Chapter 11

Which of the following would provide the most assurance concerning the valuation of accounts receivable?

Assess the allowance for uncollectible accounts for reasonableness.

The confirmation of accounts receivable is most closely associated with:

Detection risk.

In your review of ABC Company's financials, you note that Receivables have increased approximately 200% from the previous year, while Cash has declined. Further investigation reveals that 70% of ABC's receivables were booked within 7 days of the end of the quarter. If financial statement fraud is involved, which type is most likely?

Fictitious revenues.

The auditors should confirm accounts receivable unless the auditors' assessment of the risk material misstatement is low.

Or accounts receivable are immaterial, or the use of confirmations would be ineffective.

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Of the following, which combination is it most likely that the auditors will use?

The positive form used for large balances and the negative form for the small balances.

An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This may indicate that:

There was an improper cutoff of sales at the end of the year.

An aged trial balance of accounts receivable may provide evidence on the adequacy of the allowance for uncollectible accounts.

True

Analytical procedures are used by auditors to gain evidence about the adequacy of the allowance for uncollectible accounts.

True