PA Is Auditing a Client Where the Accounts Receivable Are

question 9

Multiple Choice

PA is auditing a client where the accounts receivable are in worse shape than last year: many accounts are significantly overdue.How would this fact be dealt with in the audit risk model?

• A)increase inherent risk for accounts receivable
• B)decrease inherent risk for accounts receivable
• C)increase control risk for accounts receivable
• D)decrease control risk for accounts receivable

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Definitions:

Efficient Allocation

The optimal distribution of resources among competing uses, aiming to maximize the overall benefit or utility from those resources.

Government Failure

A situation where government intervention in the economy causes inefficiencies or leads to an allocation of resources worse than the free market.

Competitive Markets

Markets where multiple sellers and buyers interact under the principles of supply and demand to determine prices and output without significant restrictions or monopolies.

Property Rights

Legal rights to possess, use, and dispose of assets such as land, buildings, or intellectual property.