Midterm Exam

Question 1

(T/F) The objective of tests of details of transactions performed as tests of controls is to evaluate whether an internal control system policy or procedure operated effectively.

Answer 1

TRUE

Question 2

CPAs are considered professional persons because they:

a. Hold a license form a government agency.
b. Pass the CPA examination and have qualifying practical experience.
c. Are members of the PICPA.
d. Serve the interests of the public in general and clients in particular

Answer 2

d. Serve the interests of the public in general and clients in particular

Question 3

(T/F) During consideration of the internal control system in a financial statement audit, an auditor is not obligated to search for significant deficiencies in the operation of the internal control system.

Answer 3

TRUE

Question 4

(T/F) Reportable conditions are matters that come to an auditor’s attention that should be communicated to an entity’s audit committee because they represent significant deficiencies in the design or operation of the internal control system.

Answer 4

TRUE

Question 5

Which one of the following might not be a signal of management’s potential lack of integrity?

a. Frequent turnover of key financial personnel.
b. Frequent turnover of key internal audit personnel.
c. Frequent disagreements with previous auditors.
d. Prior criminal conviction of an assembly line foreman.

Answer 5

d. Prior criminal conviction of an assembly line foreman.

Question 6

Which of the following attributes is more closely associated with assurance services performed by a CPA firm than with other lines of professional work?

a. Competence
b. Integrity
c. Keeping informed in current professional developments
d. Independence

Answer 6

d. Independence

Question 7

(T/F) Generally, evidence generated internally is less reliable when subject to appropriate control with the entity.

Answer 7

FALSE

Generally, evidence generated internally is more reliable when subject to appropriate control with the entity.

Question 7

A practitioner should plan and conduct the assurance engagement in an effective manner to meet the objective of the engagement. Which of the following matters need not be a
concern of the practitioner in planning the work?

a. Criteria to be used
b. Engagement objective
c. Personnel and expertise requirements
d. Specific format of the assurance report

Answer 7

d. Specific format of the assurance report

Question 8

Society has attached a special meaning to the term “professional”. A professional is

a. Any person who receives pay for the services performed.
b. Someone who has both an education in the trade and on-the-job experience received under an experienced supervisor.
c. A person who is expected to conduct himself or herself at a higher level than the requirement of society’s law or regulations.
d. Someone who has passed a qualifying exam to enter the job market.

Answer 8

c. A person who is expected to conduct himself or herself at a higher level than the requirement of society’s law or regulations.

Question 9

Governmental auditing, in addition to including audits of financial statements, often includes audits of efficiency, effectiveness, and

a. adequacy.
b. compliance.
c. evaluation.
d. accuracy.

Answer 9

b. compliance.

Question 10

The risk of material financial statement misstatement may be greater when the following conditions exist except

a. complex calculations or accounting principles is involved.
b. when there is greater management intervention to specify the accounting treatment.
c. when there is greater manual intervention for data collection and processing.
d. when there is sufficient personnel with appropriate accounting and financial reporting skills.

Answer 10

d. when there is sufficient personnel with appropriate accounting and financial reporting skills.

Question 11

When conducting an audit, errors that arouse suspicion of fraud should be given greater attention than other errors. This is an example of applying the criterion of

a. risk.
b. dual-purpose testing.
c. reliability of evidence.
d. materiality.

Answer 11

a. risk.

Question 12

Which of the following is false? Philippine Framework for Assurance Engagements

a. Identifies engagements to which Philippine Standards on Auditing, Philippine Standards on Review Engagements, and Philippine Standards on Assurance Engagements apply.
b. Describes the objective an elements of assurance engagements intended to provide either a reasonable assurance or limited assurance.
c. Provides a frame of reference for the Auditing and Assurance Standards Council in its adoption of International Standards on Auditing, International Standards on Review Engagements and International Standards on Assurance Engagements for application in the Philippines.
d. Establishes standards or provides procedural requirements for the performance of assurance engagements.

Answer 12

d. Establishes standards or provides procedural requirements for the performance of assurance engagements.

Question 13

(T/F) The primary objective of procedures performed to obtain an understanding of the internal control system is to provide an auditor with evidential matter to use in reducing detection risk.

Answer 13

FALSE

The primary objective of procedures performed to obtain an understanding of the internal control system is to provide an auditor with knowledge necessary to determine the nature timing and extent of further audit procedures

Question 14

Which of the following can an auditor observe as a general control procedure used by companies?

a. External influences such as bank examiner audits.
b. Management philosophy and operating cycle.
c. Open lines of communication to the audit committee of the board of directors.
d. Segregation of functional responsibilities.

Answer 14

d. Segregation of functional responsibilities.

Question 15

PSA 120, Framework of Philippine Standards on Auditing, provides that financial statements needed to be prepared in accordance with one, or a combination of the following except:

a. International Accounting Standards.
b. Accounting standards developed by the accountant of the business enterprise herself/himself.
c. Another authoritative and comprehensive financial reporting framework designed for use in financial reporting and is identified in the financial statements.
d. Accounting standards generally accepted in the Philippines.

Answer 15

b. Accounting standards developed by the accountant of the business enterprise herself/himself.

Question 16

(T/F) The ultimate risk against which an auditor requires reasonable protection is a combination of two separate risks. The first of these is that material errors will occur in the accounting process by which the financial statements are developed, and the second is that those errors that occur will not be detected in the auditor’s examination.

Answer 16

TRUE

Question 17

PSA 315 (Clarified) requires that the auditor should obtain an understanding of relevant industry, regulatory and other external factors including the applicable financial reporting framework. Which of the following is not among the items that relate to industry conditions?

a. Energy, supply and cost
b. Inflation and currency revaluation
c. Cyclical or seasonal activity
d. Market and competition

Answer 17

b. Inflation and currency revaluation

Question 18

A basic objective of a CPA firm is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through

a. Compliance with Philippine Standards on Auditing.
b. A system of quality assurance.
c. A system of quality control.
d. Continuing professional education.

Answer 18

c. A system of quality control.

Question 19

(T/F) Generally, evidence in the form of documents and representations is less likely to be reliable than oral representations.

Answer 19

FALSE

Generally, evidence in the form of documents and representations is more likely to be reliable than oral representations.

Question 20

(T/F) Either an understatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.

Answer 20

TRUE

Question 21

In most audits of large companies, internal control risk assessment contributes to audit efficiency, which means:

a. the cost of year-end audit work will exceed the cost of control evaluation work.
b. auditors will be able to reduce the cost of year-end audit work by an amount more than the control evaluation costs.
c. the cost of control evaluation work will exceed the cost of year-end audit work.
d. auditors will be able to reduce the cost of year-end audit work by an amount less than the control evaluation costs.

Answer 21

b. auditors will be able to reduce the cost of year-end audit work by an amount more than the control evaluation costs.

Question 22

Observation and inspection procedures that may support inquiries of management and others and also provide information about the entity and its environment will involve the following except

a. reading minutes of board of directors’ meetings.
b. confirmation of account balances.
c. walk-throughs.
d. visits to entity’s premises and plant facilities.

Answer 22

b. confirmation of account balances.

Question 23

(T/F) Either an overstatement of an asset account or an understatement of a liability account would have the same effect on the income statement.

Answer 23

TRUE

Question 24

When the professional accountant has obtained sufficient appropriate evidence to conclude that the subject matter conforms in all material respects with identified suitable criteria, he/she can provide

a. Reasonable level of assurance.
b. Limited level of assurance.
c. Absolute assurance.
d. No assurance.

Answer 24

a. Reasonable level of assurance.

Question 25

In performing an assurance engagement, a professional accountant typically

a. Provides management consulting advice.
b. Expresses a conclusion about an assertion.
c. Supplies litigation support services.
d. Assesses control risk at a low level

Answer 25

b. Expresses a conclusion about an assertion.

Question 26

(T/F) The practice of accountancy includes practice in the government.

Answer 26

TRUE

Question 27

The independent audit is important to readers of financial statements because it

a. measures and communicates financial and business data included in financial statements.
b. involves the objective audit of and reporting on management-prepared statements.
c. determines the future stewardship of the management of the company whose financial statements are audited.
d. reports on the accuracy of all information in the financial statements.

Answer 27

b. involves the objective audit of and reporting on management-prepared statements.

Question 28

PSA 315 (Clarified) requires that the auditor should obtain an understanding of relevant industry, regulatory and other external factors including the applicable financial reporting framework. Which of the following is not an example of matters relating to regulatory environment that the auditor would usually consider?

a. Regulatory framework for a regulated industry.
b. Taxation.
c. Legislation and regulation significantly affecting the entity’s operation.
d. Product technology relating to the entity’s product.

Answer 28

d. Product technology relating to the entity’s product.

Question 29

Audit procedures deemed necessary in the circumstance to achieve the objective of the audit.

a. Audit techniques
b. Scope of an audit
c. Analytical procedures
d. Agreed-upon procedures

Answer 29

b. Scope of an audit

Question 30

(T/F) The practice of accountancy includes the practice in education/academe.

Answer 30

TRUE

Question 31

PSA 315 (Clarified) requires that the auditor should obtain an understanding of the entity’s selection and application of accounting policies and consider whether they are appropriate for its business and consistent with the applicable financial reporting framework and accounting polices used in the relevant industry. The understanding does not encompass

a. the effect of significant accounting policies in contractual or emerging areas for which there is lack of authoritative guidance or consensus.
b. changes in the entity’s accounting policies.
c. criteria in the selection of the company’s chief accounting executive.
d. the methods the entity uses to account for significant and unusual transactions.

Answer 31

c. criteria in the selection of the company’s chief accounting executive.

Question 32

Risk in auditing means that the auditor accepts some level of uncertainty in performing the audit function. An effective auditor will

a. set the risk level between 5%and 10%.
b. perform the audit procedures first and quantitatively set the risk level before forming an opinion and writing the report.
c. recognize that risks exist and deal with those risks in an appropriate manner.
d. take any means available to reduce the risk to the lowest possible level.

Answer 32

c. recognize that risks exist and deal with those risks in an appropriate manner.

Question 33

Role of persons entrusted with the supervision, control and direction of an entity.

a. Management
b. Governance
c. Auditor
d. Administration

Answer 33

b. Governance

Question 34

(T/F) There have been recent media accounts of pension fund frauds. As a result, your director has asked you to “see how well the Compensation Division is following the policies, procedures, and plans established to protect those assets.” The type of audit required to satisfy your director’s request is a compliance audit.

Answer 34

TRUE

Question 35

When the auditor expresses an opinion on financial statements, their responsibilities extend to

a. an ongoing responsibility of their client’s solvency.
b. active participation in the implementation of the advice given to their client.
c. whether the results of their client’s operating decisions are fairly presented in the financial statements.
d. the underlying wisdom of their client’s management decisions.

Answer 35

c. whether the results of their client’s operating decisions are fairly presented in the financial statements.

Question 36

In a study and evaluation of the control system policies and procedures, the completion of a questionnaire is most closely associated with which of the following?

a. Tests of controls.
b. Review of the system design.
c. Substantive tests.
d. Obtaining an initial understanding of the system.

Answer 36

d. Obtaining an initial understanding of the system.

Question 37

(T/F) A program-results audit of a government-sponsored assistance program would emphasize the ability of the responsible department or agency to measure program effectiveness.

Answer 37

TRUE

Question 38

In comparison to the external auditor, an internal auditor is more likely to be concerned with

a. cost accounting procedures.
b. operational auditing.
c. internal control.
d. internal administrative control.

Answer 38

b. operational auditing.

Question 39

Which of the following best describes the operational audit?

a. It requires the constant review by internal auditors of the administrative controls as they relate to the
operations of the company.
b. It concentrates on implementing financial and accounting control in a newly organized company.
c. It attempts and is designed to verify the fair presentation of a company’s results of operations.
d. It concentrates on seeking aspects of operations in which waste could be reduced by the introduction of
controls.

Answer 39

d. It concentrates on seeking aspects of operations in which waste could be reduced by the introduction of
controls.

Question 40

(T/F) The practice of accountancy includes practice in commerce and industry, when the CPA is appointed as marketing manager of the enterprise.

Answer 40

FALSE

The practice of accounting includes the following:
a. Practice in public accountancy.
b. Practice in education/ academe.
c. Practice in the government.

Question 41

The auditor’s understanding of the entity and its environment consists of an understanding of the following aspects except

a. industry, regulatory, and other external factors, including the applicable financial reporting framework.
b. entity’s selection and screening process of marketing and production personnel.
c. measurement and review of the entity’s financial performance.
d. nature of the entity, including the entity’s selection and application of accounting policies.

Answer 41

b. entity’s selection and screening process of marketing and production personnel.

Question 42

In general, internal auditors’ independence will be greatest when they report directly to the

a. audit committee of the board of directors.
b. corporate controller.
c. financial vice president.
d. chief executive officer.

Answer 42

a. audit committee of the board of directors.

Question 43

The independent auditor lends credibility to client financial statements by

a. Testifying under oath about client financial information.
b. Stating in the auditor’s management letter that the examination was made in accordance with generally accepted auditing standards.
c. Maintaining a clear-cut distinction between management’s representation and the auditor’s representations.
d. Attaching an auditor’s opinion to the client’s financial statements.

Answer 43

d. Attaching an auditor’s opinion to the client’s financial statements.

Question 44

(T/F) A client’s control procedure is an action taken by client personnel for the purpose of preventing, detecting, and correcting errors and irregularities in transactions.

Answer 44

TRUE

Question 45

The expertise that distinguishes auditors from accountants is in the

a. accumulation and interpretation of evidence.
b. ability to interpret PAS.
c. requirement to possess education beyond the Bachelor’s degree.
d. ability to interpret financial reporting standards.

Answer 45

a. accumulation and interpretation of evidence.

Question 46

Which of the following is not among the risk assessment procedures that the auditor should perform in obtaining an understanding of the entity and its environment, including its internal control?

a. Analytical procedures.
b. Inquiries of management and others within the entity.
c. Observation and inspection.
d. Confirmation

Answer 46

d. Confirmation

Question 47

(T/F) A review of any part of an organization’s procedures and methods for the purpose of evaluating efficiency and effectiveness is classified as an operational audit.

Answer 47

TRUE

Question 48

Non-assurance engagements include all of the following except

a. Agreed-upon procedures.
b. Management consulting.
c. Preparation of tax returns where no conclusion is expressed.
d. Compliance audit.

Answer 48

d. Compliance audit.

Question 49

Although the CPA does not guarantee his findings, his opinion is nevertheless valuable to various third parties. The value of the CPA’s opinion lies in the fact that

a. he has followed generally accepted auditing standards.
b. he has the time, opportunity, and training to conduct an audit.
c. he is under the supervision of the Board of Accountancy.
d. he has the qualifications required by law to be a CPA.
e. he has gathered sufficient, competent evidential matter to support his opinion.

Answer 49

a. he has followed generally accepted auditing standards.

Answer according to Google:
e. he has gathered sufficient, competent evidential matter to support his opinion.

Question 50

To emphasize auditor independence from management, many corporations follow the practice of

a. having the independent auditor report to an audit committee of outside members of the board of directors.
b. requesting that a representative of the independent auditor to be on hand at the annual stockholders’ meeting.
c. appointing a partner of the CPA firm conducting the examination to the corporation’s audit committee.
d. establishing a policy of discouraging social contact between employees of the corporation and the staff of the independent auditor.

Answer 50

a. having the independent auditor report to an audit committee of outside members of the board of directors.

Question 51

Which of the following is not an assurance engagement?

a. Financial statements audit
b. Reviews of prospective financial statements
c. Information reliability services
d. Compilation

Answer 51

d. Compilation

Question 52

An independent audit aids in the communication of economic data because the audit

a. lends credibility to the financial statements.
b. confirms the accuracy of management’s financial representations.
c. guarantees that financial data are fairly presented.
d. assures the readers of financial statements that any fraudulent activity has been corrected.

Answer 52

a. lends credibility to the financial statements.

Question 53

The risk of management fraud increases in the presence of

a. substantial increases in sales.
b. management incentive systems based on operating income.
c. frequent changes in suppliers.
d. improved internal control.

Answer 53

b. management incentive systems based on operating income.

Question 54

(T/F) After obtaining an understanding of an entity’s internal control system, an auditor may assess control risk at the maximum level for some assertions because the auditor identifies internal control policies and procedures that are likely to prevent material misstatements.

Answer 54

FALSE

Question 55

An assurance engagement that provides a high level of assurance that the financial statements are free of material misstatement is known as

a. Agreed-upon procedures.
b. Compilation.
c. Independent financial statements audit.
d. Review.

Answer 55

c. Independent financial statements audit.

Question 56

(T/F) The control objective designed to reduce the probability that fictitious transactions get recorded in the accounts is validity

Answer 56

TRUE

Question 57

(T/F) The practice of accountancy includes the practice of public accountancy.

Answer 57

TRUE

Question 58

Assurance engagements should exhibit the following elements except

a. An engagement process.
b. Appropriate professional fees.
c. A subject matter.
d. Suitable criteria.

Answer 58

b. Appropriate professional fees.

Question 59

(T/F) A misclassification in the statement of financial position will have no effect on operating income.

Answer 59

TRUE

Question 60

Which of the following is a device designed to help the audit team obtain evidence about the control environment and about the accounting and control procedures of an audit client?

a. A narrative memorandum describing the control system.
b. An internal control questionnaire.
c. A well-indexed file of working papers.
d. A flowchart of the documents and procedures used by the company.

Answer 60

b. An internal control questionnaire.

Question 61

Which of the following is not a component of assurance engagement risk?

a. Business risk
b. Inherent risk
c. Detection risk
d. Control risk

Answer 61

a. Business risk

Question 62

In “auditing” financial accounting data, the primary concern is with

a. analyzing the financial information to be sure that it complies with government requirements.
b. determining whether recorded information properly reflects the economic events that occurred during the accounting period.
c. determining if taxable income has been calculated correctly.
d. determining if fraud has occurred.

Answer 62

b. determining whether recorded information properly reflects the economic events that occurred during the accounting period.

Question 63

(T/F) A weakness in internal control over recording retirements of equipment may cause an auditor to select certain items of equipment from the accounting records and locate them
in the plant.

Answer 63

TRUE

Question 64

(T/F) Generally, evidence from external sources is less reliable than that generated internally.

Answer 64

FALSE

Generally, evidence from external sources is more reliable than that generated internally.

Question 65

Engagement risk is influenced by the risks associated with the following except

a. Nature and form of the subject matter
b. Nature and form of the criteria applied to the subject matter
c. Unreasonably low professional fee
d. Nature and extent of the process used to collect and evaluate evidence

Answer 65

c. Unreasonably low professional fee

Question 66

Which of the following has primary responsibility for the fairness of the representations made in financial statements?

a. PICPA
b. Client’s management
c. Independent auditor
d. Audit committee

Answer 66

b. Client’s management

Question 67

An environment that exists when a computer of any type or size is involved in the processing by the entity of financial information of significance to the audit, whether that computer is operated by the entity or by a third party.

a. Control environment
b. Computer information system
c. Quality control
d. Computer service bureau

Answer 67

b. Computer information system

Question 68

Operational audits often have an objective of determining whether an entity’s

a. financial statements present fairly the results of operations.
b. operational information is in accordance with generally accepted governmental auditing standards.
c. specific operating units are functioning efficiently and effectively.
d. internal control is adequately operating as designed

Answer 68

c. specific operating units are functioning efficiently and effectively.

Question 69

(T/F) The control objective designed to reduce the probability that a credit sale transaction will get debited to cash instead of accounts receivable is classification

Answer 69

TRUE

Question 70

(T/F) When performing a compliance audit of a governmental entity, auditors are concerned with whether the entity is following laws and regulations.

Answer 70

TRUE

Question 71

Which of the following best describes the reason why an independent auditor reports on financial statement?

a. A misstatement of account balances may exist and is generally corrected as a result of the independent auditor’s work.
b. Different interests may exist between the company preparing the statements and the persons using the statements.
c. A poorly designed internal control system may be in existence.
d. A management fraud may exist, and it is more likely to be detected by independent auditors

Answer 71

b. Different interests may exist between the company preparing the statements and the persons using the
statements.

Question 72

The decision of whether the criteria are suitable involves considering whether the subject matter of the assurance engagement is capable of reasonably consistent evaluation or measurement using such criteria. Which of the following characteristics is not considered necessary in determining whether the criteria are suitable?

a. Sufficiency
b. Neutrality
c. Relevance
d. Reliability

Answer 72

a. Sufficiency

Question 73

These consist of the analysis of significant ratios and trends including the resulting investigation of fluctuations and relationship that are inconsistent with other relevant information or deviate from predictable amount.

a. Computation
b. Analysis
c. Confirmation
d. Analytical procedures

Answer 73

d. Analytical procedures

Question 74

Which of the following is not a reason an auditor should obtain an understanding of the elements of an entity’s internal control system in planning an audit?

a. To design substantive tests.
b. To consider the operating effectiveness of the internal controls.
c. To consider factors that affect the risk of material misstatements.
d. To identify types of potential misstatements that can occur.

Answer 74

b. To consider the operating effectiveness of the internal controls.

Question 75

(T/F) An audit to determine whether the auditee is following specific procedures or rules set down by some higher authority is classified as a compliance audit.

Answer 75

TRUE

Question 76

(T/F) The primary purpose for obtaining an understanding of an audit, client’s internal control structure is to determine the nature, timing, and extent of tests to be performed in the audit.

Answer 76

TRUE

Question 77

When performing a compliance audit in a large corporation, an internal auditor would be most likely to examine?

a. Records that indicate whether supervisors regularly evaluate employees and communicate their findings to them.
b. A schedule indicating that insurance coverage is adequate.
c. Leasing contracts to determine that they are accounted for properly.
d. Minutes of the board of directors’ meetings.

Answer 77

a. Records that indicate whether supervisors regularly evaluate employees and communicate their findings to them.

Question 78

Governmental auditing often extends beyond audits leading to the expression of opinion on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness, as well as

a. accuracy.
b. evaluation.
c. internal control.
d. compliance

Answer 78

c. internal control.

Answer by Google:
d. compliance

Question 79

(T/F) An auditor uses the knowledge provided by the understanding of the internal control system and the assessed level of control risk primarily to determine the nature, timing, and extent of substantive tests for financial statement assertions.

Answer 79

TRUE

Question 80

(T/F) Generally, evidence obtained directly by the practitioner is more likely to be reliable than that obtained from the entity.

Answer 80

TRUE

Question 81

(T/F) The primary difference between operational auditing and financial auditing is that in operational auditing, the auditor can use analytical skills and tools that are not necessary in financial auditing.

Answer 81

TRUE

Question 82

(T/F) Either an overstatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.

Answer 82

FALSE

Either an overstatement of an asset account or an understatement of a liability account would have the same effect on the income statement.

Question 83

In determining others within the entity to whom inquiries may be directed and the extent of those inquiries, the auditor considers what information may be obtained that would help him/her in identifying risks of material misstatement. The term “others” does not include the

a. major supplier of raw materials.
b. internal auditor.
c. controller.
d. in-house legal counsel.

Answer 83

c. controller.

Question 84

Inherent limitations in an audit stem from the following factors except

a. accounting and internal control system limitation.
b. use of testing.
c. most audit evidence is persuasive rather than conclusive.
d. incompetence of an auditor.

Answer 84

d. incompetence of an auditor.

Question 85

The most important benefit of having an annual audit by a public accounting firm is to

a. provide assurance to investors and other outsiders that the financial statements are dependable.
b. meet the requirements of government agencies.
c. enable officers and directors to avoid personal responsibility for any misstatements in the financial statements.
d. provide assurance that illegal acts, if any exist, will be brought to light.

Answer 85

a. provide assurance to investors and other outsiders that the financial statements are dependable.

Question 86

(T/F) Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments.

Answer 86

TRUE

Question 87

An assertion that a transaction or event took place which pertains to the entity during the period.

a. Occurrence
b. Measurement
c. Completeness
d. Existence

Answer 87

a. Occurrence

Question 88

(T/F) The audit procedure that may be helpful in identifying the existence of unusual transactions or events, and amounts, ratios and trends that may indicate matters that have financial statement and audit implications is analytical procedures.

Answer 88

TRUE

Question 89

PSA requires that the auditor should obtain an understanding of the entity’s objectives and strategies, and the related business risks that may result in material misstatement of the financial statements. Which of the following is not an example of business risks that may have financial consequences and may affect the financial statements?

a. Use of new IT.
b. New accounting requirements.
c. Contracting economy.
d. A contracting customer base due to industry consolidation that may increase the risk of misstatement associated with the valuation of receivables.

Answer 89

c. Contracting economy.