An Auditor's Analytical Procedures Performed During the Overall Review Stage

question 95

Multiple Choice

An auditor's analytical procedures performed during the overall review stage indicated that the client's accounts receivable balance had 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) The client liberalized its credit standards in the current year and sold much more merchandise to customers with poor credit ratings.
• B) Twice as many accounts receivable were written off in the prior year than in the current year.
• C) A greater percentage of accounts receivable 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.

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Definitions:

Violent Families

refers to family units where physical, emotional, or sexual abuse is prevalent, impacting the well-being and safety of its members.

Observing Behavior

The act of systematically watching and analyzing individuals' actions in various situations to understand their conduct.

Heavy Drinking

Consuming large quantities of alcohol in a short period, typically leading to health risks and social or legal problems.

Binge Drinking

The consumption of an excessive amount of alcohol in a short period of time, often defined as five or more drinks for males and four or more drinks for females within about two hours.