An Auditor Has Determined That a Client's 'Days in Receivables

question 84

Multiple Choice

An auditor has determined that a client's 'days in receivables' ratio has slowly increased over the last three years.Which of the following could be a possible reason for this?

• A)The client has hired a collection agency which is extremely efficient at collecting.
• B)The receivables have been secured as collateral for a recent capital asset purchase.
• C)The accounts receivable department has implemented a new IT system, making collections much quicker and more efficient.
• D)The accounts receivable turnover ratio has decreased due to poor internal controls related to credit granting procedures.

---

Definitions:

Marginal Cost

Marginal cost is the cost of producing one more unit of a good or service, which can vary depending on the level of production.

Activity

The engagement in tasks or actions, typically referring to some form of productive work or leisure actions.

Scarce Resources

Resources that are limited in supply and cannot satisfy all human wants and needs.

Standard Of Living

A level of material comfort in terms of goods and services available to someone or some group.