An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year.This may indicate that:
A)Obsolete inventory has not yet been reduced to fair market value.
B)There was an improper cutoff of sales at the end of the year.
C)An unusually large receivable was written off near the end of the year.
D)The aging of accounts receivable was improperly performed in both years.

Question

Quizplus · Accepted Answer

A lower accounts receivable turnover may indicate that sales were not properly recorded in the current year or that sales were recorded in the prior year but not properly reflected in accounts receivable. Improper cutoff of sales at the end of the year could result in an understatement of accounts receivable and a lower turnover, making option B the best choice. The other options may also affect accounts receivable and turnover, but they are less likely to be the cause of the decrease from one year to the next.

An Auditor Discovered That a Client's Accounts Receivable Turnover Is