The Allowance for Doubtful Accounts Will Not Be Precise by Either

question 35

Multiple Choice

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following reasons?

• A) It is an accounting estimate based upon judgment.
• B) GAAP is not clear on the calculation of the allowance.
• C) It is merely a reserve that is reversed by the client as income is needed for profitable results.
• D) The precision is determined by the results of confirmation responses.

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Definitions:

Capitalism

An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

Minimum Government

A principle advocating for minimal intervention by the government in the affairs of individuals and society, emphasizing freedom and limiting the scope of governmental power.

Peace and Security

Conditions where societies enjoy stability, safety from violence, conflict, and fear, allowing for the development and growth of individuals and communities.

Liberty

Being unburdened by authority-imposed constraints in society, affecting one’s life choices, actions, or political beliefs.