Question 1

For the most part, the audit of the sales and collection cycle:

Accepted Answer

A)  can be performed independently of the audit of other cycles. 
B)  cannot be performed until the audit of cash is completed. 
C)  must be performed first so that the audit of the other cycles can rely on the data. 
D)  must be performed simultaneously with the audit of the purchases and disbursements cycle. 
A)  can be performed independently of the audit of other cycles. 
B)  cannot be performed until the audit of cash is completed. 
C)  must be performed first so that the audit of the other cycles can rely on the data. 
D)  must be performed simultaneously with the audit of the purchases and disbursements cycle.

Question 2

The documents mainly related to cash receipts include:

Accepted Answer

A)  credit note. 
B)  customer order. 
C)  cash receipt. 
D)  all of the above 
A)  credit note. 
B)  customer order. 
C)  cash receipt. 
D)  all of the above

Question 3

Discuss what is meant by proof of cash receipts and explain its purpose.

Accepted Answer

A proof of cash receipts is an audit pro

Question 4

Which one of the following procedures would ordinarily be expected to BEST reveal unrecorded sales at the balance sheet date?

Accepted Answer

A)  Trace shipping documents to the sales journal. 
B)  Send accounts receivable confirmation requests. 
C)  Trace payments received subsequent to the balance sheet date. 
D)  Apply gross profit rates to inventory disposed of during the period. 
A)  Trace shipping documents to the sales journal. 
B)  Send accounts receivable confirmation requests. 
C)  Trace payments received subsequent to the balance sheet date. 
D)  Apply gross profit rates to inventory disposed of during the period.

Question 5

The most important concern in the processing and recording cash receipts function is the possibility of theft.

Accepted Answer

A) True 
 B)False

Question 6

Lapping of accounts receivable is the postponement of entries for the collection of receivables.

Accepted Answer

A) True 
 B)False

Question 7

When designing audit procedures, the direction of tests is a crucial step in satisfying the:

Accepted Answer

A)  classification objective. 
B)  valuation objective. 
C)  cutoff objective. 
D)  completeness objective. 
A)  classification objective. 
B)  valuation objective. 
C)  cutoff objective. 
D)  completeness objective.

Question 8

The business functions mainly related to the sales and returns allowances account include:

Accepted Answer

A)  processing and recording sales returns and allowances. 
B)  granting credit. 
C)  billing customers. 
D)  all of the above 
A)  processing and recording sales returns and allowances. 
B)  granting credit. 
C)  billing customers. 
D)  all of the above

Question 9

If the controls necessary to satisfy any one of the objectives are inadequate, the likelihood of errors related to that objective:

Accepted Answer

A)  is indeterminate. 
B)  may be increased if the controls for other objectives don't mitigate it. 
C)  is increased, regardless of the controls for the other objectives. 
D)  may be decreased if management is aware of the poor controls. 
A)  is indeterminate. 
B)  may be increased if the controls for other objectives don't mitigate it. 
C)  is increased, regardless of the controls for the other objectives. 
D)  may be decreased if management is aware of the poor controls.

Question 10

The documents mainly related to the sales include:

Accepted Answer

A)  customer order. 
B)  sales invoice. 
C)  sales order. 
D)  all of the above 
A)  customer order. 
B)  sales invoice. 
C)  sales order. 
D)  all of the above

Question 11

For each internal control deficiency identified by the auditor, he or she should consider potential misstatements and any compensating controls.

Accepted Answer

A) True 
 B)False

Question 12

To test for recorded sales for which there were no actual shipments, the auditor traces from the:

Accepted Answer

A)  bill of lading to the supporting customer order and sales order. 
B)  bill of lading to the sales journal. 
C)  sales journal to the bill of lading. 
D)  sales journal to the accounts receivable subsidiary ledger. 
A)  bill of lading to the supporting customer order and sales order. 
B)  bill of lading to the sales journal. 
C)  sales journal to the bill of lading. 
D)  sales journal to the accounts receivable subsidiary ledger.

Question 13

The overall objective of the audit of the sales and collection cycle is to evaluate whether:

Accepted Answer

A)  the sales account and the accounts receivable account are free of errors. 
B)  the account balances affected by the cycle are fairly presented in accordance with Australian accounting standards. 
C)  the sales account and the accounts receivable account are presented fairly in accordance with generally accepted accounting principles. 
D)  the sales account and the accounts receivable account are free of material errors. 
A)  the sales account and the accounts receivable account are free of errors. 
B)  the account balances affected by the cycle are fairly presented in accordance with Australian accounting standards. 
C)  the sales account and the accounts receivable account are presented fairly in accordance with generally accepted accounting principles. 
D)  the sales account and the accounts receivable account are free of material errors.

Question 14

Discuss the purposes of, and differences between, design format and performance format audit programs.

Accepted Answer

A design format program is used to help

Question 15

The auditor traces items from the source documents to the journals in order to satisfy the:

Accepted Answer

A)  valuation objective. 
B)  completeness objective. 
C)  existence objective. 
D)  ownership objective. 
A)  valuation objective. 
B)  completeness objective. 
C)  existence objective. 
D)  ownership objective.

Question 16

A credit note is a document indicating a reduction in the amount due from a customer.

Accepted Answer

A) True 
 B)False

Question 17

A bill of lading is a special type of sales invoice used when goods are shipped interstate.

Accepted Answer

A) True 
 B)False

Question 18

The audit procedure referred to as proof of cash receipts is useful to test:

Accepted Answer

A)  time lags in making deposits. 
B)  whether all recorded cash receipts have been deposited in the bank. 
C)  whether there are cash receipts that have not been recorded in the journals. 
D)  all of the above 
A)  time lags in making deposits. 
B)  whether all recorded cash receipts have been deposited in the bank. 
C)  whether there are cash receipts that have not been recorded in the journals. 
D)  all of the above

Question 19

In determining the extent of reliance to be placed on internal controls, the auditor considers:

Accepted Answer

A)  effectiveness of the internal controls. 
B)  assessed level of control risk. 
C)  the costs of increased tests of controls. 
D)  all of the above 
A)  effectiveness of the internal controls. 
B)  assessed level of control risk. 
C)  the costs of increased tests of controls. 
D)  all of the above

Question 20

Which one of the following statements is TRUE? In deciding on substantive tests of transactions:

Accepted Answer

A)  the materiality of the item will not influence the choice of procedures used. 
B)  results obtained in the prior year's audit will not affect the procedures used this year. 
C)  some procedures are commonly employed on every audit regardless of the circumstances. 
D)  all procedures are dependent on the adequacy of the controls and the results of the tests of controls. 
A)  the materiality of the item will not influence the choice of procedures used. 
B)  results obtained in the prior year's audit will not affect the procedures used this year. 
C)  some procedures are commonly employed on every audit regardless of the circumstances. 
D)  all procedures are dependent on the adequacy of the controls and the results of the tests of controls.

For the most part, the audit of the sales and collection cycle:

The documents mainly related to cash receipts include:

Discuss what is meant by proof of cash receipts and explain its purpose.

Which one of the following procedures would ordinarily be expected to BEST reveal unrecorded sales at the balance sheet date?

The most important concern in the processing and recording cash receipts function is the possibility of theft.

Lapping of accounts receivable is the postponement of entries for the collection of receivables.

When designing audit procedures, the direction of tests is a crucial step in satisfying the:

The business functions mainly related to the sales and returns allowances account include:

If the controls necessary to satisfy any one of the objectives are inadequate, the likelihood of errors related to that objective:

The documents mainly related to the sales include:

For each internal control deficiency identified by the auditor, he or she should consider potential misstatements and any compensating controls.

To test for recorded sales for which there were no actual shipments, the auditor traces from the:

The overall objective of the audit of the sales and collection cycle is to evaluate whether:

Discuss the purposes of, and differences between, design format and performance format audit programs.

The auditor traces items from the source documents to the journals in order to satisfy the:

A credit note is a document indicating a reduction in the amount due from a customer.

A bill of lading is a special type of sales invoice used when goods are shipped interstate.

The audit procedure referred to as proof of cash receipts is useful to test:

In determining the extent of reliance to be placed on internal controls, the auditor considers:

Which one of the following statements is TRUE? In deciding on substantive tests of transactions:

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Documentation

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters

Exam 12: Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

For the most part, the audit of the sales and collection cycle:

The documents mainly related to cash receipts include:

Discuss what is meant by proof of cash receipts and explain its purpose.

Which one of the following procedures would ordinarily be expected to BEST reveal unrecorded sales at the balance sheet date?

The most important concern in the processing and recording cash receipts function is the possibility of theft.

Lapping of accounts receivable is the postponement of entries for the collection of receivables.

When designing audit procedures, the direction of tests is a crucial step in satisfying the:

The business functions mainly related to the sales and returns allowances account include:

If the controls necessary to satisfy any one of the objectives are inadequate, the likelihood of errors related to that objective:

The documents mainly related to the sales include:

For each internal control deficiency identified by the auditor, he or she should consider potential misstatements and any compensating controls.

To test for recorded sales for which there were no actual shipments, the auditor traces from the:

The overall objective of the audit of the sales and collection cycle is to evaluate whether:

Discuss the purposes of, and differences between, design format and performance format audit programs.

The auditor traces items from the source documents to the journals in order to satisfy the:

A credit note is a document indicating a reduction in the amount due from a customer.

A bill of lading is a special type of sales invoice used when goods are shipped interstate.

The audit procedure referred to as proof of cash receipts is useful to test:

In determining the extent of reliance to be placed on internal controls, the auditor considers:

Which one of the following statements is TRUE? In deciding on substantive tests of transactions:

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Documentation

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters