The understatement of sales and accounts receivable is best uncovered by
A) testing internal controls.
B) testing the aged accounts receivable trial balance.
C) substantive tests of transactions for shipments made but not recorded.
D) substantive tests of transactions for bad debts.

Question

Quizplus · Accepted Answer

Substantive tests of transactions for shipments made but not recorded directly address the risk of understatement of sales and accounts receivable by identifying goods that have been shipped but not recorded in the financial statements, which would lead to an understatement of these accounts.

The Understatement of Sales and Accounts Receivable Is Best Uncovered