Question 1

An example of a test for completeness in the revenue cycle includes the sampling of shipping documents and tracing them to the sales journal and general ledger.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following procedures would be considered improper by the auditor in the process of confirming receivables?

Accepted Answer

A) The auditor allows the client's staff to prepare the confirmation letters after the auditor has chosen the items to be confirmed. 
B) The auditor allows the client to sign the confirmations after they are prepared. 
C) The auditor allows the client's staff to mail the confirmation letters after he or she has proofed the typing of the letters. 
D) The auditor asks the addressee to return the confirmation to the audit firm's office. 
A) The auditor allows the client's staff to prepare the confirmation letters after the auditor has chosen the items to be confirmed. 
B) The auditor allows the client to sign the confirmations after they are prepared. 
C) The auditor allows the client's staff to mail the confirmation letters after he or she has proofed the typing of the letters. 
D) The auditor asks the addressee to return the confirmation to the audit firm's office.

Question 3

Monthly statements provide a detailed list of the customer's activity for the previous month and a statement of all open items.

Accepted Answer

A) True 
 B)False

Question 4

In planning an audit for the revenue cycle,the auditor must realize the integrated relationship of evidence found between the accounts receivable and the notes payable accounts.

Accepted Answer

A) True 
 B)False

Question 5

If control risk is assessed high,the auditor may send significantly fewer confirmations for a sample of accounts receivable than if the control risk is assessed low.

Accepted Answer

A) True 
 B)False

Question 6

Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead.

Accepted Answer

A) True 
 B)False

Question 7

For which of the following accounts receivable customer populations would the use of negative confirmations be most appropriate?

Accepted Answer

A) A retail truck and trailer sales company with high inherent risk and moderate control risk over the revenue cycle. 
B) A utility company with control risk over the revenue cycle assessed high. 
C) A mortgage banking company with excellent control over the purchasing cycle. 
D) A cable company with control risk over the revenue cycle assessed low. 
A) A retail truck and trailer sales company with high inherent risk and moderate control risk over the revenue cycle. 
B) A utility company with control risk over the revenue cycle assessed high. 
C) A mortgage banking company with excellent control over the purchasing cycle. 
D) A cable company with control risk over the revenue cycle assessed low.

Question 8

Which of the following is a proper control for the detection of unusual sales transactions recorded in the general ledger?

Accepted Answer

A) Electronic authorization prior to posting. 
B) Use of sequentially numbered sales documents. 
C) Random statements to customers. 
D) Review of transactions by upper management or the board. 
A) Electronic authorization prior to posting. 
B) Use of sequentially numbered sales documents. 
C) Random statements to customers. 
D) Review of transactions by upper management or the board.

Question 9

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

Accepted Answer

A) True 
 B)False

Question 10

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Accepted Answer

A) Shipping documents and tracing them to the sales journal. 
B) Accounts receivable and tracing them to cash receipts. 
C) Recorded sales transactions and tracing them to the general ledger. 
D) Inventory records and tracing them to the shipping documents. 
A) Shipping documents and tracing them to the sales journal. 
B) Accounts receivable and tracing them to cash receipts. 
C) Recorded sales transactions and tracing them to the general ledger. 
D) Inventory records and tracing them to the shipping documents.

Question 11

Lapping of accounts receivable is least likely to occur when there is an inadequate segregation of duties.

Accepted Answer

A) True 
 B)False

Question 12

One of the benefits of establishing a formal credit policy for granting credit is that management is freed from the burden of monitoring accounts receivable.

Accepted Answer

A) True 
 B)False

Question 13

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

Accepted Answer

A) Substantiate cutoff and the occurrence of net sales transactions. 
B) Test the sufficiency of cash balances to cover refunds. 
C) Monitor customer satisfaction for disclosure. 
D) Assess the nature of procedures that will be performed for the next period's audit. 
A) Substantiate cutoff and the occurrence of net sales transactions. 
B) Test the sufficiency of cash balances to cover refunds. 
C) Monitor customer satisfaction for disclosure. 
D) Assess the nature of procedures that will be performed for the next period's audit.

Question 14

When the auditor seeks evidence concerning the allowance for doubtful accounts he or she would most likely use an aged trial balance to help identify past due balances.

Accepted Answer

A) True 
 B)False

Question 15

Substantive procedures for sales and receivables assertions The auditor for Knowles,Inc.is attempting to determine whether the recorded sales and accounts receivable are supported by valid transactions.Identify the assertions being tested and develop the substantive procedures to be used to satisfy the auditor's objectives.

Accepted Answer

The auditor is testing the existence and

Question 16

Sources of audit planning information may come from which of the following?

Accepted Answer

A) Knowledge of client's business and industry. 
B) Assessment of risk of material misstatement. 
C) Results of analytical procedures. 
D) All of the above. 
A) Knowledge of client's business and industry. 
B) Assessment of risk of material misstatement. 
C) Results of analytical procedures. 
D) All of the above.

Question 17

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total.This process is performed for which purpose?

Accepted Answer

A) Drafting financial statements. 
B) Monitoring revenue transactions. 
C) Providing management reports to the controller. 
D) Providing suggestions for operational improvement. 
A) Drafting financial statements. 
B) Monitoring revenue transactions. 
C) Providing management reports to the controller. 
D) Providing suggestions for operational improvement.

Question 18

Auditors are concerned with the addresses provided for customers in the confirmation of accounts receivable because of which of the following reasons?

Accepted Answer

A) Confirmations are selected based upon zip codes. 
B) A P.O.Box is more reliable than a street address. 
C) Confirmations should be sent only to business addresses and not residential. 
D) The address may be routed to the client for retrieval and fraudulent signing. 
A) Confirmations are selected based upon zip codes. 
B) A P.O.Box is more reliable than a street address. 
C) Confirmations should be sent only to business addresses and not residential. 
D) The address may be routed to the client for retrieval and fraudulent signing.

Question 19

What evidence is utilized by the auditor for analytical purposes in substantiating the completeness of the allowance for bad debt estimate?

Accepted Answer

A) Accounts receivable aging schedule. 
B) Copies of checks received from customers. 
C) Confirmations returned without exception. 
D) Stock prices of customer companies. 
A) Accounts receivable aging schedule. 
B) Copies of checks received from customers. 
C) Confirmations returned without exception. 
D) Stock prices of customer companies.

Question 20

The audit team typically reviews journal entries in the receivables ledger for unusual entries that may be indicators of fraudulent activity.

Accepted Answer

A) True 
 B)False

An example of a test for completeness in the revenue cycle includes the sampling of shipping documents and tracing them to the sales journal and general ledger.

Which one of the following procedures would be considered improper by the auditor in the process of confirming receivables?

Monthly statements provide a detailed list of the customer's activity for the previous month and a statement of all open items.

In planning an audit for the revenue cycle,the auditor must realize the integrated relationship of evidence found between the accounts receivable and the notes payable accounts.

If control risk is assessed high,the auditor may send significantly fewer confirmations for a sample of accounts receivable than if the control risk is assessed low.

Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead.

For which of the following accounts receivable customer populations would the use of negative confirmations be most appropriate?

Which of the following is a proper control for the detection of unusual sales transactions recorded in the general ledger?

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Lapping of accounts receivable is least likely to occur when there is an inadequate segregation of duties.

One of the benefits of establishing a formal credit policy for granting credit is that management is freed from the burden of monitoring accounts receivable.

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

When the auditor seeks evidence concerning the allowance for doubtful accounts he or she would most likely use an aged trial balance to help identify past due balances.

Sources of audit planning information may come from which of the following?

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total.This process is performed for which purpose?

Auditors are concerned with the addresses provided for customers in the confirmation of accounts receivable because of which of the following reasons?

What evidence is utilized by the auditor for analytical purposes in substantiating the completeness of the allowance for bad debt estimate?

The audit team typically reviews journal entries in the receivables ledger for unusual entries that may be indicators of fraudulent activity.

Auditing: Integral to the Economy

The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 9: Auditing the Revenue Cycle

An example of a test for completeness in the revenue cycle includes the sampling of shipping documents and tracing them to the sales journal and general ledger.

Which one of the following procedures would be considered improper by the auditor in the process of confirming receivables?

Monthly statements provide a detailed list of the customer's activity for the previous month and a statement of all open items.

In planning an audit for the revenue cycle,the auditor must realize the integrated relationship of evidence found between the accounts receivable and the notes payable accounts.

If control risk is assessed high,the auditor may send significantly fewer confirmations for a sample of accounts receivable than if the control risk is assessed low.

Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead.

For which of the following accounts receivable customer populations would the use of negative confirmations be most appropriate?

Which of the following is a proper control for the detection of unusual sales transactions recorded in the general ledger?

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Lapping of accounts receivable is least likely to occur when there is an inadequate segregation of duties.

One of the benefits of establishing a formal credit policy for granting credit is that management is freed from the burden of monitoring accounts receivable.

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

When the auditor seeks evidence concerning the allowance for doubtful accounts he or she would most likely use an aged trial balance to help identify past due balances.

Sources of audit planning information may come from which of the following?

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total.This process is performed for which purpose?

Auditors are concerned with the addresses provided for customers in the confirmation of accounts receivable because of which of the following reasons?

What evidence is utilized by the auditor for analytical purposes in substantiating the completeness of the allowance for bad debt estimate?

The audit team typically reviews journal entries in the receivables ledger for unusual entries that may be indicators of fraudulent activity.

Auditing: Integral to the Economy

The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters