Exam 12: Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

The overall objective in the audit of the sales and collection cycle is to evaluate whether the account balances affected by the cycle are fairly presented in accordance with Australian accounting standards.

Proper separation of duties is useful to prevent various types of misstatements.Which one of the following is NOT an essential separation of duties?

Footing the sales journal and tracing the totals to the general ledger are tests relating to the accuracy objective for sales.

Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?

Which of the following is a document prepared by the seller for recording the description, quantity, and related information for goods ordered by a customer?

Which one of the following internal control procedures would most likely prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable? Write-offs must be

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

Which one of the following is NOT one of the five classes of transactions included in the sales and collection cycle?

Tracing an entry from the sales journal to the master file is a posting and summarisation procedure.

The sales and collections cycle consists of eight business functions.The first four functions result in sales transactions.Discuss each of the remaining four business functions that occur after sales transactions and identify the key documents and records involved in each of those four functions.

Violations of the completeness objective for sales are of greater concern to the auditor than violations of the existence objective.

The auditor's primary concern in the audit of the write-off of individual uncollectible accounts receivable is the possibility of embezzlement.

It is important that sales be billed and recorded in the journal as soon as possible after:

The sales and collection cycle involves the transfer of ownership of goods to customers and involves the conversion of services into accounts receivable.

Documents related to the billing of customers include a bill of lading, sales invoice, uncollectible account authorisation form, and remittance advice.

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

Which one of the following types of cash defalcation is LEAST likely to be detected by an auditor?

The total of the individual account balances in the accounts receivable master file equals the:

The likely result of a lack of proper authorisation in the sales and collection cycle is the loss of:

Describe the substantive tests of transactions used to test the accuracy objective for sales.