Comparison of individual customer balances with previous years will detect what type of possible misstatement?
A)misstatement in gross profit and bad debt expense
B)overstatement or understatement of bad debt expense
C)overstatement or understatement of allowance for uncollectible accounts
D)misstatements in accounts receivable and related income statement accounts

Question

Quizplus · Accepted Answer

Comparing individual customer balances with previous years helps in identifying inconsistencies or unusual changes in accounts receivable, which could indicate misstatements in accounts receivable and related income statement accounts such as sales revenue, bad debt expense, and the allowance for doubtful accounts. This method is effective in detecting errors or fraud that could affect the accuracy of the financial statements.

Comparison of Individual Customer Balances with Previous Years Will Detect