In the area of accounts receivable, it is normal to find a high assessment of inherent risk for the existence or occurrence assertion and for the valuation or allocation assertion.

Question

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Inherent risk in accounts receivable is often considered high for the existence or occurrence assertion because there is a risk that the receivables recorded may not actually exist or may not pertain to actual sales transactions. For the valuation or allocation assertion, the risk is high due to the possibility that receivables may not be collectible or accurately valued, reflecting potential issues with bad debt estimation or incorrect allocation of payments.

In the Area of Accounts Receivable, It Is Normal to Find