Homer and Moe,PC Are Auditing the Financial Statements of Lyoncraft,Inc

question 70

Multiple Choice

Homer and Moe,PC are auditing the financial statements of Lyoncraft,Inc.and decide to confirm a sample of accounts receivable.This test is performed by Homer and Moe primarily to substantiate which of the following assertions?

• A)Existence of related party transactions.
• B)Existence of accounts receivable.
• C)Obligation of debt.
• D)Cutoff of the allowance for bad debt.

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Definitions:

Accounting Actions

Activities or tasks performed by accountants or financial officers that relate to the process of recording, summarizing, and reporting financial transactions of a business.

Earnings Targets

Pre-determined goals for an organization's financial performance, often used to motivate and measure the effectiveness of management.

Debt Covenants

Agreements or clauses within a debt contract that impose certain conditions or restrictions on the borrowing party, aimed at protecting the lender.

Merger Target

A company that is considered a potential candidate for acquisition by another company.