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Cutoff Alternative 1: Compute the accounts receivable turnover ratio and days sales outstanding. If you selected this procedure, you opted to perform analytical procedures to
Cutoff Alternative 1: Compute the accounts receivable turnover ratio and days sales outstanding. If you selected this procedure, you opted to perform analytical procedures to test the cutoff for the client sales transactions. Ratios assist auditors in determining the rate of collections for a company, which can also be useful in evaluating the cutoff assertion. These ratios can be compared with industry averages to determine any unlikely fluctuations. The senior has already performed research on the industry standards in the wholesaler industry and provided you with the following averages: AR turnover = 12.4 and days sales outstanding (DSO) = 29.4. 8
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