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During the audit of Hoang Colors Products, the auditor computed financial ratios on liquidity and shows the company's current assets cannot pay current liabilities as
During the audit of Hoang Colors Products, the auditor computed financial ratios on liquidity and shows the company's current assets cannot pay current liabilities as they will come due. Accounts receivable turnover also shows how ineffective the client is in collecting its debts. What do these results suggest to the auditor? Select answer from the options below This analytical procedure could suggest that there might be fraud in the cash collection area of the client. This analytical procedure reveals that the client is selling their inventory faster than able to collect its sales on account. This analytical procedure could suggest that the client has strong controls over its accounts receivable and collection process. This analytical procedure could signify going concern issues, such that the client might be having a hard time paying its short-term debts due to restricted cash from operations
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