The Most Effective Audit Procedure for Determining the Collectability of an Account

question 69

Multiple Choice

The most effective audit procedure for determining the collectability of an account receivable is the

• A) Review of the subsequent cash collections.
• B) Examination of the related sales invoice(s).
• C) Confirmation of the account.
• D) Review of authorization of credit sales to the customer and the previous history of collections.

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Definitions:

Resource-Owners' Money Income

The income generated by individuals or entities from renting or providing their owned resources, such as land, labor, or capital, to others for use.

Costs to Business

All expenses incurred by a business in the process of producing goods or services, including both fixed and variable costs.

Distribution of Output

The way in which the total goods and services produced by an economy are allocated or distributed among its population.

Interest Income

The earnings received from investments in vehicles such as savings accounts, certificates of deposit, or bonds, typically presented as a percentage of the investment's total value.