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 auditors to:
A)Consider internal control over credit sales.
B)Test the accuracy of recorded charge sales.
C)Estimate credit losses.
D)Verify the validity of the recorded receivables.

Question

Quizplus · Accepted Answer

The aged trial balance of accounts receivable provides information about the age of individual accounts receivable balances. Auditors can use this information to estimate credit losses by applying appropriate rates of provision to the balances in each aging category, based on historical credit loss experience of the client or industry. This estimation is necessary to ensure that the recorded receivables are fairly stated in accordance with the applicable financial reporting framework. Choice (B) would be addressed through other audit procedures, such as testing the accuracy of invoices and posting to the general ledger. Choice (A) would typically be addressed through testing controls over the sales process. Choice (D) would be addressed through confirming selected accounts receivable balances with customers or performing other substantive tests of the balances.

The Audit Working Papers Often Include a Client-Prepared,aged Trial Balance