Which of the following is typically an effective source of evidence for confirming outstanding customer balances at period end in a real estate development audit?

• A. External confirmations from customers
• B. Management's internal notes
• C. Public press releases
• D. Analyst reports

Answer: (A)

Independent confirmations from customers provide direct, third‑party evidence of what customers actually owe and whether those amounts are correct at period end. This external source helps verify the existence and accuracy of the receivable balances, which is especially important in real estate development where sales can be complex, progress billing is common, and balances may be large. When customers acknowledge the amount they owe, it reduces the risk that the reported receivables are overstated or misstated and can uncover disputes or timing differences in billing. These confirmations are generally considered highly reliable because they come from the debtor, not from management.

Internal notes, by contrast, are internal documents and can be biased or incomplete. Public press releases and analyst reports don’t provide the specific, itemized balances or confirmations from the customers themselves, so they don’t serve as appropriate substitutes for direct confirmations of outstanding receivables.