Assume You Are Working on a 12/31 Year-End Audit

question 28

Essay

Assume you are working on a 12/31 year-end audit. It is now March 31ˢᵗ and the 12/31 accounts receivable aging shows a large receivable that was outstanding on 12/31 for 120 days. Further, the entity's receivables are typically collected in less than 45 days. You anticipate that the entity's allowance for doubtful account should be increased and inform the entity about your disposition. Management disagrees. Is there an alternative substantive procedure that you could perform that would provide convincing evidence that this balance is collectible? If so, explain.

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Definitions:

Cover Charge

A fee that patrons are required to pay upon entry to a bar, nightclub, or restaurant, typically to cover entertainment expenses.

Hank's Honkytonk

A fictional or specific bar or entertainment venue, often associated with country music and dancing.

Unprofitability

The condition of a business or an investment generating more expenses than revenue, resulting in a financial loss.

Nickel-and-dimed

A phrase describing a situation where small amounts of money are frequently charged, leading to a substantial total expense over time.