A common way to evaluate the adequacy of the bad debt allowance is to
A)review the results of tests of controls that are concerned with the client's credit policy.
B)inspect carefully the noncurrent accounts on the aged trial balance to determine which ones have not been paid subsequent to the balance sheet date.
C)examine the program logic that is used to prepare the aged trial balance and to monitor the implementation of credit policies.
D)send positive confirmations to all accounts with balances over 90 days based on the aged trial balance.

Question

Quizplus · Accepted Answer

Inspecting the noncurrent accounts on the aged trial balance helps to identify accounts that have not been paid subsequent to the balance sheet date, which is important for evaluating the adequacy of the bad debt allowance. Reviewing tests of controls, examining program logic, and sending positive confirmations can be useful audit procedures but may not directly assess the adequacy of the bad debt allowance.

A Common Way to Evaluate the Adequacy of the Bad