Question 1

Which of the following is an account that is not affected by the sales and collection cycle?

Accepted Answer

A) Cash 
B) Accounts receivable 
C) Allowance for doubtful accounts 
D) Accounts payable 
A) Cash 
B) Accounts receivable 
C) Allowance for doubtful accounts 
D) Accounts payable

Question 2

Credit should be approved before a customer's order is received.

Accepted Answer

A) True 
 B)False

Question 3

The ________ is a contract between a carrier (e.g., a trucking company)and the seller of goods that dictates the details surrounding the shipment of goods.

Accepted Answer

A) bill of lading 
B) sales invoice 
C) picking ticket 
D) remittance advice 
A) bill of lading 
B) sales invoice 
C) picking ticket 
D) remittance advice

Question 4

When posting items from the sales journal, details of the journal and journal totals are posted to which items?

Accepted Answer

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

Question 5

When designing tests of controls and substantive tests of transactions for cash receipts, it is important to remember that:

Accepted Answer

A) the test of controls are designed to test for monetary misstatements. 
B) auditors use the same methodology for designing tests of controls and substantive tests of transactions for cash receipts as they use for sales. 
C) the tests of controls are not dependent on the controls the auditor identifies. 
D) the tests of controls is not dependent on whether the company being audited is publicly traded/ 
A) the test of controls are designed to test for monetary misstatements. 
B) auditors use the same methodology for designing tests of controls and substantive tests of transactions for cash receipts as they use for sales. 
C) the tests of controls are not dependent on the controls the auditor identifies. 
D) the tests of controls is not dependent on whether the company being audited is publicly traded/

Question 6

An effective procedure to test for unbilled shipments is to trace from the:

Accepted Answer

A) sales journal to the shipping documents. 
B) shipping documents to the sales journal. 
C) sales journal to the accounts receivable ledger. 
D) sales journal to the general ledger sales account. 
A) sales journal to the shipping documents. 
B) shipping documents to the sales journal. 
C) sales journal to the accounts receivable ledger. 
D) sales journal to the general ledger sales account.

Question 7

Tracing from source documents to the journal is useful for testing the existence objective.

Accepted Answer

A) True 
 B)False

Question 8

The completeness transaction-related audit objective must be considered when determining key controls for for sales.List three key controls that must be considered when cash received is recorded in the cash receipts journal.

Accepted Answer

(1)is a prelisting of cash receipts prep

Question 9

A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the:

Accepted Answer

A) accounts receivable subsidiary ledger. 
B) monthly statement. 
C) remittance advice. 
D) sales invoice. 
A) accounts receivable subsidiary ledger. 
B) monthly statement. 
C) remittance advice. 
D) sales invoice.

Question 10

Which one of the following statements is true? In deciding on substantive tests of transactions:

Accepted Answer

A) some procedures are commonly employed on every audit regardless of the circumstances. 
B) all procedures are dependent on the adequacy of the controls and the results of the tests of controls. 
C) results obtained in the prior year's audit will not affect the procedures used this year. 
D) the materiality of the item will not influence the choice of procedures used. 
A) some procedures are commonly employed on every audit regardless of the circumstances. 
B) all procedures are dependent on the adequacy of the controls and the results of the tests of controls. 
C) results obtained in the prior year's audit will not affect the procedures used this year. 
D) the materiality of the item will not influence the choice of procedures used.

Question 11

You are part of the audit team that is auditing Hillsburg Hardware Co.and you have been assigned to the sales and collection business process.You are testing whether the cash received has been recorded in the cash receipts journal.(completeness objective /assertion).List two tests of controls and at least one test of transactions that you would do to satisfy yourself regarding the completeness assertion.

Accepted Answer

Control Tests: 1.Observe prelisting of c

Question 12

Which of the following would least concern an auditor regarding the lack of a specific authorization to conduct the sales transaction?

Accepted Answer

A) Granting of credit 
B) Shipment of goods 
C) Determination of discounts 
D) Selling of goods for cash 
A) Granting of credit 
B) Shipment of goods 
C) Determination of discounts 
D) Selling of goods for cash

Question 13

In planning the audit, an auditor takes 3 basic steps in determining the audit procedures to be performed for any business cycle or class of transactions in order to gather audit evidence concerning possible misstatement due to error or fraud.List those three basic steps below.

Accepted Answer

The three basic steps in designing tests

Question 14

Some companies have customers send payments directly to an address maintained by a bank.This is called a(n)________ system.

Accepted Answer

A) direct deposit 
B) funds transfer 
C) lockbox 
D) interbank transfer 
A) direct deposit 
B) funds transfer 
C) lockbox 
D) interbank transfer

Question 15

The preparation of a sales invoice is the final step in the sales and collection cycle.

Accepted Answer

A) True 
 B)False

Question 16

Credit memos are normally issued to:

Accepted Answer

A) adjust the customers balance to the amount owed to the company because of returned goods or an allowance. 
B) assist in the aging of accounts receivable. 
C) reduce customer frustration and sales losses. 
D) inform the customer of the balance due. 
A) adjust the customers balance to the amount owed to the company because of returned goods or an allowance. 
B) assist in the aging of accounts receivable. 
C) reduce customer frustration and sales losses. 
D) inform the customer of the balance due.

Question 17

Customer billing is a critical process which auditors must understand.What are the most important aspects of billing and what are the related objectives?

Accepted Answer

The most important aspects of billing ar

Question 18

In designing substantive audit procedures for tests of transactions for sales the auditor needs to test for evidence of misstatements due to errors or fraud.Describe at least 2 potential errors (unintentional)and at least 1 intentional (fraud).

Accepted Answer

1.Unintentional-sales included in the jo

Question 19

To prevent fraud, management should deny cash access to anyone responsible for:

Accepted Answer

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

Question 20

Explain each of the following types of documents and indicate the class of transactions in which they are commonly used.
1.Customer order
2.Shipping document
3.Remittance advice
4.Sales returns and allowance journal
5.Uncollectible account authorization form

Accepted Answer

1.Customer order - request for merchandi

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

Which of the following is an account that is not affected by the sales and collection cycle?

Credit should be approved before a customer's order is received.

The ________ is a contract between a carrier (e.g., a trucking company)and the seller of goods that dictates the details surrounding the shipment of goods.

When posting items from the sales journal, details of the journal and journal totals are posted to which items?

When designing tests of controls and substantive tests of transactions for cash receipts, it is important to remember that:

An effective procedure to test for unbilled shipments is to trace from the:

Tracing from source documents to the journal is useful for testing the existence objective.

The completeness transaction-related audit objective must be considered when determining key controls for for sales.List three key controls that must be considered when cash received is recorded in the cash receipts journal.

A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the:

Which one of the following statements is true? In deciding on substantive tests of transactions:

Which of the following would least concern an auditor regarding the lack of a specific authorization to conduct the sales transaction?

In planning the audit, an auditor takes 3 basic steps in determining the audit procedures to be performed for any business cycle or class of transactions in order to gather audit evidence concerning possible misstatement due to error or fraud.List those three basic steps below.

Some companies have customers send payments directly to an address maintained by a bank.This is called a(n)________ system.

The preparation of a sales invoice is the final step in the sales and collection cycle.

Credit memos are normally issued to:

Customer billing is a critical process which auditors must understand.What are the most important aspects of billing and what are the related objectives?

In designing substantive audit procedures for tests of transactions for sales the auditor needs to test for evidence of misstatements due to errors or fraud.Describe at least 2 potential errors (unintentional)and at least 1 intentional (fraud).

To prevent fraud, management should deny cash access to anyone responsible for:

Explain each of the following types of documents and indicate the class of transactions in which they are commonly used. 1.Customer order 2.Shipping document 3.Remittance advice 4.Sales returns and allowance journal 5.Uncollectible account authorization form

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

Filters