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Question
You are auditing the allowance for doubtful accounts (ADA) and perform the analytical procedures shown below. Assume that no significant changes have occurred during the year in either the entity's credit policies or customer base. What concerns, if any, about adjusting the ADA should the auditor have based on the information shown below?
ADA/AR 8.3 7.2 8.5 7.4 8.3 7.3
Days AR Outstanding 32.4 23.8 28.6 25.1 28.3 24.7
It appears that the industry has remained relatively stable in both its ADA/AR and Days AR Outstanding, while the entity has significantly increased in the Days AR Outstanding in 2013. Assuming no significant changes in customer base or credit policies, the entity should increase the allowance in 2013, since Days AR Outstanding has increased.
Answer
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Related questions
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Which of the following statements is not true concerning assurance services?
A. The growth in assurance services has been driven in part by users' demands for more relevant information.
B. Assurance services focus on improving the quality of information or its context, for decision makers.
C. Unlike audit and attestation engagements, an engagement to perform assurance services does not require the CPA to consider information reliability.
D. Auditing and attestation services can be viewed as subsets of assurance services since there is overlap in their objectives.
Q:
The report of a CPA on a review of the financial statements of a nonpublic entity should not include a statement that
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B. the review was performed in accordance with generally accepted auditing standards.
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Q:
Which of the following procedures is not included in a review engagement of a nonpublic entity?
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During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the problem, the CPA should
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To be successful in a civil action under Section 11 of the Securities Act of 1933 concerning liability for a misleading registration statement, the plaintiff must prove
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Q:
Under common law, which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements?
A. The CPA is liable only to third parties in privity of contract with the CPA.
B. The CPA is liable only to known users of the financial statements.
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D. The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinion.
Q:
An auditor can be held criminally liable for
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Q:
When an accountant compiles a nonpublic entity's financial statements that omit substantially all disclosures required by generally accepted accounting principles, the accountant should indicate in the compilation report that the financial statements are
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Q:
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C. The accounting basis on which the financial statements are to be presented.
D. The accountant would need to know all of the other items listed when conducting a compilation.
Q:
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Q:
During a review of the financial statements of a nonpublic entity, an accountant becomes aware of inadequate disclosure that is material to the financial statements. If management refuses to correct the financial statement presentations, the accountant should
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Q:
Which of the following procedures is usually included in a review engagement of a nonpublic entity?
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Q:
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Q:
Section 11 under the Securities Act of 1933 treats claims against auditors more favorably than common law. What two things does a plaintiff need to prove to have a case against the auditor of a company in which she purchased new investments? What does the auditor have to do to have the case dismissed?
Q:
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Q:
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A. is considered an "except for" qualification of the opinion.
B. violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements.
C. necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."
D. is appropriate and would not negate the unqualified opinion.
Q:
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A. possibility of purchasing certain assets rather than leasing them.
B. capability of extending the due dates of existing debt.
C. appropriateness of changing depreciation methods from double declining balance to straight line.
D. marketability of property and equipment that management plans to keep.
Q:
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A. periods presented plus the one preceding period.
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C. current period and those of the other periods presented.
D. current and immediately preceding period only.
Q:
A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.