An Auditor Should Perform Alternative Procedures to Substantiate the Existence

question 26

Multiple Choice

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when ________.

• A)there is no response to a positive confirmation request
• B)there is no response to a negative confirmation request
• C)collectability of the receivables is in doubt
• D)pledging of the receivables is probable

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses, resulting in a net profit or loss over a specific period.

Retained Earnings

The portion of a company's profits that is not distributed as dividends to shareholders but is kept for reinvestment in the business or to pay debt.

Balance Sheet

Financial report presenting the total assets, liabilities, and equity of a company at a certain date, used to assess its financial stability and operational efficiency.

Assets

Assets are resources owned by a company that have economic value and can be used to meet debts, commit to investments, or generate income.