Question 1

Prenumbered documents are intended to help:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

When sales invoices are automatically calculated and posted by a computer, the auditor may be able to reduce substantive tests of transactions for which, if any, assertion?

Accepted Answer

A) Accuracy 
B) Existence 
C) Completeness 
D) None of the above 
A) Accuracy 
B) Existence 
C) Completeness 
D) None of the above

Question 3

Sales should be recorded, at the earliest, when:

Accepted Answer

A) the order is received. 
B) the order is received and credit is approved. 
C) credit is approved and it is verified that there is enough inventory to fill the order. 
D) the shipment takes place. 
A) the order is received. 
B) the order is received and credit is approved. 
C) credit is approved and it is verified that there is enough inventory to fill the order. 
D) the shipment takes place.

Question 4

A bill of lading is a written contract between the seller and the buyer.

Accepted Answer

A) True 
 B)False

Question 5

The document that requires adjustments to the customers subsidiary ledger account is the:

Accepted Answer

A) bill of lading. 
B) sales invoice. 
C) credit memo. 
D) monthly statement. 
A) bill of lading. 
B) sales invoice. 
C) credit memo. 
D) monthly statement.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Misstatements involving the completeness objective for sales lead to overstatements of assets and income.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would offer the best protection for a company that wishes to prevent a reoccurrence of a previously detected "lapping" problem with trade accounts receivable?

Accepted Answer

A) Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail. 
B) Segregate duties so that no employee has access to both checks from customers and currency from daily cash receipts. 
C) Have customers send payments directly to the company's depository bank. 
D) Request that customer's payment checks be made payable to the company and addressed to the treasurer. 
A) Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail. 
B) Segregate duties so that no employee has access to both checks from customers and currency from daily cash receipts. 
C) Have customers send payments directly to the company's depository bank. 
D) Request that customer's payment checks be made payable to the company and addressed to the treasurer.

Question 9

Sales returns and allowances are often ignored by auditors because they are often immaterial.

Accepted Answer

A) True 
 B)False

Question 10

The audit procedure referred to as proof of cash receipts is particularly 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) the client's reconciliation between cash receipts and bank deposits. 
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) the client's reconciliation between cash receipts and bank deposits.

Question 11

The shipping point is critical because it is the first point at which company assets are released to another party.

Accepted Answer

A) True 
 B)False

Question 12

The sales and collection cycle applies to businesses that transfer goods to customers or provides services to businesses.

Accepted Answer

A) True 
 B)False

Question 13

What event initiates a transaction in the sales and collection cycle?

Accepted Answer

A) Receipt of cash 
B) Delivery of product to a customer 
C) Identification of a new customer 
D) Customer request for goods 
A) Receipt of cash 
B) Delivery of product to a customer 
C) Identification of a new customer 
D) Customer request for goods

Question 14

A sales invoice is a document that usually indicates credit approval.

Accepted Answer

A) True 
 B)False

Question 15

In the accounts receivable subsidiary ledger the length of time the account has been due can be useful to the client and the auditor in preparing the:

Accepted Answer

A) trial balance. 
B) working trial balance. 
C) accounts receivable trial balance. 
D) aged accounts receivable trial balance. 
A) trial balance. 
B) working trial balance. 
C) accounts receivable trial balance. 
D) aged accounts receivable trial balance.

Question 16

The document used to indicate to the customer the amount of a sale and payment due date is the:

Accepted Answer

A) sales invoice. 
B) bill of lading. 
C) purchase order. 
D) sales order. 
A) sales invoice. 
B) bill of lading. 
C) purchase order. 
D) sales order.

Question 17

An auditor needs to determine whether all customers of an electric utility company are being billed.The auditor should test from the:

Accepted Answer

A) sales register to the accounts receivable ledger. 
B) sales register to the meter department records. 
C) accounts receivable ledger to the sales register. 
D) meter department records to the sales register. 
A) sales register to the accounts receivable ledger. 
B) sales register to the meter department records. 
C) accounts receivable ledger to the sales register. 
D) meter department records to the sales register.

Question 18

The document that the accounting staff will use as the primary basis for recording sales transactions and updating the customers accounts receivable subsidiary ledger is the:

Accepted Answer

A) sales order. 
B) bill of lading. 
C) sales journal. 
D) sales invoice. 
A) sales order. 
B) bill of lading. 
C) sales journal. 
D) sales invoice.

Question 19

When auditors evaluate sales returns and allowances, a primary emphasis is on the objective of occurrence.

Accepted Answer

A) True 
 B)False

Question 20

In determining the level of audit efficiency, once the auditor has identified the key internal controls and identified any deficiencies in order to determine the level of control risk appropriate for a private company client, it is appropriate to decide whether:

Accepted Answer

A) substantive tests can be reduced sufficiently to justify costs of performing tests of controls. 
B) substantive tests can be increased sufficiently to justify costs of performing tests of controls. 
C) tests of controls can be increased sufficiently to justify costs of performing substantive tests. 
D) tests of controls can be reduced sufficiently to justify costs of performing substantive tests. 
A) substantive tests can be reduced sufficiently to justify costs of performing tests of controls. 
B) substantive tests can be increased sufficiently to justify costs of performing tests of controls. 
C) tests of controls can be increased sufficiently to justify costs of performing substantive tests. 
D) tests of controls can be reduced sufficiently to justify costs of performing substantive tests.

Exam 14: Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Prenumbered documents are intended to help:

When sales invoices are automatically calculated and posted by a computer, the auditor may be able to reduce substantive tests of transactions for which, if any, assertion?

Sales should be recorded, at the earliest, when:

A bill of lading is a written contract between the seller and the buyer.

The document that requires adjustments to the customers subsidiary ledger account is the:

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

Misstatements involving the completeness objective for sales lead to overstatements of assets and income.

Which of the following would offer the best protection for a company that wishes to prevent a reoccurrence of a previously detected "lapping" problem with trade accounts receivable?

Sales returns and allowances are often ignored by auditors because they are often immaterial.

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

The shipping point is critical because it is the first point at which company assets are released to another party.

The sales and collection cycle applies to businesses that transfer goods to customers or provides services to businesses.

What event initiates a transaction in the sales and collection cycle?

A sales invoice is a document that usually indicates credit approval.

In the accounts receivable subsidiary ledger the length of time the account has been due can be useful to the client and the auditor in preparing the:

The document used to indicate to the customer the amount of a sale and payment due date is the:

An auditor needs to determine whether all customers of an electric utility company are being billed.The auditor should test from the:

The document that the accounting staff will use as the primary basis for recording sales transactions and updating the customers accounts receivable subsidiary ledger is the:

When auditors evaluate sales returns and allowances, a primary emphasis is on the objective of occurrence.

In determining the level of audit efficiency, once the auditor has identified the key internal controls and identified any deficiencies in order to determine the level of control risk appropriate for a private company client, it is appropriate to decide whether:

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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