Question 1

Trade accounts receivable should exclude

Accepted Answer

A) accounts receivable denominated in foreign currencies. 
B) past-due accounts receivable. 
C) related party accounts receivable. 
D) accounts receivable of clients entitled to receive discounts. 
A) accounts receivable denominated in foreign currencies. 
B) past-due accounts receivable. 
C) related party accounts receivable. 
D) accounts receivable of clients entitled to receive discounts.

Question 2

Before goods are shipped on account to a new customer,a properly authorized person must

Accepted Answer

A) prepare the sales invoice. 
B) approve the journal entry. 
C) approve credit. 
D) verify that the unit price is accurate. 
A) prepare the sales invoice. 
B) approve the journal entry. 
C) approve credit. 
D) verify that the unit price is accurate.

Question 3

A)Describe each of the six key control activities for sales.B)When assessing planned control risk for sales,the auditor is concerned about proper authorization at three key points.Discuss each of these three points.C)When testing the existence objective for sales,the auditor is concerned with the possibility of three types of misstatements.One type is sales being included in the journal for which no shipment was made.Discuss the other two types of misstatements.

Accepted Answer

A)The six key control activities for sal

Question 4

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of

Accepted Answer

A) completeness. 
B) validity. 
C) authorization. 
D) accuracy. 
A) completeness. 
B) validity. 
C) authorization. 
D) accuracy.

Question 5

In the audit of cash and accounts receivable,the main emphasis should be on which assertion?

Accepted Answer

A) completeness 
B) existence 
C) rights and obligations 
D) presentation and disclosure 
A) completeness 
B) existence 
C) rights and obligations 
D) presentation and disclosure

Question 6

You are the auditor for GreenAcres,a non-profit home for homeless elderly.GreenAcres has a December 31 year end.It receives government funding and also relies on donations for revenue.GreenAcres has a major funding drive in November,when it collects pledges by means of activities at a garage sale,a walkathon,and bake sales in the community.
In late February you had a meeting with Ellen Famous,the President of GreenAcres,at the organization's premises.Ellen reviews and approves bank statements and is the second and final cheque signer.Two other accounting staff have the following responsibilities:
•Paul approves pledge write-offs (which normally average about 15%),opens the mail,endorses cheques received in the mail,prepares and delivers bank deposits,and posts transactions into the accounting system.
•Diana,a retired bookkeeper,volunteers about 10 hours per week to reconcile the bank account,review journal entries posted to the general ledger,and prepare payroll and accounts payable transactions for processing.
Ellen normally reviews pledge write-offs,but was very busy in February,so she took a look while you were there.To her surprise,she found that about 40% of the pledges had been written off.She asked Diana to investigate,and Diana found that most of the write-offs had actually been paid.
Required:A)What are possible causes of the inconsistency with the pledge write-offs? B)What are the weaknesses in internal control that could allow the excess write-offs to occur? Provide recommendations for improvement.C)Identify audit procedures that you would complete to quantify any potential misstatement with respect to the pledges receivable balance as at December 31.

Accepted Answer

A)The inconsistency could either be due

Question 7

Outline the audit procedures the auditor may consider performing to validate the valuation assertion for accounts receivables.

Accepted Answer

The audit procedures the auditor may con

Question 8

There are three main types of revenue manipulations.Which of the following revenue manipulations affects the valuation objective?

Accepted Answer

A) recording subsequent period sales as current period sales 
B) the use of "bill and holds" (goods are invoiced but not shipped) 
C) understatement of bad debts 
D) creation of fictitious sales that are misclassified as revenue 
A) recording subsequent period sales as current period sales 
B) the use of "bill and holds" (goods are invoiced but not shipped) 
C) understatement of bad debts 
D) creation of fictitious sales that are misclassified as revenue

Question 9

Beltrand,a PA,is auditing the financial statements of a small rural municipality.The receivable balances represent residents' delinquent property taxes or receivables over the due date.The internal controls at the municipality are weak.To determine the existence of the accounts receivable balances at the balance sheet date,Beltrand would most likely

Accepted Answer

A) send positive confirmation requests. 
B) send negative confirmation request. 
C) examine evidence of subsequent cash receipts. 
D) inspect the internal records such as copies of the tax invoices that were mailed to the residents. 
A) send positive confirmation requests. 
B) send negative confirmation request. 
C) examine evidence of subsequent cash receipts. 
D) inspect the internal records such as copies of the tax invoices that were mailed to the residents.

Question 10

You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable:
   
Required:A)What are the audit implications of these figures? B)Identify key audit steps that you would perform for any of the above accounts.

Accepted Answer

A)Accounts receivable has increased subs

Question 11

Which of the following data elements would be included in the customer master file?

Accepted Answer

A) transaction date 
B) credit limit 
C) transaction amount 
D) amount paid 
A) transaction date 
B) credit limit 
C) transaction amount 
D) amount paid

Question 12

For cash receipts,the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable.Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect?

Accepted Answer

A) allocation 
B) completeness 
C) rights and obligations 
D) existence 
A) allocation 
B) completeness 
C) rights and obligations 
D) existence

Question 13

Stefano is performing a review of the accounts receivable for large and unusual amounts.Of the following accounts receivables,Stefano should pay special attention to an account receivable

Accepted Answer

A) from a related party. 
B) for a large dollar amount. 
C) recorded close to year end. 
D) that is recurring. 
A) from a related party. 
B) for a large dollar amount. 
C) recorded close to year end. 
D) that is recurring.

Question 14

Office Design Inc.(ODI)has been your audit client for five years.ODI designs and sells office furniture such as desks,cabinets,and couches used in office reception areas.ODI has sales in Canada and the U.S. ,with five distribution locations where furniture is available to prospective purchasers to try out before purchasing.These locations are in Toronto,Montreal,Halifax,New York,and Chicago.The company uses custom-designed software for its order processing and sales,which is kept current by one of the five information systems personnel.
The Vice President of Finance is new.Executive management is paid a salary and a bonus based on the annual net income of ODI.Unfortunately,the accounting staff at the head office (in Montreal)has been downsized from ten people to six due to a recent slowdown in sales.Your review of the aged accounts receivable trial balance revealed that one third of the accounts have been outstanding for more than one year.ODI's profits have declined substantially from last year.Its line of credit and bank loans are at their maximum and the company is considering selling its U.S.operations to provide cash flow.
Prior year working papers revealed few errors and indicate that you considered management integrity to be good.However,due to segregation issues,you did not rely on the internal controls in the prior year.
Required:A)What issues in corporate governance and in the control environment affect your assessment of internal controls for revenue? How does this affect the decision to conduct substantive testing (i.e.exclusion of tests of controls)? B)What is the likely assessment of computer general controls? How does this affect the type of audit testing conducted at ODI?

Accepted Answer

A)Senior executives are motivated to ove

Question 15

Scanning sales invoices to determine whether there are any numbers missing in the sequence is a control over which of the following objectives?

Accepted Answer

A) validity 
B) completeness. 
C) accuracy. 
D) ownership. 
A) validity 
B) completeness. 
C) accuracy. 
D) ownership.

Question 16

Comparison of individual customer balances with previous years will detect what type of possible misstatement?

Accepted Answer

A) misstatement in gross profit and bad debt expense 
B) overstatement or understatement of bad debt expense 
C) overstatement or understatement of allowance for uncollectible accounts 
D) misstatements in accounts receivable and related income statement accounts 
A) misstatement in gross profit and bad debt expense 
B) overstatement or understatement of bad debt expense 
C) overstatement or understatement of allowance for uncollectible accounts 
D) misstatements in accounts receivable and related income statement accounts

Question 17

What are the criteria the auditor should take into account in order for substantive analytical procedures to provide the necessary assurance?

Accepted Answer

The criteria the auditor should take int

Question 18

The most reliable evidence from confirmations is obtained when they are sent

Accepted Answer

A) several months before the year-end,so the auditor will have adequate time to perform alternate procedures if they are required. 
B) at various times throughout the year to different sections of the sample,so that the entire sample is representative of account balances scattered throughout the year. 
C) as close to the balance sheet date as possible. 
D) at various times throughout the year to the same group in the sample,so that the sample will not have a time bias. 
A) several months before the year-end,so the auditor will have adequate time to perform alternate procedures if they are required. 
B) at various times throughout the year to different sections of the sample,so that the entire sample is representative of account balances scattered throughout the year. 
C) as close to the balance sheet date as possible. 
D) at various times throughout the year to the same group in the sample,so that the sample will not have a time bias.

Question 19

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

Accepted Answer

A) existence objective. 
B) completeness objective. 
C) accuracy objective. 
D) classification objective. 
A) existence objective. 
B) completeness objective. 
C) accuracy objective. 
D) classification objective.

Question 20

Poor controls over credit limit approval or in changing the credit limit in the master file may result in

Accepted Answer

A) confused and frustrated customers. 
B) incomplete sales records. 
C) financial statement errors for sales and AR accounts. 
D) excessive bad debts and uncollectible accounts receivable. 
A) confused and frustrated customers. 
B) incomplete sales records. 
C) financial statement errors for sales and AR accounts. 
D) excessive bad debts and uncollectible accounts receivable.

Trade accounts receivable should exclude

Before goods are shipped on account to a new customer,a properly authorized person must

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of

In the audit of cash and accounts receivable,the main emphasis should be on which assertion?

Outline the audit procedures the auditor may consider performing to validate the valuation assertion for accounts receivables.

There are three main types of revenue manipulations.Which of the following revenue manipulations affects the valuation objective?

You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable: Required:A)What are the audit implications of these figures? B)Identify key audit steps that you would perform for any of the above accounts.

Which of the following data elements would be included in the customer master file?

For cash receipts,the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable.Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect?

Stefano is performing a review of the accounts receivable for large and unusual amounts.Of the following accounts receivables,Stefano should pay special attention to an account receivable

Scanning sales invoices to determine whether there are any numbers missing in the sequence is a control over which of the following objectives?

Comparison of individual customer balances with previous years will detect what type of possible misstatement?

What are the criteria the auditor should take into account in order for substantive analytical procedures to provide the necessary assurance?

The most reliable evidence from confirmations is obtained when they are sent

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

Poor controls over credit limit approval or in changing the credit limit in the master file may result in

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 12: Audit of the Revenue Cycle

Trade accounts receivable should exclude

Before goods are shipped on account to a new customer,a properly authorized person must

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of

In the audit of cash and accounts receivable,the main emphasis should be on which assertion?

Outline the audit procedures the auditor may consider performing to validate the valuation assertion for accounts receivables.

There are three main types of revenue manipulations.Which of the following revenue manipulations affects the valuation objective?

You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable: Required:A)What are the audit implications of these figures? B)Identify key audit steps that you would perform for any of the above accounts.

Which of the following data elements would be included in the customer master file?

For cash receipts,the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable.Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect?

Stefano is performing a review of the accounts receivable for large and unusual amounts.Of the following accounts receivables,Stefano should pay special attention to an account receivable

Scanning sales invoices to determine whether there are any numbers missing in the sequence is a control over which of the following objectives?

Comparison of individual customer balances with previous years will detect what type of possible misstatement?

What are the criteria the auditor should take into account in order for substantive analytical procedures to provide the necessary assurance?

The most reliable evidence from confirmations is obtained when they are sent

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

Poor controls over credit limit approval or in changing the credit limit in the master file may result in

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters