Which of the Following Items Should Alert the Analyst to the Potential

question 7

Multiple Choice

Which of the following items should alert the analyst to the potential for manipulation when analyzing accounts receivable and the allowance for doubtful accounts?

• A)Sales, accounts receivable and the allowance for doubtful accounts are all growing at approximately the same rate.
• B)A company lowers its credit standards and also increases the balance in the allowance for doubtful accounts.
• C)Accounts receivable is growing at a large rate and the allowance for doubtful accounts is decreasing.
• D)An analysis of the "Valuation and Qualifying Accounts" schedule required in the Form 10-K reveals that the amounts recorded for bad debt expense are close in amount to the actual amounts written off each year.

---

Definitions:

Relevant

Directly related to the matter at hand; bearing significance or importance to the issue or subject being considered.

Culture

The accumulated habits, beliefs, values, and knowledge that characterize a group of people or society, shaping their worldview and practices.

Pattern of Beliefs

A consistent and typical set of convictions or opinions that shape an individual’s or group's worldview and actions.

Automatically Transmitted

Pertains to the process where data or information is sent and received without the need for manual intervention.