An Auditor Is Comparing the Write-Off of Uncollectible Accounts as a Percentage

question 40

Multiple Choice

An auditor is comparing the write-off of uncollectible accounts as a percentage of total accounts receivable with previous years. A possible misstatement this procedure could uncover is

• A) overstatement or understatement of sales.
• B) overstatement or understatement of accounts receivable.
• C) overstatement or understatement of bad debt expense.
• D) overstatement or understatement of sales returns and allowances.

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Definitions:

Liability

The legal responsibility for one's actions or omissions, which can result in being obliged to offer compensation for harm caused.

Proxy

A proxy is an authorization given by a shareholder or other party to represent them and vote on their behalf in a corporate or other formal meeting.

Shareholders' Meeting

A gathering of a corporation's shareholders, held to discuss the company's performance, elect the board of directors, and make decisions on major company issues.

Embezzlement

The act of dishonestly withholding or misappropriating funds or assets that have been entrusted to someone's care, typically in a work or official capacity.