The audit working papers often include a client- prepared, aged trial balance of accounts receivable as of the balance sheet date. This aging is BEST used by the auditor to:
A) test the accuracy of recorded charge sales.
B) evaluate internal control over credit sales.
C) estimate credit losses.
D) verify the validity of the recorded receivables.

Question

Quizplus · Accepted Answer

The client-prepared, aged trial balance of accounts receivable can be used by the auditor to estimate credit losses. This aging report categorizes receivables by the length of time they have been outstanding, and the auditor can use this information to assess the likelihood of collection and determine the adequacy of the allowance for doubtful accounts. While it may be possible to use the aging report to test the accuracy of recorded sales, evaluate internal control over credit sales, or verify the validity of recorded receivables to some extent, these are not the primary purposes of the aging report in the audit context.

The Audit Working Papers Often Include a Client- Prepared, Aged