The auditor of the revenue cycle of ABC Company computes an estimate of ABC's allowance for doubtful accounts and compares it to the estimate provided by ABC's management.The purpose for this procedure is to substantiate which assertion?
A)Existence of receivables.
B)Cutoff of receivables.
C)Valuation of receivables.
D)Rights to receivables.

Question

Quizplus · Accepted Answer

The auditor comparing their estimate of ABC's allowance for doubtful accounts to the estimate provided by management helps to substantiate the valuation assertion of the receivables. This assertion relates to whether the amounts stated for the receivables in the financial statements are accurate, including the allowance for doubtful accounts. By comparing the auditor's estimate with management's estimate, the auditor is able to assess whether the allowance for doubtful accounts is reasonable and adequately reflects the risks associated with collecting the receivables.

The Auditor of the Revenue Cycle of ABC Company Computes