If the business environment is experiencing a recession, the auditor most likely would focus increased attention on which of the following accounts?
A) Purchase returns and allowances.
B) Allowance for doubtful accounts.
C) Common stock.
D) Noncontrolling interest of a subsidiary purchased during the year.

Question

Quizplus · Accepted Answer

In a recession, there is a higher likelihood of customers experiencing financial difficulties and not being able to pay their debts. Therefore, the auditor would focus increased attention on the allowance for doubtful accounts to ensure that it accurately reflects the potential for bad debts.

If the Business Environment Is Experiencing a Recession, the Auditor