Question 1

Auditing the details of customer payments listed in bank deposits in comparison to details of customer payment postings can detect _______.

Accepted Answer

The answer of Auditing the details of customer payments listed...

Question 2

Which of the following internal control activities most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

Accepted Answer

A) Daily sales summaries are compared to daily postings to the accounts receivable ledger. 
B) Each sales invoice is supported by a prenumbered shipping document. 
C) The accounts receivable ledger is reconciled daily to the control account in the general ledger. 
D) Each shipment on credit is supported by a prenumbered sales invoice. 
A) Daily sales summaries are compared to daily postings to the accounts receivable ledger. 
B) Each sales invoice is supported by a prenumbered shipping document. 
C) The accounts receivable ledger is reconciled daily to the control account in the general ledger. 
D) Each shipment on credit is supported by a prenumbered sales invoice.

Question 3

Smith Manufacturing Company's accounts receivable clerk has a friend who is also Smith's customer. The accounts receivable clerk, on occasion, has issued fictitious credit memorandums to his friend for goods supposedly returned (these returns did not exist). The most effective control for preventing this activity is to:

Accepted Answer

A) prenumber and account for all credit memorandums. 
B) require receiving reports to support all credit memorandums before they are approved. 
C) have the sales department independent of the accounts-receivable department. 
D) mail monthly statements to the customer. 
A) prenumber and account for all credit memorandums. 
B) require receiving reports to support all credit memorandums before they are approved. 
C) have the sales department independent of the accounts-receivable department. 
D) mail monthly statements to the customer.

Question 4

Elm Tree Inc. has a December 31 year end. On October 15, the auditor evaluated and tested Elm Tree's internal control procedures over the sales recording process and finds the controls to be effective. At a minimum, the auditor's year-end procedures for testing internal control procedures must include:

Accepted Answer

A) confirmations of year-end accounts that were examined on October 15. 
B) tests the client's internal control procedures from October 15 through the year end. 
C) tests of compliance with internal control for a random sample of transactions throughout the audit period. 
D) a comparison of the responses to the auditor's internal control questionnaire with a detailed flowchart of control procedures at year end. 
A) confirmations of year-end accounts that were examined on October 15. 
B) tests the client's internal control procedures from October 15 through the year end. 
C) tests of compliance with internal control for a random sample of transactions throughout the audit period. 
D) a comparison of the responses to the auditor's internal control questionnaire with a detailed flowchart of control procedures at year end.

Question 5

If the auditor obtains sufficient appropriate evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable, the auditor's opinion should be unqualified and could be expected to:

Accepted Answer

A) disclose the fact that alternative procedures were used due to client-imposed scope limitation. 
B) disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. 
C) avoid mentioning the alternative procedures. 
D) include an explanatory paragraph that discloses the performance of alternative procedures. 
A) disclose the fact that alternative procedures were used due to client-imposed scope limitation. 
B) disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. 
C) avoid mentioning the alternative procedures. 
D) include an explanatory paragraph that discloses the performance of alternative procedures.

Question 6

The sum of customers' unpaid balances that is compared to the general ledger balance comes from:

Accepted Answer

A) a total of sales invoices. 
B) a total of shipping orders. 
C) the sales journal. 
D) the accounts receivable trial balance. 
A) a total of sales invoices. 
B) a total of shipping orders. 
C) the sales journal. 
D) the accounts receivable trial balance.

Question 7

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the:

Accepted Answer

A) type of confirmation to be used. 
B) client's internal control over transactions affecting receivables. 
C) availability of staff auditors. 
D) number of customer accounts. 
A) type of confirmation to be used. 
B) client's internal control over transactions affecting receivables. 
C) availability of staff auditors. 
D) number of customer accounts.

Question 8

An auditor noted that client sales had increased 10 percent for the year. At the same time, cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent. The auditor is most likely concerned about:

Accepted Answer

A) unrecorded costs. 
B) improper credit approvals. 
C) improper sales cut-off. 
D) fictitious sales. 
A) unrecorded costs. 
B) improper credit approvals. 
C) improper sales cut-off. 
D) fictitious sales.

Question 9

Which of the following audit procedures is the most effective in testing sales for understatement?

Accepted Answer

A) Analyze the aged trial balance of recorded accounts receivable. 
B) Confirm recorded accounts receivable. 
C) Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D) Vouch a sample of recorded sales from the sales journal to shipping documents. 
A) Analyze the aged trial balance of recorded accounts receivable. 
B) Confirm recorded accounts receivable. 
C) Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D) Vouch a sample of recorded sales from the sales journal to shipping documents.

Question 10

A small business owner can best offset the lack of separation of duties by:

Accepted Answer

A) creating an internal audit department. 
B) installing the latest computer equipment and software. 
C) being actively involved in the accounting process. 
D) relying on the external auditor to detect errors. 
A) creating an internal audit department. 
B) installing the latest computer equipment and software. 
C) being actively involved in the accounting process. 
D) relying on the external auditor to detect errors.

Question 11

A client has a separate sales group for its largest "preferred" customers. This is a select group of customers that normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?

Accepted Answer

A) Prepare a schedule of purchases and payments for these customers. 
B) Send out negative confirmations on a large sample of these customers. 
C) Inquire of the sales manager regarding the accounts receivable terms. 
D) Send out positive confirmations on a large sample of these customers. 
A) Prepare a schedule of purchases and payments for these customers. 
B) Send out negative confirmations on a large sample of these customers. 
C) Inquire of the sales manager regarding the accounts receivable terms. 
D) Send out positive confirmations on a large sample of these customers.

Question 12

The SEC requires all of the following for revenue to be recognized except:

Accepted Answer

A) cash is collected. 
B) persuasive evidence of an arrangement exists. 
C) delivery has occurred or services have been rendered. 
D) the seller's price to the buyer is fixed or determinable. 
A) cash is collected. 
B) persuasive evidence of an arrangement exists. 
C) delivery has occurred or services have been rendered. 
D) the seller's price to the buyer is fixed or determinable.

Question 13

Which of the following is an example of a control activity that satisfies the accuracy control objective for sales invoices?

Accepted Answer

A) Recorded sales in the sales journal are supported by invoices. 
B) Invoices, shipping documents, and sales orders are prenumbered and the numerical sequence is checked. 
C) Sales are recorded in the proper account. 
D) Invoice quantities are compared to shipment and customer order quantities. 
A) Recorded sales in the sales journal are supported by invoices. 
B) Invoices, shipping documents, and sales orders are prenumbered and the numerical sequence is checked. 
C) Sales are recorded in the proper account. 
D) Invoice quantities are compared to shipment and customer order quantities.

Question 14

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates respondents' exceptions and comments. By this procedure, the auditor would be most likely to learn of which of the following?

Accepted Answer

A) One of the cashiers has been covering a personal embezzlement by lapping. 
B) One of the sales clerks has not been preparing charge slips for credit sales to family and friends. 
C) One of the IT control clerks has been removing all sales invoices applicable to his account from the data file. 
D) The credit manager has misappropriated remittances from customers whose accounts have been written off. 
A) One of the cashiers has been covering a personal embezzlement by lapping. 
B) One of the sales clerks has not been preparing charge slips for credit sales to family and friends. 
C) One of the IT control clerks has been removing all sales invoices applicable to his account from the data file. 
D) The credit manager has misappropriated remittances from customers whose accounts have been written off.

Question 15

When accounts receivable are confirmed at an interim date, auditors need not be concerned with:

Accepted Answer

A) obtaining a summary of receivables transactions from the interim date to the year-end date. 
B) obtaining a year-end trial balance of receivables, comparing it to the interim trial balance, and obtaining evidence and explanations for large variations. 
C) sending negative confirmations to all the customers as of the year-end date. 
D) considering the necessity for some additional confirmations as of the balance sheet date if balances have increased materially. 
A) obtaining a summary of receivables transactions from the interim date to the year-end date. 
B) obtaining a year-end trial balance of receivables, comparing it to the interim trial balance, and obtaining evidence and explanations for large variations. 
C) sending negative confirmations to all the customers as of the year-end date. 
D) considering the necessity for some additional confirmations as of the balance sheet date if balances have increased materially.

Question 16

Scanning sales invoices for missing numbers in the sequence would be an activity intended to satisfy what assertion?

Accepted Answer

A) Completeness. 
B) Accuracy. 
C) Occurrence. 
D) Classification. 
A) Completeness. 
B) Accuracy. 
C) Occurrence. 
D) Classification.

Question 17

"Bill and hold" refers to an arrangement where:

Accepted Answer

A) sales are recorded but are not shipped. 
B) sales are shipped but are not recorded. 
C) sales are billed but not collected. 
D) inventory is held but not billed. 
A) sales are recorded but are not shipped. 
B) sales are shipped but are not recorded. 
C) sales are billed but not collected. 
D) inventory is held but not billed.

Question 18

Which of the following accounts is not normally part of the revenue and collection cycle?

Accepted Answer

A) Sales. 
B) Accounts Receivable. 
C) Cash. 
D) Purchases Returns and Allowances. 
A) Sales. 
B) Accounts Receivable. 
C) Cash. 
D) Purchases Returns and Allowances.

Question 19

Which of the following internal control activities most likely would deter lapping of collections from customers?

Accepted Answer

A) Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries. 
B) Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval. 
C) Separation of duties between receiving cash and posting the accounts receivable ledger. 
D) Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries. 
A) Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries. 
B) Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval. 
C) Separation of duties between receiving cash and posting the accounts receivable ledger. 
D) Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.

Question 20

Custody of inventory is transferred to the shipping area upon authorization of:

Accepted Answer

A) the customer order. 
B) the shipping order. 
C) the invoice. 
D) the purchase order. 
A) the customer order. 
B) the shipping order. 
C) the invoice. 
D) the purchase order.

Auditing the details of customer payments listed in bank deposits in comparison to details of customer payment postings can detect _______.

Which of the following internal control activities most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

If the auditor obtains sufficient appropriate evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable, the auditor's opinion should be unqualified and could be expected to:

The sum of customers' unpaid balances that is compared to the general ledger balance comes from:

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the:

An auditor noted that client sales had increased 10 percent for the year. At the same time, cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent. The auditor is most likely concerned about:

Which of the following audit procedures is the most effective in testing sales for understatement?

A small business owner can best offset the lack of separation of duties by:

The SEC requires all of the following for revenue to be recognized except:

Which of the following is an example of a control activity that satisfies the accuracy control objective for sales invoices?

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates respondents' exceptions and comments. By this procedure, the auditor would be most likely to learn of which of the following?

When accounts receivable are confirmed at an interim date, auditors need not be concerned with:

Scanning sales invoices for missing numbers in the sequence would be an activity intended to satisfy what assertion?

"Bill and hold" refers to an arrangement where:

Which of the following accounts is not normally part of the revenue and collection cycle?

Which of the following internal control activities most likely would deter lapping of collections from customers?

Custody of inventory is transferred to the shipping area upon authorization of:

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters

Exam 7: Revenue and Collection Cycle 279

Auditing the details of customer payments listed in bank deposits in comparison to details of customer payment postings can detect _______.

Which of the following internal control activities most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

If the auditor obtains sufficient appropriate evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable, the auditor's opinion should be unqualified and could be expected to:

The sum of customers' unpaid balances that is compared to the general ledger balance comes from:

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the:

An auditor noted that client sales had increased 10 percent for the year. At the same time, cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent. The auditor is most likely concerned about:

Which of the following audit procedures is the most effective in testing sales for understatement?

A small business owner can best offset the lack of separation of duties by:

The SEC requires all of the following for revenue to be recognized except:

Which of the following is an example of a control activity that satisfies the accuracy control objective for sales invoices?

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates respondents' exceptions and comments. By this procedure, the auditor would be most likely to learn of which of the following?

When accounts receivable are confirmed at an interim date, auditors need not be concerned with:

Scanning sales invoices for missing numbers in the sequence would be an activity intended to satisfy what assertion?

"Bill and hold" refers to an arrangement where:

Which of the following accounts is not normally part of the revenue and collection cycle?

Which of the following internal control activities most likely would deter lapping of collections from customers?

Custody of inventory is transferred to the shipping area upon authorization of:

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters