Question

The accounts receivable balance-related audit objective net realizable value is not affected by assessed control risk for sales or cash receipts.

A) True
B) False

Answer 1

The accounts receivable balance-related audit objective net realizable value is affected by assessed control risk for sales or cash receipts.

Step-by-step explanation:

The statement given in the question is false. The accounts receivable balance-related audit objective net realizable value is affected by assessed control risk for sales or cash receipts.

The net realizable value (NRV) is the amount of accounts receivable that a company expects to collect after accounting for any potential losses due to uncollectible accounts. Control risk is the risk that a material misstatement could occur in a specific assertion and not be prevented or detected on a timely basis by the company's internal controls.

Assessed control risk affects the auditor's assessment of the risk of material misstatement and the nature, timing, and extent of auditing procedures. If control risk is assessed as high, it means the company's internal controls are not effective in preventing or detecting misstatements related to sales or cash receipts, which in turn affects the reliability of the net realizable value.