Which of the following is a substantive test of the trade receivables balance that is always performed?
A)Evaluating the adequacy of the provision for doubtful debts
B)Testing the accounting classification of sales transactions
C)Testing the mathematical accuracy of the cash receipts ledger
D)None of the above

Question

Quizplus · Accepted Answer

Evaluating the adequacy of the provision for doubtful debts is a substantive test that is always performed to ensure that the trade receivables balance is accurately stated. This test involves examining the aging of accounts receivable, identifying any unusual or significant items, and assessing the reasonableness of the provision for doubtful debts based on historical experience and current economic factors. Testing the accounting classification of sales transactions and testing the mathematical accuracy of the cash receipts ledger may also be performed as substantive tests, but they are not always required.

Which of the Following Is a Substantive Test of the Trade