Positive accounts receivable confirmations were circularized,and there were many differences where the client stated that the goods had not been received as of the date of the confirmation.In addition to the possibility that the goods were not received by the client,this type of reported difference could be an indication of
A)a cutoff misstatement.
B)timing differences with respect to recording sales returns.
C)improper recording of sales allowances.
D)theft of cash or lapping.

Question

Quizplus · Accepted Answer

A cutoff misstatement occurs when a transaction or event that occurred in one period is recorded in another period. In this case, the differences could be due to sales that occurred before the confirmation date but were recorded afterwards, leading to an overstatement of accounts receivable. The possibility that the goods were not received by the client is also a potential indication of a cutoff misstatement.

Positive Accounts Receivable Confirmations Were Circularized,and There Were Many Differences