Audit Documentation Often Includes a Client-Prepared, Aged Trial Balance of Accounts

question 16

Multiple Choice

Audit documentation often includes a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. The audit team uses this aging primarily to:

• A)evaluate internal control over credit sales.
• B)test the accuracy of recorded charge sales.
• C)estimate credit losses.
• D)verify the existence of the recorded receivables.

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Definitions:

Labor-Hour Contract

A contract in which payment is made based on the number of hours worked, typically used for projects where the scope is not clearly defined.

Hourly Rate

The amount of money paid for each hour of work.

Incentive Fee Contract

A contract type that provides additional compensation to the contractor for exceeding performance targets.

Cost Reimbursable Contract

A contract where the buyer reimburses the contractor for all legitimate costs incurred plus an additional fee for profit.