Question 1

Match between columns
                        Premises: Cash may not be deposited intact daily.
Receipts may be posted to the Wrong customer account.
Mail receipts may be lost or misappropriated after receipt.
Some receipts may not be recorded.
Errors may be made in journalizing receipts.
Errors may be made in recording cash receipts.
Cash sales may not be registered.
Remittance advices may not agree with the prelist.
Cash receipts may not be recorded or may be posted to the wrong accounts.
Cash and checks received for deposit may not agree with the cash count sheets and prelist.

Accepted Answer

The Answer of Independent check of agreement of  cash is...

Question 2

Since the confirmation is a request for payment, it provides strong evidence as to the collectibility of the balance.

Accepted Answer

A) True 
 B)False  False

Question 3

In considering the amount to write-off of past-due amounts, the auditor will pay particular attention to customers that demonstrate deteriorating payment history as the year progressed.

Accepted Answer

A) True 
 B)False  False

Question 4

In comparing Accounts Receivable Growth to Sales Growth, ratios larger than 1.0 indicate that receivables are growing faster than sales.

Accepted Answer

A) True 
 B)False

Question 5

The audit objective, "The accounts receivable balance represents gross claims on customers and agrees with the sum of the accounts receivable subsidiary ledger" is derived from the assertion of:

Accepted Answer

A)  existence or occurrence. 
B)  completeness. 
C)  rights and obligations. 
D)  valuation or allocation. 
E)  presentation or disclosure. 
A)  existence or occurrence. 
B)  completeness. 
C)  rights and obligations. 
D)  valuation or allocation. 
E)  presentation or disclosure.

Question 6

The confirmation of accounts receivable is primarily aimed at the existence or occurrence assertion.

Accepted Answer

A) True 
 B)False

Question 7

In most merchandising firm audits, the auditor's concern over sales adjustment transactions is based upon the:

Accepted Answer

A)  sheer number and value of these transactions. 
B)  implication these transactions have for operating efficiency. 
C)  poor controls normally found over these transactions and the inherent lack of documentation. 
D)  lack of proper authorization for these transactions. 
E)  potential use of these transactions to conceal a theft of cash. 
A)  sheer number and value of these transactions. 
B)  implication these transactions have for operating efficiency. 
C)  poor controls normally found over these transactions and the inherent lack of documentation. 
D)  lack of proper authorization for these transactions. 
E)  potential use of these transactions to conceal a theft of cash.

Question 8

The allowance for uncollectible accounts is an accounting estimate made by management that involves both objective and subjective considerations.

Accepted Answer

A) True 
 B)False

Question 9

Confirming accounts receivable is a generally accepted auditing standard.

Accepted Answer

A) True 
 B)False

Question 10

A company has a policy of rotating employees' assigned duties. This policy is most important for employees who:

Accepted Answer

A)  are not bonded. 
B)  maintain the detailed accounting records. 
C)  handle cash receipts. 
D)  have access to the general ledger. 
E)  serve as inventory clerks. 
A)  are not bonded. 
B)  maintain the detailed accounting records. 
C)  handle cash receipts. 
D)  have access to the general ledger. 
E)  serve as inventory clerks.

Question 11

When numerous exceptions are found, or insufficient responses are received from confirmation requests and the auditor is unable to obtain sufficient competent evidence from other substantive tests, he or she can still issue a standard auditor's report.

Accepted Answer

A) True 
 B)False

Question 12

Cash collection may precede revenue recognition, resulting in earned revenues.

Accepted Answer

A) True 
 B)False

Question 13

When the positive form of accounts receivable confirmation is used and no response is received, the auditor should normally:

Accepted Answer

A)  assume the account is in error. 
B)  assume the account is correct. 
C)  send a second request. 
D)  send a negative confirmation. 
E)  contact the customer by telephone. 
A)  assume the account is in error. 
B)  assume the account is correct. 
C)  send a second request. 
D)  send a negative confirmation. 
E)  contact the customer by telephone.

Question 14

Controls designed to reduce the risk of omissions, duplications, incorrect pricing, and other types of errors in the billing process include all of the following except:

Accepted Answer

A)  comparison of control totals for shipping documents with corresponding totals for sales invoices. 
B)  computer matching of sales invoice information with purchase order information. 
C)  computer matching of sales invoice information with sales order and shipping information. 
D)  computer-programmed checks on the mathematical accuracy of sales invoices. 
E)  computer matching of sales prices with an authorized price list and sales order prices in preparing the sales invoices. 
A)  comparison of control totals for shipping documents with corresponding totals for sales invoices. 
B)  computer matching of sales invoice information with purchase order information. 
C)  computer matching of sales invoice information with sales order and shipping information. 
D)  computer-programmed checks on the mathematical accuracy of sales invoices. 
E)  computer matching of sales prices with an authorized price list and sales order prices in preparing the sales invoices.

Question 15

In most cases there is a lesser risk of overstatement of receivables and sales than of understatement of receivables and sales.

Accepted Answer

A) True 
 B)False

Question 16

The bonding of employees will normally be expected to:

Accepted Answer

A)  "weed out" dishonest employees already hired. 
B)  eliminate the need for separation of duties in the cash receipts area. 
C)  guarantee that all employee fraud will be prevented. 
D)  provide reasonable assurance that all employees will perform their jobs with the utmost integrity. 
E)  serve as a deterrent to dishonesty. 
A)  "weed out" dishonest employees already hired. 
B)  eliminate the need for separation of duties in the cash receipts area. 
C)  guarantee that all employee fraud will be prevented. 
D)  provide reasonable assurance that all employees will perform their jobs with the utmost integrity. 
E)  serve as a deterrent to dishonesty.

Question 17

Periodic bank reconciliations should be performed by an employee who is usually involved in executing or recording cash transactions.

Accepted Answer

A) True 
 B)False

Question 18

The blank form confirmation is a way of increasing the response rate on positive confirmations.

Accepted Answer

A) True 
 B)False

Question 19

Proper access controls over cash require that all cash receipts be deposited intact daily, less minor disbursements made from the receipts.

Accepted Answer

A) True 
 B)False

Question 20

A negative confirmation is requested to be returned only if there is an error.

Accepted Answer

A) True 
 B)False

Since the confirmation is a request for payment, it provides strong evidence as to the collectibility of the balance.

In considering the amount to write-off of past-due amounts, the auditor will pay particular attention to customers that demonstrate deteriorating payment history as the year progressed.

In comparing Accounts Receivable Growth to Sales Growth, ratios larger than 1.0 indicate that receivables are growing faster than sales.

The audit objective, "The accounts receivable balance represents gross claims on customers and agrees with the sum of the accounts receivable subsidiary ledger" is derived from the assertion of:

The confirmation of accounts receivable is primarily aimed at the existence or occurrence assertion.

In most merchandising firm audits, the auditor's concern over sales adjustment transactions is based upon the:

The allowance for uncollectible accounts is an accounting estimate made by management that involves both objective and subjective considerations.

Confirming accounts receivable is a generally accepted auditing standard.

A company has a policy of rotating employees' assigned duties. This policy is most important for employees who:

When numerous exceptions are found, or insufficient responses are received from confirmation requests and the auditor is unable to obtain sufficient competent evidence from other substantive tests, he or she can still issue a standard auditor's report.

Cash collection may precede revenue recognition, resulting in earned revenues.

When the positive form of accounts receivable confirmation is used and no response is received, the auditor should normally:

Controls designed to reduce the risk of omissions, duplications, incorrect pricing, and other types of errors in the billing process include all of the following except:

In most cases there is a lesser risk of overstatement of receivables and sales than of understatement of receivables and sales.

The bonding of employees will normally be expected to:

Periodic bank reconciliations should be performed by an employee who is usually involved in executing or recording cash transactions.

The blank form confirmation is a way of increasing the response rate on positive confirmations.

Proper access controls over cash require that all cash receipts be deposited intact daily, less minor disbursements made from the receipts.

A negative confirmation is requested to be returned only if there is an error.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 14: Auditing the Revenue Cycle

Since the confirmation is a request for payment, it provides strong evidence as to the collectibility of the balance.

In considering the amount to write-off of past-due amounts, the auditor will pay particular attention to customers that demonstrate deteriorating payment history as the year progressed.

In comparing Accounts Receivable Growth to Sales Growth, ratios larger than 1.0 indicate that receivables are growing faster than sales.

The audit objective, "The accounts receivable balance represents gross claims on customers and agrees with the sum of the accounts receivable subsidiary ledger" is derived from the assertion of:

The confirmation of accounts receivable is primarily aimed at the existence or occurrence assertion.

In most merchandising firm audits, the auditor's concern over sales adjustment transactions is based upon the:

The allowance for uncollectible accounts is an accounting estimate made by management that involves both objective and subjective considerations.

Confirming accounts receivable is a generally accepted auditing standard.

A company has a policy of rotating employees' assigned duties. This policy is most important for employees who:

When numerous exceptions are found, or insufficient responses are received from confirmation requests and the auditor is unable to obtain sufficient competent evidence from other substantive tests, he or she can still issue a standard auditor's report.

Cash collection may precede revenue recognition, resulting in earned revenues.

When the positive form of accounts receivable confirmation is used and no response is received, the auditor should normally:

Controls designed to reduce the risk of omissions, duplications, incorrect pricing, and other types of errors in the billing process include all of the following except:

In most cases there is a lesser risk of overstatement of receivables and sales than of understatement of receivables and sales.

The bonding of employees will normally be expected to:

Periodic bank reconciliations should be performed by an employee who is usually involved in executing or recording cash transactions.

The blank form confirmation is a way of increasing the response rate on positive confirmations.

Proper access controls over cash require that all cash receipts be deposited intact daily, less minor disbursements made from the receipts.

A negative confirmation is requested to be returned only if there is an error.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters