention to their balances. Your preliminary assessment of internal control over the loan area is that control risk is low and results of tests of controls support that assessment. Inherent risk is deemed to be lower as well.

Required:

1. Discuss the accounts receivable confirmation process used by Auditors.
2. Elaborate on the types of confirmations that may be used for the audit of Badapoo Bank.
3. Which confirmation type would you select for Badapoo and why?