An internal auditor for a large retail chain suspects that a store manager has been stealing money from cash sales by listing the sales as accounts receivable and then writing off the accounts as bad debts. Which of the following irregularities is the most likely cause of the auditor's suspicion?
A much higher bad debt expense as a percentage of sales than that of other stores is the most likely indicator of irregularities specific to one store manager. Comparing the bad debt expense to other stores helps highlight discrepancies that could stem from intentional misclassification of cash sales as accounts receivable and subsequent write-offs as bad debts, flagging suspicious activity localized to that store.
Why not A?
Because he is an internal auditor for a large retail chain. He can therefore evaluate the trends that deviate during the different seasons.