An auditor's analysis of specific accounts receivable and recent trends in bad debt losses as a percent of sales may cause the auditor to conclude that the allowance for doubtful accounts should be between $130,000 and $160,000.If management's recorded estimate falls within that range,the auditor ordinarily would conclude that the recorded amount is reasonable,and no difference would be aggregated.If management's recorded estimate is $110,000,how much would be aggregated as a misstatement?
A)$0.
B)$30,000.
C)$20,000.
D)$110,000.

Question

Quizplus · Accepted Answer

If management's recorded estimate falls within the range given by the auditor ($130,000 - $160,000), then the recorded amount is considered reasonable and no difference would be aggregated. However, if the recorded estimate is outside of that range, a misstatement would need to be aggregated. In this case, management's recorded estimate is $110,000, which falls below the range given by the auditor. Therefore, the misstatement would be the difference between the range given by the auditor and management's recorded estimate, which is $20,000 ($130,000 - $110,000 = $20,000). Therefore, the answer is choice C.

An Auditor's Analysis of Specific Accounts Receivable and Recent Trends