Certain types of misstatements that affect cash may be detected in the audit of tests of controls.Which of the following misstatements would be detected in the audit of the sales and collection cycle?

Question

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A defalcation of cash hidden by an unauthorized write-off of a bad debt would affect the accounts receivable balance and the allowance for doubtful accounts, which are part of the sales and collection cycle. Testing the controls in this cycle should reveal any irregularities in cash handling and reporting. The other misstatements listed are more likely to be detected during the audit of the acquisition and payment cycle or the inventory and warehousing cycle.

Certain Types of Misstatements That Affect Cash May Be Detected