Question

The understatement of sales and accounts receivable is best uncovered by?

1) Testing internal controls
2) Testing the aged accounts receivable trial balance
3) Substantive tests of transactions for shipments made but not recorded
4) Substantive tests of transactions for bad debts

Answer 1

Testing the aged accounts receivable trial balance is the best way to uncover understatement of sales and accounts receivable.

Step-by-step explanation:

The understatement of sales and accounts receivable is best uncovered by testing the aged accounts receivable trial balance. This involves reviewing the accounts receivable ledger and verifying the accuracy of the balances. It helps to identify any potential discrepancies or unrecorded transactions that could lead to an understatement of sales and accounts receivable.