AICPA CPA-Auditing Exam - Topic 1 Question 77 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 77
Topic #: 1

[All CPA-Auditing Questions]

The accounts receivable turnover ratio increased significantly over a two-year period. This trend could indicate that:

AThe accounts receivable aging has deteriorated.

BThe company has eliminated its discount policy.

CThe company is more aggressively collecting customer accounts.

DCustomer sales have substantially decreased.

Show Suggested Answer

Suggested Answer: D

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.

by Howard at Nov 21, 2023, 04:19 PM

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Jeannine

3 months ago

I agree, the aging could be getting worse too.

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Elenore

3 months ago

Wait, how can we be sure it's not just a drop in sales?

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Brinda

3 months ago

Definitely sounds like they're getting more aggressive with collections!

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Cathern

4 months ago

I think it could also mean they stopped giving discounts.

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Cassi

4 months ago

Increased turnover usually means better collections.

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Alexia

4 months ago

I’m a bit confused about option A; if the aging deteriorated, wouldn’t that mean the turnover would decrease instead?

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Lou

4 months ago

I practiced a similar question where a higher turnover indicated improved collections, so I’m leaning towards C as well.

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Leota

4 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.

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Margery

5 months ago

I remember studying that an increase in accounts receivable turnover usually means better collection practices, so I think option C makes sense.

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Casie

5 months 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.

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Katy

5 months 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.

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Arlene

5 months ago

Hmm, this seems like a straightforward ratio question. I'll need to think through the implications of the accounts receivable turnover ratio increasing.

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Irene

5 months 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.

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Dean

5 months 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.

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Cathern

5 months 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.

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Ressie

5 months 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.

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Margurite

5 months 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.

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Chaya

9 months 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.

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Earleen

9 months 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.

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Fabiola

8 months ago

D) Customer sales have substantially decreased.

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Karl

8 months ago

C) The company is more aggressively collecting customer accounts.

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Lisha

8 months ago

B) The company has eliminated its discount policy.

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Mozell

9 months ago

A) The accounts receivable aging has deteriorated.

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Georgeanna

9 months 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.

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Bong

9 months ago

I think it's a good sign for the company's cash flow if they are collecting payments faster.

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Lashon

9 months ago

I agree, that could be a possibility. It shows they are managing their receivables efficiently.

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Nancey

9 months ago

I think the accounts receivable turnover ratio increasing could mean the company is more aggressively collecting customer accounts.

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Chantay

10 months 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.

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Luz

9 months ago

Yeah, it's a good sign that they are managing their accounts receivable well. It's important for cash flow.

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Jose

9 months ago

I agree, option C makes the most sense. It shows that the company is on top of collecting what they are owed.

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Xenia

9 months ago

Yeah, it's a good sign that they are managing their accounts receivable effectively.

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Lavelle

9 months ago

I agree, option C makes the most sense. It shows that the company is on top of collecting what's owed to them.

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Omer

11 months 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.

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Alfred

11 months ago

I agree with Sherell. A higher accounts receivable turnover ratio usually means faster collection of accounts.

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Sherell

11 months ago

I think the answer is C. The company is more aggressively collecting customer accounts.

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