An Auditor Discovered That a Client's Accounts Receivable Turnover Is

question 16

Multiple Choice

An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year.This may indicate that:

• A)Obsolete inventory has not yet been reduced to fair market value.
• B)There was an improper cutoff of sales at the end of the year.
• C)An unusually large receivable was written off near the end of the year.
• D)The aging of accounts receivable was improperly performed in both years.

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Definitions:

Consumer Surplus

The gap between the total price consumers are ready and able to pay for a good or service versus what they actually spend.

Producer Surplus

The difference between the amount a producer is willing to accept for a good or service versus what they actually receive, usually resulting from market prices above minimum selling prices.

Deadweight Loss

The loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved, leading to a loss of total welfare or economic surplus.

Price Ceilings

Regulatory measures that set a maximum price that can be charged for a product or service, intended to protect consumers from excessive pricing.