An Auditor Should Perform Alternative Procedures to Substantiate the Existence

question 27

Multiple Choice

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when:

• A)No reply to a positive confirmation request is received.
• B)No reply to a negative confirmation request is received.
• C)Collectibility of the receivables is in doubt.
• D)Pledging of the receivables is probable.

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Definitions:

Free Cash Flow

This represents the amount of cash a company generates from its operations after accounting for capital expenditures, showing the liquidity available for expansion, dividends, or debt repayment.

Capital Expenditures

Expenses incurred by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment, often to improve or maintain their long-term capacity and efficiency.

Net Cash

The amount of cash available after accounting for cash inflows minus cash outflows, reflecting a company's ability to meet its short-term obligations.

Operating Activities

Activities directly related to the principal revenue-generating activities of an organization.