Comparing bad debt expense as a percentage of gross sales with previous years will detect what kind of possible misstatement?
A)uncollectible accounts receivable not provided for
B)overstatement of sales and accounts receivable
C)understatement of sales and accounts receivable
D)understatement of allowance for uncollectible accounts

Question

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Comparing bad debt expense as a percentage of gross sales with previous years will detect a possible misstatement of uncollectible accounts receivable not provided for. This is because if bad debt expense as a percentage of gross sales is higher than previous years, it can indicate that the company may not have properly accounted for its uncollectible accounts receivable in the current period.

Comparing Bad Debt Expense as a Percentage of Gross Sales