What evidence is utilized by the auditor for analytical purposes in substantiating the completeness of the allowance for bad debt estimate?
A)Accounts receivable aging schedule.
B)Copies of checks received from customers.
C)Confirmations returned without exception.
D)Stock prices of customer companies.

Question

Quizplus · Accepted Answer

The accounts receivable aging schedule provides information on the age of unpaid customer debts, which helps in assessing the adequacy of the allowance for bad debt estimate. If the aging schedule shows a high proportion of overdue debts, it might indicate that the allowance for bad debt needs to be increased.

Answer: B, C 
 Copies of checks received from customers and confirmations returned without exception are not relevant for substantiating the completeness of the allowance for bad debt estimate. These pieces of evidence are more suited to verifying the existence and accuracy of recorded accounts receivable balances.

Answer: D 
 Stock prices of customer companies are not relevant for substantiating the completeness of the allowance for bad debt estimate. This piece of evidence is not directly connected to the estimation of the allowance for bad debt but may be useful in assessing the financial health of customer companies.

What Evidence Is Utilized by the Auditor for Analytical Purposes