Question

An auditor compares the current-year revenues and expenses with those of the prior year and investigates all changes exceeding 5 percent. By this procedure the auditor would be most likely to learn that

(a) Fourth-quarter payroll taxes in the current year were not paid.
(b) The client changed its capitalization policy for small tools in the current year.
(c) A current-year increase in property tax rates has not been recognized in the client's accrual.
(d) The current-year provision for uncollectible accounts is inadequate because of worsening economic conditions.

Answer 1

The auditor would be most likely to learn that the current-year provision for uncollectible accounts is inadequate because of worsening economic conditions.

Step-by-step explanation:

The auditor would be most likely to learn that (d) the current-year provision for uncollectible accounts is inadequate because of worsening economic conditions. An auditor compares the current-year revenues and expenses with those of the prior year and investigates all changes exceeding 5 percent. If there has been a significant increase in uncollectible accounts in the current year compared to the prior year, it may indicate that the provision for uncollectible accounts is inadequate. This could be a result of worsening economic conditions, making it more difficult for customers to pay their debts.