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.

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Definitions:

DNA

Deoxyribonucleic acid, a molecule that carries the genetic instructions used in the growth, development, functioning, and reproduction of all known living organisms.

Ribose

A five-carbon sugar that is a crucial component of RNA (ribonucleic acid) molecules.

Helix

A three-dimensional, spiral shape, common in structural biology, particularly in the structure of proteins and nucleic acids like DNA.

Adenine

A purine nucleobase vital for the structure of DNA and RNA, where it pairs with thymine in DNA and uracil in RNA.