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

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

Which of the following is the principle "weakness" of using negative confirmations for your tests of details of balances for accounts receivable?

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

Auditors are especially concerned with three aspects of internal control for the sales and collection cycle.Which of the following is not one of their major concerns?

A procedure to test for a cash receipts cutoff error is:

When sending confirmations during most audits of accounts receivable,the emphasis is often on confirming larger and older accounts.

Confirmation is the most common test of details of balances for the accuracy of accounts receivable.

Which of the following types of receivables would not deserve the special attention of the auditor?

For sales,the completeness transaction-related audit objective affects the existence balance-related audit objective.

Favorable results from analytical procedures may reduce the extent to which the auditor needs to test details of balances.

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

A type of positive confirmation in which an individual invoice is confirmed,rather than the customer's entire accounts receivable balance is the ________ confirmation.

The two primary classes of transactions in the sales and collection cycle are:

Tests of which balance-related audit objective are normally performed first in an audit of the sales and collection?

Confirmation of accounts receivable balances normally provides evidence concerning the:

Match seven of the terms (a-k)with the definitions provided below (1-7): a.Accounts receivable balance-related audit objectives b.Aged trial balance c.Alternative procedures d.Blank confirmation form e.Cutoff misstatements f.Evidence planning worksheet g.Negative confirmation h.Positive confirmation i.Realizable value of accounts receivable j.Timing difference in an account receivable confirmation k.Invoice confirmation ________ 1.The follow-up of a positive confirmation not returned by the debtor with the use of documentation evidence to determine whether the recorded receivable exists and is collectible. ________ 2.A letter,addressed to the debtor,requesting that the recipient indicate directly on the letter whether the stated account balance is correct or incorrect and,if incorrect,by what amount. ________ 3.Misstatements that take place as a result of current period transactions being recorded in a subsequent period,or subsequent period transactions being recorded in the current period. ________ 4.A form used to help the auditor decide whether planned detection risk for tests of details of balances should be low,medium,or high for each balance-related audit objective. ________ 5.A letter,addressed to the debtor,requesting a response only if the recipient disagrees with the amount of the stated account balance. ________ 6.A reported difference in a confirmation from a debtor that is determined to be a timing difference between the client's and debtor's records and therefore not a misstatement. ________ 7.A listing of the balances in the accounts receivable master file at the balance sheet date broken down according to the amount of time that has passed between the date of sale and the balance sheet date.

Describe each of the following types of confirmations: • Positive confirmation • Blank confirmation • Invoice confirmation • Negative confirmation

When do most companies record sales returns and allowances?

Cutoff misstatements occur:

Negative confirmations normally require a larger sample size than positive confirmations.