Question 1

For most audits, revenue recognition is considered to be a significant risk.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is likely to be determined first when performing tests of details for accounts receivable?

Accepted Answer

A)  Recorded accounts receivable exist. 
B)  Accounts receivable in the aged trial balance agree with related master file amounts, and the total is correctly added and agrees with the general ledger. 
C)  The client has a right to the accounts receivable. 
D)  Existing accounts receivable are included. 
A)  Recorded accounts receivable exist. 
B)  Accounts receivable in the aged trial balance agree with related master file amounts, and the total is correctly added and agrees with the general ledger. 
C)  The client has a right to the accounts receivable. 
D)  Existing accounts receivable are included. B

Question 3

The auditor should perform procedures to verify the addresses used for the accounts receivable confirmations.

Accepted Answer

A) True 
 B)False  True

Question 4

Testing the information on the aged trial balance for detail tie-in is a necessary audit procedure, which would normally include

Accepted Answer

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

Question 5

Describe how the auditor tests the accuracy objective for accounts receivable.

Accepted Answer

Confirmation of accounts selected from t

Question 6

When designing tests of details of balances, an important point to remember is

Accepted Answer

A)  auditors emphasize income statement accounts. 
B)  the audit procedures selected depends heavily on whether planned evidence for a given objective is low, medium, or high. 
C)  if accounts receivable are overstated, then sales will be understated. 
D)  sales cutoff is the most important test of details of accounts receivable. 
A)  auditors emphasize income statement accounts. 
B)  the audit procedures selected depends heavily on whether planned evidence for a given objective is low, medium, or high. 
C)  if accounts receivable are overstated, then sales will be understated. 
D)  sales cutoff is the most important test of details of accounts receivable.

Question 7

The appropriate and sufficient evidence to be obtained from tests of details must be decided on an

Accepted Answer

A)  efficiency basis. 
B)  effectiveness basis. 
C)  objective-by-objective basis. 
D)  none of the above 
A)  efficiency basis. 
B)  effectiveness basis. 
C)  objective-by-objective basis. 
D)  none of the above

Question 8

A listing of the balances in the accounts receivable master file at the balance sheet date, including individual customer balances outstanding and a breakdown of each balance by the time passed between the date of the sale and the balance sheet date, is the

Accepted Answer

A)  customer list. 
B)  aged trial balance. 
C)  accounts receivable ledger. 
D)  schedule of accounts receivable. 
A)  customer list. 
B)  aged trial balance. 
C)  accounts receivable ledger. 
D)  schedule of accounts receivable.

Question 9

Name the nine balance-related general audit objectives specifically applied to an audit of accounts receivable:

Accepted Answer

1. Accounts receivable on the aged trial

Question 10

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is to satisfy the audit objective of

Accepted Answer

A)  accuracy. 
B)  existence. 
C)  control. 
D)  completeness. 
A)  accuracy. 
B)  existence. 
C)  control. 
D)  completeness.

Question 11

A high inherent risk increases planned detection risk and decreases planned substantive tests.

Accepted Answer

A) True 
 B)False

Question 12

Discuss the advantages and disadvantages of using negative accounts receivable confirmations rather than positive confirmations.

Accepted Answer

The primary advantage of negative confir

Question 13

A confirmation is a type of audit evidence.

Accepted Answer

A) True 
 B)False

Question 14

If material, all of the following are required to be separately disclosed in the financial statements except for

Accepted Answer

A)  accounts receivable from officers. 
B)  accounts receivable from affiliates. 
C)  sales and assets for different business segments. 
D)  sales for the last ten days of the fiscal year. 
A)  accounts receivable from officers. 
B)  accounts receivable from affiliates. 
C)  sales and assets for different business segments. 
D)  sales for the last ten days of the fiscal year.

Question 15

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when

Accepted Answer

A)  no reply to a positive confirmation request is received. 
B)  no reply to a negative confirmation request is received. 
C)  collectibility of the receivables is in doubt. 
D)  pledging of the receivables is probable. 
A)  no reply to a positive confirmation request is received. 
B)  no reply to a negative confirmation request is received. 
C)  collectibility of the receivables is in doubt. 
D)  pledging of the receivables is probable.

Question 16

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.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 17

Assuming the client's internal controls are effective, describe how the auditor can verify proper cutoff of sales transactions.

Accepted Answer

Assuming the client's internal controls

Question 18

Significant credit balances in accounts receivable should be reclassified as accounts payable.

Accepted Answer

A) True 
 B)False

Question 19

Analytical procedures are substantive tests and, if the results of the analytical procedures are favorable, the auditor would normally

Accepted Answer

A)  reduce the extent of tests of details of balances. 
B)  reduce the extent of tests of controls. 
C)  reduce the tests of transactions. 
D)  reduce all of the other tests. 
A)  reduce the extent of tests of details of balances. 
B)  reduce the extent of tests of controls. 
C)  reduce the tests of transactions. 
D)  reduce all of the other tests.

Question 20

As a test of the occurrence transaction-related audit objective for sales and the accuracy balance-related audit objective for accounts receivable, auditors can use audit data analytics to match, for example, cash receipts to invoiced sales amounts.

Accepted Answer

A) True 
 B)False

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

For most audits, revenue recognition is considered to be a significant risk.

Which of the following is likely to be determined first when performing tests of details for accounts receivable?

The auditor should perform procedures to verify the addresses used for the accounts receivable confirmations.

Testing the information on the aged trial balance for detail tie-in is a necessary audit procedure, which would normally include

Describe how the auditor tests the accuracy objective for accounts receivable.

When designing tests of details of balances, an important point to remember is

The appropriate and sufficient evidence to be obtained from tests of details must be decided on an

A listing of the balances in the accounts receivable master file at the balance sheet date, including individual customer balances outstanding and a breakdown of each balance by the time passed between the date of the sale and the balance sheet date, is the

Name the nine balance-related general audit objectives specifically applied to an audit of accounts receivable:

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is to satisfy the audit objective of

A high inherent risk increases planned detection risk and decreases planned substantive tests.

Discuss the advantages and disadvantages of using negative accounts receivable confirmations rather than positive confirmations.

A confirmation is a type of audit evidence.

If material, all of the following are required to be separately disclosed in the financial statements except for

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when

Assuming the client's internal controls are effective, describe how the auditor can verify proper cutoff of sales transactions.

Significant credit balances in accounts receivable should be reclassified as accounts payable.

Analytical procedures are substantive tests and, if the results of the analytical procedures are favorable, the auditor would normally

As a test of the occurrence transaction-related audit objective for sales and the accuracy balance-related audit objective for accounts receivable, auditors can use audit data analytics to match, for example, cash receipts to invoiced sales amounts.

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 Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

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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