CPA · Question 24 · Area III: Performing Procedures
An auditor is auditing the allowance for doubtful accounts of a nonissuer. The auditor is concerned that management has understated the allowance by failing to account for deteriorating economic conditions affecting a major customer. Which of the following procedures would provide the MOST persuasive evidence regarding the adequacy of the allowance?
Answer options:
Inquiring of the credit manager regarding the customer's payment history.
Reviewing the aging of accounts receivable at year-end.
Reviewing the customer's financial statements and credit agency reports, and analyzing subsequent cash receipts from the customer.
Confirming the balance directly with the customer.
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