Realizable Value Is an Essential Balance-Related Audit Objective for Accounts

question 41

Multiple Choice

Realizable value is an essential balance-related audit objective for accounts receivable because collectibility of receivables is often a significant concern. Which of the following is not an internal control the auditor should evaluate to reduce the likelihood of uncollectible accounts?

• A) customer credit approval by appropriate personnel
• B) preparation of an aged trial balance reviewed and followed up by appropriate management personnel
• C) a written policy of writing off uncollectable receivables
• D) All of the above are internal controls the auditor should evaluate.

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Definitions:

Liabilities

Financial obligations or debts that a company owes to external parties, which need to be settled over time.

Liquidity

Liquidity is the ability of an asset to be quickly converted into cash or other assets without significant loss of value, indicating a company's ability to meet its short-term obligations.

Asset Management

The practice of effectively managing a company's tangible and intangible assets to maximize their value.

Debt Management

The process of overseeing and controlling an entity's debt load through financial planning, budgeting, and various strategies to ensure financial stability.