The Audit Working Papers Often Include a Client-Prepared,aged Trial Balance

question 54

Multiple Choice

The audit working papers often include a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.This aging is best used by the auditors to:

• A)Consider internal control over credit sales.
• B)Test the accuracy of recorded charge sales.
• C)Estimate credit losses.
• D)Verify the validity of the recorded receivables.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.

Current Assets

Short-term assets that are expected to be converted into cash, sold, or consumed within one year or the business's operating cycle, whichever is longer.

Market Value

The existing rate at which an asset or service might be sold or acquired in the trading space.

Replacement Cost

The current cost of replacing an asset with a new asset of similar kind and quality, often used in insurance and accounting.