Exam 10: Auditing the Revenue Process

The XYZ Company billing department has decided to assign one employee to each of its customers. This employee will be responsible for granting credit to the entity and then handling the billing. XYZ believes this will result in better customer service, because the entity will only have to deal with one person and that one person will be very familiar with the credit terms. As an auditor, would you agree with XYZ's decision?

All of the following are important controls over credit memos except:

Match the test of controls described below to the appropriate assertion it is used to test: -Observe the endorsement of checks

When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger, the auditor is testing the ________ assertion.

Immediately upon receipt of cash, a responsible employee should:

Which of the following most likely would give the most assurance concerning the valuation assertion for accounts receivable?

A negative confirmation requests that customers respond whether they agree or not with the amount due to the entity stated in the confirmation.

Which of the following control activities may prevent the failure to bill customers for some shipments?

The return of vendor purchases is a part of the revenue process.

An auditor is reviewing sales cutoff as of March 31, 2019. All sales are shipped FOB destination and the company records sales three days after shipment. The auditor notes the following transactions: If the entity records the required adjustments, the net effect on income (in thousands of dollars)for the period ended March 31, 2019 is

An auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control account as of October 31. By this procedure, the auditor would be most likely to learn about which of the following?

In the confirmation of accounts receivable, the auditor would most likely:

A remittance advice is used to track purchases.

Match the test of controls described below to the appropriate assertion it is used to test: -Test a sample of sales invoices for the presence of authorized customer order and shipping document

Match the test of controls described below to the appropriate assertion it is used to test: -Test a sample of cash receipts transactions for proper cash discounts

Auditors are more concerned with the occurrence assertion for revenues than the completeness assertion because:

Customers having substantial year-end past due balances fail to reply after second request confirmation forms have been mailed directly to them. Which of the following is the most appropriate audit procedure?

Which of the following is a test of controls for the transaction assertion of completeness for revenue?

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

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because: