The most persuasive audit evidence for assessing accounts receivable department performance is a recently completed accounts receivable aging report, which provides direct data on the effectiveness of the department’s processes.
Table of Contents
Question
Which of the following would be the most persuasive form of audit evidence regarding the performance of the accounts receivable department?
A. Documented policies and procedures of the accounts receivable process and organizational chart showing the employees responsible for each procedure.
B. Confirmation with customers regarding the existence of receivables.
C. Copies of contracts with key customers.
D. A recently completed accounts receivable aging report.
Answer
The most persuasive form of audit evidence regarding the performance of the accounts receivable department would be:
D. A recently completed accounts receivable aging report.
Explanation
An accounts receivable aging report provides a breakdown of outstanding customer invoices and groups them based on how long they have been outstanding (e.g. current, 30 days past due, 60 days past due, etc.). This report offers direct evidence of the accounts receivable department’s effectiveness at collecting customer payments in a timely manner.
While documented policies and procedures (A) describe the intended receivables process, they do not provide evidence of how well those processes are actually being performed. Customer confirmations (B) help verify the existence and accuracy of receivable balances, but do not speak to the performance of the AR department itself. Copies of customer contracts (C) show payment terms but again do not directly demonstrate AR department performance.
In contrast, the aging report (D) shows the actual output and results achieved by the accounts receivable department. An aging report with a high proportion of significantly past due receivables would indicate the department is not effectively collecting on invoices. Conversely, minimal past due balances suggests strong performance in managing receivables.
So in summary, the accounts receivable aging report is the most persuasive evidence listed because it provides direct, results-oriented data to assess how well the department is functioning and meeting its objectives of timely collections. The other options provide relevant context but do not offer as concrete and conclusive evidence of performance.
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