An Auditor's Analytical Procedures Have Revealed That the Accounts Receivable

question 13

Multiple Choice

An auditor's analytical procedures have revealed that the accounts receivable of a client have doubled since the end of the prior year. However, the allowance for doubtful accounts, as a percentage of accounts receivable remained about the same. Which of the following client explanations most likely would satisfy the auditor?

• A) Credit standards were liberalized in the current year.
• B) Twice as many accounts receivable were written off in the prior year as compared to this year.
• C) A greater percentage of accounts were currently listed in the "more than 90 days overdue" category than in the prior year.
• D) The client opened a second retail outlet in the current year and its credit sales approximately equaled the older, established outlet.