CAF-8 · Chapter 7 · Question 7 of 10
An auditor identifies a massive increase in revenue just prior to the year-end, but a subsequent analytical review shows the receivables turnover days have spiked from 30 to 80 days. What combination of assertions is at highest risk here?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Occurrence of sales and valuation of trade receivables.
Explanation
A late spike in revenue coupled with unpaid, aging receivables strongly suggests that fictitious sales may have been recorded (testing occurrence) or that these new debtors will not pay, threatening the recoverability of the asset (testing valuation).
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