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:

High Conscientiousness

A personality trait characterized by diligence, carefulness, and thoroughness.

Internal Control

A process designed to assure the efficiency of operations, reliability of reporting, and compliance with laws and regulations within an organization.

Burnout

A state of physical, emotional, and mental exhaustion caused by prolonged exposure to stress, particularly in the workplace.

American Psychological Association

A professional organization representing psychologists in the United States, dedicated to advancing the creation, communication, and application of psychological knowledge to benefit society.