It is the auditor's job to review the client's estimate to evaluate whether it has been determined in accordance with the applicable financial reporting framework.To do this,the auditor considers whether the allowance for doubtful accounts is properly valued based on
A)the accounts written off during the current year
B)the accounts receivable balance at the end of the current year
C)past economic conditions
D)the economic status of past customers
E)the net receivable balance that should represent the amount of cash the company expects to collect in the current year
F)both A and B
G)both C and D

Question

Quizplus · Accepted Answer

The auditor should consider both the accounts written off during the current year (choice A) and the accounts receivable balance at the end of the current year (choice B) when evaluating the client's estimate for allowance for doubtful accounts. Choice C (past economic conditions) and choice D (economic status of past customers) may be considered but they are not the primary factors in determining the valuation of the allowance for doubtful accounts. Choice E (net receivable balance) is not specific enough to determine whether the estimate is in accordance with the financial reporting framework. Therefore, F (both A and B) is the best choice.

It Is the Auditor's Job to Review the Client's Estimate