In Evaluating the Adequacy of the Allowance for Doubtful Accounts

question 45

Multiple Choice

In evaluating the adequacy of the allowance for doubtful accounts, an auditor most likely reviews the entity's aging of receivables to support management's financial statement assertion of:

• A)existence.
• B)valuation or allocation.
• C)completeness.
• D)rights and obligations.

---

Definitions:

Incremental Net Income

The increase in net income resulting from a particular business decision compared to the scenario where the decision is not made.

Income Tax Expense

The amount of money a company or individual owes in taxes based on the taxable income for a given period, typically one year.

Profitability Index

A calculation used to determine the relative profitability of a project by dividing the present value of future cash flows by the initial investment.

Working Capital

Working capital is the difference between a company's current assets and current liabilities, indicating the liquidity and operational efficiency of the business.