In the audit of accounts receivable at XYZ company (the client), the gross amount (i.e. not including Allowance for doubtful debt) presented on the financial statement is $700,000 which includes customer A ($300,000) and company B ($400,000). The balance of Allowance for doubtful debt account is zero. You are the auditor and you are asked to check the accounts receivable account.

Required: . In a reply, company B informed you that B was in the process of filing for liquidation (i.e. bankrupt) before the financial year-end and B had informed your client of this matter. You have determined that based on the relevant accounting standard your client should have made Allowance for doubtful debt of $400,000 (whole amount) for company B. Given that your client did not make any Allowance for doubtful debt for company B, determine which management assertion is violated (or at risk).