When evaluating the risk of material misstatement with regards to defalcations involving receivables (a credit entry to accounts receivable for amounts not received), the auditor would expect an experienced bookkeeper to most likely debit which of the following accounts?
A)Cash.
B)Sales returns.
C)Miscellaneous income.
D)Accounts payable.

Question

Quizplus · Accepted Answer

When defalcations (fraudulent removal of funds) involving receivables occur, an experienced bookkeeper might attempt to cover up the fraud by debiting Sales returns. This action would reduce the receivables without affecting cash, making it appear as if a customer returned goods or declined services, thus concealing the missing funds.

When Evaluating the Risk of Material Misstatement with Regards to Defalcations