Audit documents often include a client-prepared aged trial balance of accounts receivable as of the balance sheet date.This aging is used by the auditor to
A) Evaluate internal control over credit sales.
B) Test the accuracy of recorded credit sales.
C) Evaluate the allowance for doubtful accounts.
D) Verify the existence of the recorded receivables.

Question

Quizplus · Accepted Answer

The aged trial balance of accounts receivable is used by the auditor to evaluate the adequacy of the allowance for doubtful accounts. This involves analyzing the aging to identify any past due or potentially uncollectible amounts and assessing whether the allowance is sufficient to properly reflect the expected losses. It is not used to evaluate internal control over credit sales, test the accuracy of recorded credit sales, or verify the existence of the recorded receivables, although these may be indirectly impacted by the adequacy of the allowance.

Audit Documents Often Include a Client-Prepared Aged Trial Balance of Accounts