Question 1

The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues.

Accepted Answer

A) True 
 B)False

Question 2

A review of the terms of client debt agreements assists the audit of the presentation and disclosure assertion for accounts receivable.

Accepted Answer

A) True 
 B)False

Question 3

Management has been found involved in many fraudulent schemes; a common one is "channel stuffing." What does "channel stuffing" involve?

Accepted Answer

A) Overly complex transactions. 
B) Growth through stock acquisitions. 
C) Shipment of goods not ordered. 
D) Management compensation schemes. 
A) Overly complex transactions. 
B) Growth through stock acquisitions. 
C) Shipment of goods not ordered. 
D) Management compensation schemes.

Question 4

All companies attempting to comply with GAAP should refer to the Securities and Exchange Commission for guidance as it supersedes all AICPA,PCAOB,FASB and EITF literature.

Accepted Answer

A) True 
 B)False

Question 5

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following reasons?

Accepted Answer

A) It is an accounting estimate based upon judgment. 
B) GAAP is not clear on the calculation of the allowance. 
C) It is merely a reserve that is reversed by the client as income is needed for profitable results. 
D) The precision is determined by the results of confirmation responses. 
A) It is an accounting estimate based upon judgment. 
B) GAAP is not clear on the calculation of the allowance. 
C) It is merely a reserve that is reversed by the client as income is needed for profitable results. 
D) The precision is determined by the results of confirmation responses.

Question 6

Ratio analysis performed by the audit team may include the comparison of gross sales to industry averages and previous periods.

Accepted Answer

A) True 
 B)False

Question 7

The relationship between the sales cycle and an inventory system can best be noted in which of the following examples?

Accepted Answer

A) Credit is established prior to completion of a sales order. 
B) Invoices are sent to customers only after shipment is evidenced. 
C) Availability of products ordered are verified prior to processing a sale. 
D) Billing information is added to the database for new customers. 
A) Credit is established prior to completion of a sales order. 
B) Invoices are sent to customers only after shipment is evidenced. 
C) Availability of products ordered are verified prior to processing a sale. 
D) Billing information is added to the database for new customers.

Question 8

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

Accepted Answer

A) True 
 B)False

Question 9

An example of a control over the sales cycle is the authorization of price lists by the appropriate sales and marketing manager.

Accepted Answer

A) True 
 B)False

Question 10

The revenue cycle involves the procedures in generating a sales order,shipping the products,recording the transaction and collecting the receivable.

Accepted Answer

A) True 
 B)False

Question 11

In the audit of accounting estimates,such as the allowance for doubtful accounts,the auditor strives to provide reasonable assurance about which of the following?

Accepted Answer

A) All material accounting estimates have been developed properly. 
B) The estimates are reasonable. 
C) The estimates are presented in accordance with GAAP. 
D) All of the above are true. 
A) All material accounting estimates have been developed properly. 
B) The estimates are reasonable. 
C) The estimates are presented in accordance with GAAP. 
D) All of the above are true.

Question 12

Sales transactions should be documented at initiation in order to accomplish which of the following objectives?

Accepted Answer

A) To provide the customer a copy of the transaction. 
B) To provide evidence of authorization and recording. 
C) To offer credit to customers. 
D) To generate back orders. 
A) To provide the customer a copy of the transaction. 
B) To provide evidence of authorization and recording. 
C) To offer credit to customers. 
D) To generate back orders.

Question 13

Control over completeness for the revenue cycle What control procedures should be implemented to ensure the completeness objective is met with respect to sales?

Accepted Answer

Control procedures to ensure that the ob

Question 14

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

Accepted Answer

A) Customer collections that are over 90 days past due. 
B) Credit entries in customer accounts receivable for authorized writeoffs. 
C) Recurring entries in the sales journal. 
D) Altered shipping documents and invoices. 
A) Customer collections that are over 90 days past due. 
B) Credit entries in customer accounts receivable for authorized writeoffs. 
C) Recurring entries in the sales journal. 
D) Altered shipping documents and invoices.

Question 15

The major risk associated with receivables is related to which of the following?

Accepted Answer

A) They may be sold to a bank with recourse. 
B) They may be recorded as long-term when in fact they will be realized in the current period. 
C) They will not be realized for the entire amount due. 
D) They are pledged as collateral as disclosed in the footnotes to financial statements. 
A) They may be sold to a bank with recourse. 
B) They may be recorded as long-term when in fact they will be realized in the current period. 
C) They will not be realized for the entire amount due. 
D) They are pledged as collateral as disclosed in the footnotes to financial statements.

Question 16

The aged accounts receivable report is utilized by the auditor to accomplish which of the following?

Accepted Answer

A) Encourage the client to collect on receivables that are long past due. 
B) Select the type of confirmations that will be sent to banks. 
C) Assess the adequacy of the allowance for doubtful accounts. 
D) Identify debits in the receivables balance that should be reclassified to payables. 
A) Encourage the client to collect on receivables that are long past due. 
B) Select the type of confirmations that will be sent to banks. 
C) Assess the adequacy of the allowance for doubtful accounts. 
D) Identify debits in the receivables balance that should be reclassified to payables.

The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues.

A review of the terms of client debt agreements assists the audit of the presentation and disclosure assertion for accounts receivable.

Management has been found involved in many fraudulent schemes; a common one is "channel stuffing." What does "channel stuffing" involve?

All companies attempting to comply with GAAP should refer to the Securities and Exchange Commission for guidance as it supersedes all AICPA,PCAOB,FASB and EITF literature.

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following reasons?

Ratio analysis performed by the audit team may include the comparison of gross sales to industry averages and previous periods.

The relationship between the sales cycle and an inventory system can best be noted in which of the following examples?

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

An example of a control over the sales cycle is the authorization of price lists by the appropriate sales and marketing manager.

The revenue cycle involves the procedures in generating a sales order,shipping the products,recording the transaction and collecting the receivable.

In the audit of accounting estimates,such as the allowance for doubtful accounts,the auditor strives to provide reasonable assurance about which of the following?

Sales transactions should be documented at initiation in order to accomplish which of the following objectives?

Control over completeness for the revenue cycle What control procedures should be implemented to ensure the completeness objective is met with respect to sales?

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

The major risk associated with receivables is related to which of the following?

The aged accounts receivable report is utilized by the auditor to accomplish which of the following?

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

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Exam 9: Auditing the Revenue Cycle

The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues.

A review of the terms of client debt agreements assists the audit of the presentation and disclosure assertion for accounts receivable.

Management has been found involved in many fraudulent schemes; a common one is "channel stuffing." What does "channel stuffing" involve?

All companies attempting to comply with GAAP should refer to the Securities and Exchange Commission for guidance as it supersedes all AICPA,PCAOB,FASB and EITF literature.

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following reasons?

Ratio analysis performed by the audit team may include the comparison of gross sales to industry averages and previous periods.

The relationship between the sales cycle and an inventory system can best be noted in which of the following examples?

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

An example of a control over the sales cycle is the authorization of price lists by the appropriate sales and marketing manager.

The revenue cycle involves the procedures in generating a sales order,shipping the products,recording the transaction and collecting the receivable.

In the audit of accounting estimates,such as the allowance for doubtful accounts,the auditor strives to provide reasonable assurance about which of the following?

Sales transactions should be documented at initiation in order to accomplish which of the following objectives?

Control over completeness for the revenue cycle What control procedures should be implemented to ensure the completeness objective is met with respect to sales?

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

The major risk associated with receivables is related to which of the following?

The aged accounts receivable report is utilized by the auditor to accomplish which of the following?

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

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