Question

If the number of days' sales in accounts receivable (365 days/receivables turnover) decreases significantly, which of the following assertions for accounts receivable most likely is violated?

A. Existence/Occurence
B. Completeness
C. Rights and Obligations
D. Classification

Answer 1

Completeness

Step-by-step explanation:

I am also looking for explanation. Here is one:

If the time it takes to collect money from customers decreases a lot, it's likely that some sales were not recorded, violating the completeness of accounts receivable.

Answer 2

When the number of days' sales in accounts receivable decreases significantly, the accounting assertion most likely violated is Completeness, suggesting all accounts receivable may not be fully recorded or there could be accuracy issues. The answer is B) Completeness

Step-by-step explanation:

If the number of days' sales in accounts receivable (365 days/receivables turnover) decreases significantly, the assertion for accounts receivable that is most likely violated is B. Completeness. This financial ratio reflects how quickly a company collects cash from its credit sales. A significant decrease in this ratio could suggest that the company's accounts receivable are not fully recorded or that there are issues with the accuracy of the recorded receivables.

For example, if a company has made a sale but has not yet invoiced the customer, the sale may not be included in the receivables turnover calculation, which would artificially improve the ratio. This would indicate a problem with the completeness of the accounts receivable. Auditors look at this ratio to help identify any such irregularities.