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The accounts receivable turnover ratio increased significantly over a two-year period. This trend could indicate that:
Suggested Answer: D
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Choice 'd' is correct. When obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to search for significant deficiencies in the operation of internal control.
Choice 'a' is incorrect. In order to determine the nature, timing and extent of tests to be performed, an auditor must determine whether the control activities have been implemented.
Choice 'b' is incorrect. An auditor is required to perform procedures to confirm his/her understanding of the internal control systems' design, and to determine whether relevant controls have been implemented.
Choice 'c' is incorrect. An auditor is required to document his or her understanding of the entity's internal control components, even if he or she intends to use a substantive approach.
35 comments · newest first
JE
Jeannine
11 months ago
I agree, the aging could be getting worse too.
EL
Elenore
11 months ago
Wait, how can we be sure it's not just a drop in sales?
BR
Brinda
11 months ago
Definitely sounds like they're getting more aggressive with collections!
CA
Cathern
11 months ago
I think it could also mean they stopped giving discounts.
CA
Cassi
11 months ago
Increased turnover usually means better collections.
AL
Alexia
12 months ago
I’m a bit confused about option A; if the aging deteriorated, wouldn’t that mean the turnover would decrease instead?
LO
Lou
12 months ago
I practiced a similar question where a higher turnover indicated improved collections, so I’m leaning towards C as well.
LE
Leota
12 months ago
I'm not entirely sure, but I think if the turnover ratio is increasing, it might not mean that sales are decreasing, so D seems unlikely.
MA
Margery
1 year ago
I remember studying that an increase in accounts receivable turnover usually means better collection practices, so I think option C makes sense.
CA
Casie
1 year ago
I'm a bit unsure about this one. Does the increase in turnover ratio necessarily mean the accounts receivable aging has deteriorated? I'll need to double-check my understanding of that concept.
KA
Katy
1 year ago
Okay, let's see. If the turnover ratio went up, that means the company is collecting on its receivables faster. So it could be that they're being more aggressive with collections, or they eliminated discounts.
AR
Arlene
1 year ago
Hmm, this seems like a straightforward ratio question. I'll need to think through the implications of the accounts receivable turnover ratio increasing.
IR
Irene
1 year ago
I've got a good handle on this type of question. The key is to think through the possible reasons for the increased turnover ratio and select the most likely one based on the information provided.
DE
Dean
1 year ago
Ah, this is a good one! I remember learning about the different container image building commands in class. I think the correct answer is C, docker build. That's the command I use most often when working with containers.
CA
Cathern
1 year ago
I'm stuck between A and C. A seems weird because risk appetite isn't always about hard numbers, right? But I'm not 100% certain.
RE
Ressie
1 year ago
I'm a little confused by this question. I know there are different ways to maintain state on the web, but I can't recall the specific term they're looking for here. I'll have to review my notes and try to jog my memory.
MA
Margurite
1 year ago
I remember learning that federal guidelines can indeed help health plans navigate state law conflicts, but I'm not sure if that makes option A the best choice.
CH
Chaya
1 year ago
Haha, imagine if the real reason was that customer sales have substantially decreased. That would be a real bummer! I'll steer clear of Option D, though.
EA
Earleen
1 year ago
Wow, this is tricky. If the turnover ratio went up, maybe the accounts receivable aging has actually improved? I'll have to think about this one a bit more.
FA
Fabiola
1 year ago
D) Customer sales have substantially decreased.
KA
Karl
1 year ago
C) The company is more aggressively collecting customer accounts.
LI
Lisha
1 year ago
B) The company has eliminated its discount policy.
MO
Mozell
1 year ago
A) The accounts receivable aging has deteriorated.
GE
Georgeanna
1 year ago
Hmm, I'm not sure. Could it also mean the company has eliminated its discount policy? That would make sense too. I'll go with Option B.
BO
Bong
1 year ago
I think it's a good sign for the company's cash flow if they are collecting payments faster.
LA
Lashon
1 year ago
I agree, that could be a possibility. It shows they are managing their receivables efficiently.
NA
Nancey
1 year ago
I think the accounts receivable turnover ratio increasing could mean the company is more aggressively collecting customer accounts.
CH
Chantay
1 year ago
The accounts receivable turnover ratio increased, so I think the company is more aggressively collecting customer accounts. Option C seems like the correct answer here.
LU
Luz
1 year ago
Yeah, it's a good sign that they are managing their accounts receivable well. It's important for cash flow.
JO
Jose
1 year ago
I agree, option C makes the most sense. It shows that the company is on top of collecting what they are owed.
XE
Xenia
1 year ago
Yeah, it's a good sign that they are managing their accounts receivable effectively.
LA
Lavelle
1 year ago
I agree, option C makes the most sense. It shows that the company is on top of collecting what's owed to them.
OM
Omer
2 years ago
I'm not sure, but I think D could also be a possibility. If customer sales have decreased, it could lead to a higher turnover ratio.
AL
Alfred
2 years ago
I agree with Sherell. A higher accounts receivable turnover ratio usually means faster collection of accounts.
SH
Sherell
2 years ago
I think the answer is C. The company is more aggressively collecting customer accounts.