Exam 16: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

The criterion used by most merchandising and manufacturing clients for determining when revenue recognition takes place is whether title to the goods has passed.

If the auditor decides not to confirm accounts receivable, the auditor should:

For which of the following accounts is cutoff least important?

If auditors consider confirmations of accounts receivable to be ineffective evidence because response rates will be very low, they need not confirm accounts receivable.

If the client's internal control for recording sales returns and allowances is evaluated as ineffective:

List three of the major factors affecting sample size for confirming accounts receivable.

For effective internal control, employees maintaining the accounts receivable subsidiary ledger should not also approve:

Audit procedures designed to uncover credit sales made after the client's fiscal year end that relate to the current year being audited provide evidence for which of the following audit objective?

Each client misstatement in accounts receivable must be analyzed to determine whether it was consistent with the original assessed level of control risk.

Describe the differences between positive and negative confirmations.Which type is generally viewed as more reliable?

The net realizable value of accounts receivable is equal to:

The balance-related audit objectives of realizable value and rights are not affected by assessed control risk.

Recording a sale that did not occur violates the occurrence transaction-related audit objective and the existence balance-related audit objective.

A positive confirmation is more reliable evidence than a negative confirmation because:

Confirmation of accounts receivable selected from the trial balance is the most common test of details of balances for the ________ of accounts receivable.

The results of the tests of controls determine whether assessed control risk for sales and cash receipts needs to be revised.

A listing of the balances in the accounts receivable master file at the balance sheet date, by total balance outstanding and by the amount of time the component parts have been outstanding, is the:

Generally accepted accounting principles require that revenue be reported net of sales returns and allowances:

One of the shortcomings in evaluating the allowance for uncollectible accounts by reviewing individual noncurrent balances on the aged trial balance is: I. it is difficult to compare the results of the current year with those of the previous year. II) current accounts are ignored in establishing the adequacy of the allowance.