ACC450: Chapter 6

Audit plan

Match the Term: A description of the nature, timing, and extent to the audit [procedures to be performed

Time budget

Match the Term: An estimate of the time required to perform each step in the audit

Engagement letter

Match the Term: The purpose of this document is to avoid misunderstanding between the auditors and the client

Inherent risk

Match the Term: The risk of material misstatement of an assertion about an account without considering internal control

a. A material amount would significantly alter the "total mix" of information made available to an investor

PCAOB standards suggest which of the following when interpreting the federal securities laws relating to materiality a. A material amount would significantly alter the "total mix" of information made available to an investor b. Materiality cannot be used as a basis for interpreting federal securities laws. c. A material amount is that at which an individual's decision would be changed. d. Materiality is composed of quantitative and not qualitative aspects.

d. An engagement letter.

Preliminary arrangements agreed to by the auditors and the client should be reduced to writing by the auditors. The best place to set forth these arrangements is in: a. A client representation letter. b.A memorandum to be placed in the permanent section of the auditing working papers. c. A confirmation letter attached to the constructive services letter. d. An engagement letter.

d. Members of the board of directors who are not officers or employees.

The audit committee of a company must be made up of: a. Representatives from the client's management, investors, suppliers, and customers. b. The audit partner, the chief financial officer, the legal counsel, and at least one outsider. c. Representatives of the major equity interests, such as preferred and common stockholders. d. Members of the board of directors who are not officers or employees.

c. Substantive procedures.

The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on: a. Internal control. b. Statistical analysis. c. Substantive procedures. d. Tests of controls.

c. Details of the procedures which the auditors intend to apply.

The auditors will not ordinarily initiate discussion with the audit committee concerning the: a. Extent to which change in the company's organization will influence the scope of the examination. b. Details of potential problems which the auditors believe might cause a qualified opinion. c. Details of the procedures which the auditors intend to apply. d. Extent to which the work of internal auditors will influence the scope of the examination

d. Inherent risk

The risk of a material misstatement occurring in an account, assuming an absence of internal control, is referred to as a. Account risk. b. Control risk. c. Detection risk. d. Inherent risk

d. Detection risk.

The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as a. Business risk. b. Engagement risk. c. Control risk. d. Detection risk.

d. General ledger to source documents.

To best test existence, an auditor would sample from the: a. Source documents to journals. b. General ledger to the financial statements. c. Source documents to the general ledger. d. General ledger to source documents.

d. Original source documents.

To test for unsupported entries in the journals, the direction of audit testing should be to the: a. Ledger entries. b. Journal entries. c. Financial statements. d. Original source documents.

b. Use less predictable audit procedures.

Which of the following is most likely to be an overall response to fraud risks identified in an audit? a. Supervise members of the audit team less closely and rely more upon judgment. b. Use less predictable audit procedures. c. Use only certified public accountants on the engagement. d. Place increased emphasis on the audit of objective transactions rather than subjective transactions.

a. Relevance

Which of the following is not one of the assertions made by management about an account balance a. Relevance b. Existence. c. Valuation. d. Rights and obligations

b. Factors whose presence often have been observed in circumstances where frauds have occurred.

Which of the following statements is accurate about "fraud risk factors" considered when conducting an audit? a. Factors whose presence indicates that fraud exists. b. Factors whose presence often have been observed in circumstances where frauds have occurred. c. Factors obtained during the audit which lead to required communications with the audit committee. d. Factors whose presence will require modification to planned audit procedures

c. Supervisory position.

hree conditions generally are present when fraud occurs. Select the one below that is not one of those conditions. a. Incentive or pressure. b. Opportunity. c. Supervisory position. d. Attitude. e. References

d.Accepting the engagement

A successor auditor is required to attempt communication with the predecessor auditor prior to a. Performing test of controls. b. Testing beginning balances for the current year. c. Making a proposal for the audit engagement. d.Accepting the engagement

c. Obtain a knowledge of matters that relate to the nature of the entity's business.

An auditor who accepts an audit engagement and does not possess the industry expertise of the business entity, should: a. First inform management that an unqualified opinion cannot be issued. b. Engage financial experts familiar with the nature of the business entity. c. Obtain a knowledge of matters that relate to the nature of the entity's business. d. Refer a substantial portion of the audit to another CPA who will act as the principal auditor

d. Recorded sales have been properly posted to customer accounts.

As one step in testing sales transactions, a CPA traces a random sample of sales journal entries to debits in the accounts receivable subsidiary ledger. This test provides evidence as to whether: a. Each recorded sale represents a bona fide transaction. b. All sales have been recorded in the sales journal. c. All debit entries in the accounts receivable subsidiary ledger are properly supported by sales journal entries. d. Recorded sales have been properly posted to customer accounts.

b. Examining physical controls over assets.

Auditors must assess fraud risk on every audit and respond to the risks that are identified. Which of the following is not a procedure required to further address the fraud risk of management override of internal control a. Reviewing accounting estimates for biases. b. Examining physical controls over assets. c. Evaluating the business rationale for significant unusual transactions. d. Examining journal entries and other adjustments for evidence of fraud

a. Yes Yes

Audits of financial statements are designed to obtain reasonable assurance of detecting material misstatements due to Misappropriation of Assets Errors a. Yes Yes b. Yes No c. No Yes d. No No

c. It is an acceptable practice to carry out parts of the examination at interim dates.

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers. The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the? a. An engagement should not be accepted after the fiscal year-end. b. An inventory count must be observed at the balance sheet date. c. It is an acceptable practice to carry out parts of the examination at interim dates. d. The client's audit committee should not be told of any specific audit procedures which will be performed

c. Negative cash flows from investing.

In using the information on the statement of cash flows while obtaining an understanding of a profitable, growing company, which of the following would ordinarily be least surprising to an auditor? a. Decreases in accounts payable. b. Decreases in accounts receivable. c. Negative cash flows from investing. d. Negative operating cash flows.

a. Yes Yes

Individuals who commit fraud are ordinarily able to rationalize the act and also have an Incentive Opportunity a. Yes Yes b. Yes No c. No Yes d. No No

Business risk

Match the Term: A risk that threatens management's ability to achieve the organization's objectives

Significant risk

Match the Term: An identifies risk that requires special audit consideration

Audit risk

Match the Term: At the overall engagement level, this is the risk that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated.

Assertions

Match the Term: Representation by management that are communicated, explicitly or implicitly, in the financial statements

a. Source documents to recorded journal entries

Tests for unrecorded assets typically involve tracing from a. Source documents to recorded journal entries b. Source documents to observations. c. Recorded journal entries to documents. d. Recorded journal entries to observations.

c. Prior-year working papers of the predecessor auditors.

The auditors are planning an audit engagement for a new client in a business that is unfamiliar to the auditors. Which of the following would be the most useful source of information for the auditors during the preliminary planning stage when they are trying to obtain a general understanding of audit problems that might be encountered a. Client manuals of accounts and charts of accounts. b. AICPA Industry Audit Guides. c. Prior-year working papers of the predecessor auditors. d. Latest annual and interim financial statements issued by the client

c. Detect material misstatements in the financial statements.

The primary objective of tests of details of transactions performed as substantive procedures is to: a. Comply with generally accepted auditing standards. b. Attain assurance about the reliability of the accounting system. c. Detect material misstatements in the financial statements. d. Evaluate whether management's policies and procedures are operating effectively

a. General ledger to source documents.

To best test existence, an auditor would sample from the: a. General ledger to source documents. b. General ledger to the financial statements. c. Source documents to the general ledger. d. Source documents to journals.

a. Completeness

Tracing from source documents forward to ledgers is most likely to address which assertion related to posted entries a. Completeness b. Existence. c. Rights. d. Valuation.

False

True or False: An audit plan includes a detailed listing of the audit procedures to be performed in the verification of items in the financial statements.

True

True or False: At least a portion of the auditors' consideration of internal control usually is performed at an interim date rather than at the balance sheet date.

False

True or False: Audit committees should be made up of the most qualified directors regardless of whether they are part of management of the company

False

True or False: Confirming a bank account establishes existence but not rights to the cash balance

False

True or False: Preliminary arrangements with clients should be set forth in the management letter

False

True or False: The auditors' tests of controls are designed to substantiate the fairness of specific financial statement accounts

a. Yes Yes

Which measure of materiality (or both) considers quantitative considerations Planning Evaluation a. Yes Yes b. Yes No c. No Yes d. No No

c. Materiality and audit risk.

Which of the following elements underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting? a. Adequate disclosure. b. Quality control. c. Materiality and audit risk. d. Client acceptance.

c. Legality.

Which of the following is not an assertion that is made in the financial statements by management concerning each major account balance a. Completeness. b. Rights and obligations. c. Legality. d. Valuation

c. Substantive procedures.

Which portion of an audit is least likely to be completed before the balance sheet date? a. Tests of controls. b. Issuance of an engagement letter. c. Substantive procedures. d. Assessment of control risk.

c. An unreliable accounting system.

In planning and performing an audit, auditors are concerned about risk factors for two distinct types of fraud: fraudulent financial reporting and misappropriation of assets. Which of the following is a risk factor for misappropriation of assets? a. Generous performance-based compensation systems. b. Management preoccupation with increased financial performance. c. An unreliable accounting system. d. Strained relationships between management and the auditors.

a. Negative cash flows from investing.

In using the information on the statement of cash flows while obtaining an understanding of a profitable, growing company, which of the following would ordinarily be least surprising to an auditor? a. Negative cash flows from investing. b. Decreases in accounts receivable. c. Negative operating cash flows. d. Decreases in accounts payable.

b. The auditors' preliminary estimate of the smallest amount of misstatement that would be material to any one of the client's financial statements.

The auditors must consider materiality in planning an audit engagement. Materiality for planning purposes is a. The auditors' preliminary estimate of the largest amount of misstatement that would be material to any one of the client's financial statements. b. The auditors' preliminary estimate of the smallest amount of misstatement that would be material to any one of the client's financial statements. c. The auditors' preliminary estimate of the amount of misstatement that would be material to the client's balance sheet. d. An amount that cannot be quantitatively stated since it depends on the nature of the item

c. Written communication with the client.

The auditors' understanding established with a client should be established through a (an): a. Completely detailed audit plan. b. Oral communication with the client. c. Written communication with the client. d. Written or oral communication with the client.

c. Detection risk.

The risk that the auditors' procedures will lead them to conclude that a material misstatement does not exist in an account balance when in fact such a misstatement does exist is referred to as a. Account risk. b. Control risk. c. Detection risk. d. Inherent risk.

False

True or False: Analytical procedures are seldom used during the risk assessment stage of an audit engagement because they are substantive procedures

True

True or False: The completeness of recording of assets is generally verified by tracing from the source documents to the recorded entry.

True

True or False: The substantive approach to an audit is appropriate for many small businesses

True

True or False: Vouching the acquisition of assets is an audit procedure that is often performed to establish the valuation of the assets

a. The successor auditor has the responsibility to initiate contact with the predecessor auditor to ask about the client before the engagement is accepted; the predecessor has no responsibility to initiate this contact, even when aware of matters bearing on the integrity of management.

When a company has changed auditors, according to the Professional Standards: a. The successor auditor has the responsibility to initiate contact with the predecessor auditor to ask about the client before the engagement is accepted; the predecessor has no responsibility to initiate this contact, even when aware of matters bearing on the integrity of management. b. The predecessor must always respond fully to all inquiries made by the successor auditor. c. The successor may choose not to attempt any communication with the predecessor auditor. d. The successor must discuss with the predecessor matters bearing on the engagement prior to accepting the engagement

a. Make preliminary judgments about materiality levels for audit purposes.

When planning an audit, an auditor should: a. Make preliminary judgments about materiality levels for audit purposes. b. Conclude whether changes in compliance with prescribed control procedures justifies reliance on them. c. Prepare a preliminary draft of the management representation letter. d. Consider whether the extent of substantive procedures may be reduced based on the results of the internal control questionnaire.

b. Factors often observed in circumstances where frauds have occurred.

Which of the following best describes what is meant by the term "fraud risk factor"? a. Factors that, when present, indicate that risk exists. b. Factors often observed in circumstances where frauds have occurred. c. Factors that, when present, require modification of planned audit procedures. d. Weaknesses in internal control identified during an audit.

a. Management is interested in maintaining the entity's earnings trend by using aggressive accounting practices.

Which of the following circumstances would an auditor most likely consider a risk factor relating to misstatements arising from fraudulent financial reporting? a. Management is interested in maintaining the entity's earnings trend by using aggressive accounting practices. b. Several members of the board of directors have recently sold shares of the entity's stock. c. Several members of management have recently purchased additional shares of the entity's stock. d. The entity distributes financial forecasts to financial analysts that predict conservative operating results.

d. Inventory items of small size, but high value.

Which of the following conditions identified during the audit increases the risk of employee fraud? a. Large amounts of cash in the bank. b. Presence of reconciling items on a client prepared year-end proof of cash. c. Existence of a mandatory vacation policy for employees performing key functions. d. Inventory items of small size, but high value.

b. The prospective client is unwilling to make financial records available to the CPA.

Which of the following factors most likely would cause a CPA to not accept a new audit engagement? a. The CPA is unable to review the predecessor auditor's working papers due to a major fire that destroyed both hard and soft copy documentation. b. The prospective client is unwilling to make financial records available to the CPA. c. The prospective client has fired its prior auditor. d. The CPA lacks a thorough understanding of the prospective client's operations and industry

a. An overly complex organizational structure involving unusual lines of authority.

Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting? a. An overly complex organizational structure involving unusual lines of authority. b. Financial management's participation in the initial selection of accounting principles. c. Low growth and profitability as compared to other entity's in the same industry. d. Large amounts of liquid assets that are easily convertible into cash.

d. It is unlikely that sufficient evidence is available to support an opinion on the financial statements

Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should not be accepted a. There are significant related party transactions that management claims occurred in the ordinary course of business. b. Internal control activities requiring the segregation of duties are subject to management override. c. Management continues to employ an inefficient system of information technology to record financial transactions. d. It is unlikely that sufficient evidence is available to support an opinion on the financial statements

b. Management's disregard for internal control.

Which of the following factors would most likely cause a CPA to decide not to accept a new audit engagement a. Lack of understanding of the potential client's internal auditors' computer-assisted audit techniques. b. Management's disregard for internal control. c. The existence of related party transactions. d. Management's attempt to meet earnings per share growth rate goals

a. Yes Yes

Which of the following is (are) considered a further audit procedure(s) that may be designed after assessing the risks of material misstatement Substantive Tests of Details Substantive Analytical Procedures a. Yes Yes b. Yes No c. No Yes d. No No

c. Company management falsifies inventory count tags thereby overstating ending inventory and understating cost of goods sold.

Which of the following is an example of fraudulent financial reporting? a. An employee steals inventor and the "shrinkage" is recorded in cost of goods sold. b. An employee "borrows" tools from the company and neglects to return them; the cost is reported as a miscellaneous operating expense. c. Company management falsifies inventory count tags thereby overstating ending inventory and understating cost of goods sold. d. An employee diverts customer payments to his personal use, concealing his actions by debiting an expense account, thus overstating expenses.

a. Fraud with a material effect on the financial statements should ordinarily be disclosed by the auditor through use of an "emphasis of a matter" paragraph added to the audit report.

Which of the following is correct concerning requirements about auditor communications about fraud? a. Fraud with a material effect on the financial statements should ordinarily be disclosed by the auditor through use of an "emphasis of a matter" paragraph added to the audit report. b. All fraud with a material effect on the financial statements should be reported directly by the auditor to the Securities and Exchange Commission. c. Fraud that involves senior management should be reported directly to the audit committee regardless of the amount involved. d. The auditor has no responsibility to disclose fraud outside the entity under any circumstances

d. In deciding whether an account is a significant account one does not consider the effect of internal control.

Which of the following is correct concerning the PCAOB's concept of a significant account? a. It is an account for which qualitative materiality considerations are particularly important. b. It is the same as a relevant assertion. c. The auditor need only consider significant accounts when controls do not operate effectively. d. In deciding whether an account is a significant account one does not consider the effect of internal control.

d. Management operating and financing decisions are dominated by top management.

Which of the following is least likely to be considered a financial statement audit risk factor? a. Rate of change in the entity's industry is rapid. b. Profitability of the entity relative to its industry is inconsistent. c. A new client with no prior audit history. d. Management operating and financing decisions are dominated by top management.

a. Are all financial reporting operations at one location?

Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud a. Are all financial reporting operations at one location? b. Does it have knowledge of fraud or suspect fraud? c. Does it have programs to mitigate fraud risks? d. Has it reported to the audit committee the nature of the company's internal control?

a. Make a legal determination of whether fraud has occurred.

Which of the following is least likely to be required on an audit? a. Make a legal determination of whether fraud has occurred. b. Evaluate the business rationale for significant, unusual transactions. c. Test appropriateness of journal entries and adjustments. d. Review accounting estimates for biases

c. Arises from an item not capable of precise measurement.

Which of the following is least likely to render material a quantitatively small misstatement material? a. The transaction involves a related party. b. Affects the registrant's compliance with regulatory requirements. c. Arises from an item not capable of precise measurement. d. Masks a change in earnings or other trends.

c. Arises from an item not capable of precise measurement.

Which of the following is least likely to render material a quantitatively small misstatement material? a. Affects the registrant's compliance with regulatory requirements. b. Masks a change in earnings or other trends. c. Arises from an item not capable of precise measurement. d. The transaction involves a related party.

d. Use less predictable audit procedures

Which of the following is most likely to be an overall response to fraud risks identified in an audit? a. Only use certified public accountants on the engagement. b. Place increased emphasis on the audit of objective transactions rather than subjective transactions. c. Supervise members of the audit team less closely and rely more upon judgment. d. Use less predictable audit procedures

a. Extreme degree of competition within the industry.

Which of the following is most likely to be considered a risk factor relating to fraudulent financial reporting? a. Extreme degree of competition within the industry. b. Sales goals in excess of any of the preceding three years. c. Low turnover of senior management. d. Capital structure including various operating subsidiaries.

c. Establishing proper liabilities relating to assets.

Which of the following is not a general objective for the audit of asset accounts? a. Establishing existence of assets. b. Establishing proper valuation of assets. c. Establishing proper liabilities relating to assets. d. Establishing the completeness of assets.

c. Results of tests of controls.

Which of the following is not a required source of information for the auditors' assessment of fraud risk a. Discussion among audit team members. b. Fraud risk factors. c. Results of tests of controls. d. Inquiry of management and others.

b. Increase the assessed level of detection risk.

Which of the following is not an example of a likely adjustment in the auditors' overall audit approach when significant risk is found to exist? a. Assign personnel with particular skill to areas of high risk. b. Increase the assessed level of detection risk. c. Obtain increased evidence about the appropriateness of management's selection of accounting principles. d. Apply increased professional skepticism about material transactions.

d. Vouching transactions.

Which of the following is not used by auditors to establish the completeness of recorded assets? a. Performing analytical procedures. b. Tracing from source documents to entries in the accounting records. c. Assessing control risk. d. Vouching transactions.

a. Limitations of the engagement

Which of the following matters is generally included in an auditor's engagement letter a. Limitations of the engagement b. Factors to be considered in establishing preliminary judgments about materiality. c. Management's liability for all illegal acts committed by its employees. d. The auditor's responsibility to obtain negative assurance relating to non-compliance with laws and regulations

c. Confirmation of all major accounts.

Which of the following procedures is not performed as a part of planning an audit engagement? a. Designing an audit program. b. Reviewing the working papers of the prior year. c. Confirmation of all major accounts. d. Developing an overall audit strategy

d. A listing of the client's branch offices selected for testing.

Which of the following should not normally be included in the engagement letter for an audit? a. A description of the responsibilities of client personnel to provide assistance. b. An indication of the amount of the audit fee. c. A description of the limitations of an audit. d. A listing of the client's branch offices selected for testing.

d. Facts that might bear on the integrity of management.

Which of the following should the auditors obtain from the predecessor auditors before accepting an audit engagement? a. Analysis of balance sheet accounts. b. Analysis of income statement accounts. c. All matters of continuing accounting significance. d. Facts that might bear on the integrity of management.

b. Inventory is comprised of precious stones.

Which of the following situations would most likely require special audit planning by the auditors? a. Depreciation methods used on the client's tax return differ from those used on the books. b. Inventory is comprised of precious stones. c. Assets costing less than $500 are expensed even though the expected life exceeds one year. d. Some items of factory and office equipment do not bear identification numbers.

b. The auditors' planning level of materiality may be disaggregated into smaller "tolerable misstatements" for the various accounts.

Which of the following statements is correct regarding the auditor's determination of materiality a. The planning level of materiality should normally be the larger of the amount considered for the balance sheet versus the income statement. b. The auditors' planning level of materiality may be disaggregated into smaller "tolerable misstatements" for the various accounts. c. Auditors may use various rules of thumb to arrive at an evaluation level of materiality, but not for determining the planning level of materiality. d. The amount used for the planning should equal that used for evaluation

a. The auditors' preliminary assessment of internal control

Which of the following topics is not normally included in an engagement letter a. The auditors' preliminary assessment of internal control b. The auditors' estimate of the fee for the engagement. c. Limitations on the scope of the engagement. d. A description of responsibility for the detection of fraud.

a. Perform the risk assessment.

Which of the following would be least likely to be considered an audit planning procedure? a. Perform the risk assessment. b. Develop the overall audit strategy c. Develop the audit plan. d. Use an engagement letter.

a. Inability to generate positive cash flows from operations, while reporting large increases in earnings

Which of the following would heighten an auditor's concern about the risk of fraudulent financial reporting? a. Inability to generate positive cash flows from operations, while reporting large increases in earnings b. Management's lack of interest in increasing the dividend paid on common stock. c. Large amounts of liquid assets that are easily convertible into cash. d. Inability to borrow necessary capital without obtaining waivers on debt covenants.

b. The successor auditors should obtain permission from the prospective client to contact the predecessor auditors.

Which statement is correct relating to a potential successor auditor's responsibility for communicating with the predecessor auditors in connection with a prospective new audit client a. The successor auditors have no responsibility to contact the predecessor auditors. b. The successor auditors should obtain permission from the prospective client to contact the predecessor auditors. c. The successor auditors should contact the predecessors regardless of whether the prospective client authorizes contact. d. The successor auditors need not contact the predecessors if the successors are aware of all available relevant facts.

c. Consider the likelihood that the risks could result in material misstatements.

While assessing the risks of material misstatement auditors identify risks, relate risk to what could go wrong, consider the magnitude of risks and a. Assess the risk of misstatements due to illegal acts. b. Consider the complexity of the transactions involved. c. Consider the likelihood that the risks could result in material misstatements. d. Determine materiality levels.

c. Form 8-K.

A form filed with the SEC when a company changes auditors is a: a. Form B-1. b. Form S-1. c. Form 8-K. d. Form 10-K.

d. No No

A predecessor auditor will ordinarily initiate communication with the successor auditor Prior to the Successor's Acceptance of the Engagement, Subsequent to the Successor's Acceptance of the Engagement a. Yes Yes b. Yes No c. No Yes d. No No

d. Analytical procedures.

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the risk assessment phase of the audit by the use of: a. Tests of transactions and balances. b. An assessment of internal control. c. Specialized audit programs. d. Analytical procedures.

b. Completeness.

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of a. Accuracy. b. Completeness. c. Control. d. Existence.

d. Understanding as to the reasons for the change of auditors

Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's a. Awareness of the consistency in the application of generally accepted accounting principles between accounting periods. b. Evaluation of all matters of continuing accounting significance. c. Opinion of any subsequent events occurring since the predecessor's audit report was issued. d. Understanding as to the reasons for the change of auditors

c. Valuation.

Determining that receivables are presented at net-realizable value is most directly related to which management assertion? a. Rights. b. Presentation and disclosure. c. Valuation. d. Existence

b. Allowance for doubtful accounts.

If the business environment is experiencing a recession, the auditor most likely would focus increased attention on which of the following accounts? a. Common stock. b. Allowance for doubtful accounts. c. Purchase returns and allowances. d. Noncontrolling interest of a subsidiary purchased during the year