Auditors use trends in the accounts receivable turnover ratio to assess the reasonableness of the allowance for doubtful accounts.

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Auditors use the accounts receivable turnover ratio to evaluate the efficiency of a company's collections policies and to identify any potential issues with the collectability of the accounts receivable. By analyzing trends in this ratio, auditors can determine if there may be a need to adjust the allowance for doubtful accounts. A declining accounts receivable turnover ratio may indicate that the quality of the accounts receivable is deteriorating, which may lead to an increased risk of uncollectible accounts. In this case, the auditor may recommend that the client increase their allowance for doubtful accounts to address the possible bad debt.

Auditors Use Trends in the Accounts Receivable Turnover Ratio to Assess