Example) The auditor notes a significant increase in AR (214%) while Sales remain relatively constant (-1%). One reason we see this unexpected change in AR without a supporting change in sales is that the credit policy changed and credit sales were extended to lower quality customers who have been less likely to remit payment. Further investigation will be performed. Another reason we may see the change is that some uncollectible accounts in AR were not removed, we note a supporting decrease in Bad Debt Expense which has no balance for the current year. This raises the risk of material misstatement associated with AR and the ADA and BDE.

Provide detailed explanations using alpha characters below and use these alpha characters to cross-reference to balances on the preliminary analytic above.

A)

B)

C)