Question

During the audit of Moon Co., the auditor disagrees with management's estimation of collectible accounts receivable. The possible misstatement amount is material. Which of the statements below should weigh more heavily for the auditor in this instance?

A. Moon management has the right to make company estimates.
B. Requiring an adjustment to the allowance for doubtful accounts would give stockholders access to fair and adequate information.
C. Accounts Receivable as stated by Moon Co., might turn out to be fully collectible.
D. The interests of Moon Co., the auditor, and the public should be weighed equally in the decision.

Answer 1

The statement that should weigh more heavily for the auditor in this instance is option B: Requiring an adjustment to the allowance for doubtful accounts would give stockholders access to fair and adequate information.

Step-by-step explanation:

The statement that should weigh more heavily for the auditor in this instance is option B: Requiring an adjustment to the allowance for doubtful accounts would give stockholders access to fair and adequate information.

When management's estimation of collectible accounts receivable is disagreed upon by the auditor, it indicates a potential misstatement that could affect the financial statements. Adjusting the allowance for doubtful accounts would provide more accurate and reliable information about the company's financial position to the stockholders.

It is essential for the auditor to prioritize the interests of the stockholders and ensure that the financial information presented is transparent, fair, and reflects the true collectability of accounts receivable.