Formamould Inc.sells plastic moulds to a variety of companies.Some moulds are custom made and cost thousands of dollars.To help customers finance these purchases,Formamould uses a variety of methods,such as payment terms stretched over three years,delayed payment,and pay-as-you-produce models tailored to individual customer needs.The outstanding balance is included in current accounts receivable.The general balance-related audit objective affected by this activity is
A)completeness.
B)accuracy.
C)allocation to accounts.
D)existence.

Question

Quizplus · Accepted Answer

The general balance-related audit objective affected by this activity is "allocation to accounts." This is because Formamould Inc. uses various financing methods for its sales, which can complicate how the outstanding balances are recorded and allocated in the financial statements. Proper allocation ensures that the receivables are correctly classified in the accounts, reflecting the terms and conditions of the sales and financing arrangements.