Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Textbook Question
Chapter 16, Problem 19.3MCQ
c. After a CPA has determined that accounts receivable have increased as a result of slow collections in a “tight money” environment, the CPA will be likely to
- (1) increase the balance in the allowance for
bad debt account. - (2) review the going concern ramifications.
- (3) review the credit and collection policy.
- (4) expand tests of collectibility.
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The objectives of Receivables Management are as follows:
a. All of above
O b. To maintain the debtors at minimum according to the credit policy offered to customers.
O C.
To control the cost of receivables, cost of collection, administrative expenses, bad debts and opportunity cost of funds blocked in the receivables.
O d. To obtain optimum (non maximum) value of sales;
Any time management makes an estimate, there is the risk of earnings management or fraud. Accounting for bad debts requires management to make an estimate on the future collectability of receivables. Discuss why this could be an area at risk for earnings management.
1. The negative form of accounts receivable confirmation request is particularly useful except when
a. Individual account balances are relatively large
b. Internal control surrounding accounts receivable is considered to be effective
c. A large number of small balances are involved
d. The auditor has reason to believe the persons receiving the request are likely to give them consideration
2. The starting point for the verification of the balance in the general ledger account is to obtain
a. A bank reconciliation from the client
b. The client’s cash account from the general ledger
c. A cutoff bank statement directly from the bank
d. The client’s year-end bank statement
Chapter 16 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Explain why you agree or disagree with the...Ch. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 10RQ
Ch. 16 - Under what circumstances is it acceptable to...Ch. 16 - Prob. 12RQCh. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Prob. 19.1MCQCh. 16 - Prob. 19.2MCQCh. 16 - c. After a CPA has determined that accounts...Ch. 16 - The following questions deal with confirmation of...Ch. 16 - Prob. 20.1MCQCh. 16 - Prob. 20.2MCQCh. 16 - Prob. 21.1MCQCh. 16 - Prob. 21.2MCQCh. 16 - Prob. 21.3MCQCh. 16 - Prob. 22.3MCQCh. 16 - Which of the following is least likely to be a...Ch. 16 - The following questions concern auditor...Ch. 16 - Prob. 23DQPCh. 16 - Prob. 25DQPCh. 16 - Prob. 24DQPCh. 16 - The following misstatements are sometimes found in...Ch. 16 - Prob. 27DQPCh. 16 - Niosoki Auto Parts sells new parts for foreign...Ch. 16 - Prob. 29DQPCh. 16 - Prob. 30DQPCh. 16 - (OBJECTIVES 16-2, 16.3) The Albring Company sells...Ch. 16 - Prob. 36C
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Question: Which of the following is not a control over debtors? a. investigation the credit worthiness of each other. b. sending out regular statements. c. monitoring all overdue accounts. d. paying within discount period. required: please answer this question by choosing the right options.arrow_forward4. Prepare reports and file documentation as required through completion of the following actions: a. Prepare reports that document the accounts receivable, debt recovery type and cause, and debt recovery plan, and distribute these to the supervisors, managers, and other designated parties b. File the documentation and reports according to organisational policy and procedures. Document or provide the policy/procedures used for file storage. Create an Aged Receivables Detail report that aligns with the bad debts ageing as per your Collections Policy and submit it with this assessmentarrow_forwardWhen using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet at the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will Group of answer choices A)decrease the net realizable value of the accounts receivable. B)have an effect that is not determinable from the information given. C)increase the net realizable value of the accounts receivable. D)decrease total current assets. e)None of the abovearrow_forward
- Which among the statements is not correct? a. Net realizable value of accounts receivable results when accounts receivable is reduced by allowance for doubtful accounts b. Credit balances in accounts receivable arising from customer's advances should be excluded from accounts receivable c. The allowance method of recording bad debt loss is the one consistent with accrual accounting. d. answer not givenarrow_forwardWhich of the following best describes the concept of the aging method of receivables? a.An accurate estimate of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period. b.Accounts receivable should be directly written off when the due date arrives and the customers have not paid the bill. c.Estimating the appropriate balance for the allowance for doubtful accounts results in the appropriate value for net accounts receivable on the statement of financial position. d.The precise amount of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period.arrow_forwardWhich of the following best describes the objective of estimating bad debt expense with the percentage of credit sales method? a.To estimate the amount of bad debt expense based on an aging of accounts receivable. b.To estimate bad debt expense based on a percentage of credit sales made during the period. c.To determine the amount of uncollectible accounts during a given period. d.To facilitate the use of the direct write-off method.arrow_forward
- Choose the one correct answer. Which of the following statements is invalid relating to confirmation of accounts receivable? a. A negative form of confirmation is preferable to use when individual account balances of customers are relatively smallb. A positive confirmation provides more reliable evidence than the negative confirmation because the auditor can perform follow-up procedures if no response is received from the debtorc. An auditor must consider using the negative form of confirmation when there is reason to believe that there may be a substantial number of accounts in dispute or with inaccuracies or irregularitiesd. In negative confirmation, failure to reply must be regarded as a correct response, even though the debtor may have ignored the confirmation requeste. None of the abovearrow_forwardChoose the correct and explain. The following statements pertain to presentation and valuation of receivables. Which is not in accordance with generally accepted practice? a.Credit balances in customers’ account receivable should be offset against other receivables to arrive at the net amount. b.Receivable balances should be valued at face amount minus allowance for doubtful accounts and for any anticipated adjustments, which in the normal course of events will reduce the amount of receivable to estimated realizable value. c.Long-term notes receivables which nominally bear no interest or an interest, which is unreasonably low should be stated at present value. d.Receivables denominated in foreign currency should be translated to local currency using the exchange rate on reporting period.arrow_forwardWhich method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance methodarrow_forward
- When a customer is delinquent on paying a notes receivable, your company has the option to continue to attempt collection or sell the debt to a collection agency. Research the benefits and challenges with each of these options and in a short essay, answer the following questions. A. What are the benefits and challenges of continuing to attempt collection yourself? B. What are the benefits and challenges of selling debt to a collection agency? C. If you had a dishonored notes receivable, which option would you select and why? D. Would you weight certain benefits or challenges differently when making your selection? How?arrow_forward2. Substantial amount of credit losses is due to poor loan monitoring. In view of this, suggest how might one safeguard a bank's interest when providing loans.arrow_forwardIf the auditor concludes that there is a high likelihood of material misstatement in accounts receivable due to changing economic conditions, the auditor concludes that inherent risk for accounts receivab is low. Select one: OTrue O False earrow_forward
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