Question

If the business environment is experiencing a recession, the auditor most likely would focus increased attention on which of the following accounts?

a. Accounts Receivable
b. Inventory
c. Property, Plant, and Equipment
d. Allowance for Doubtful Accounts

Answer 1

During a recession, an auditor would likely focus on the Allowance for Doubtful Accounts because of increased customer payment defaults or delays, impacting the collectability of accounts receivable.

Step-by-step explanation:

If the business environment is experiencing a recession, the auditor would likely focus increased attention on the Allowance for Doubtful Accounts. During a recession, customers may delay or default on their payments, which increases the risk that accounts receivable may not be collectible. The Allowance for Doubtful Accounts is an estimate of the receivables that a company does not expect to actually collect, making it critical to carefully assess during economic downturns.