Question 1

A customer reply on a positive confirmation says "We dispute the $250 charge.We believe it is excessive." This confirmation

Accepted Answer

A)  Provides evidence of existence. 
B)  Does not provide evidence of existence because the customer may refuse to pay the $250 charge. 
C)  Provides evidence that the account was understated. 
D)  Provides evidence that the account should be written off. 
A)  Provides evidence of existence. 
B)  Does not provide evidence of existence because the customer may refuse to pay the $250 charge. 
C)  Provides evidence that the account was understated. 
D)  Provides evidence that the account should be written off.

Question 2

When auditing the revenue and collection cycle,auditors normally select balances to confirm from the

Accepted Answer

A)  Sales journal. 
B)  Accounts receivable listing. 
C)  General ledger. 
D)  Cash receipts listing. 
A)  Sales journal. 
B)  Accounts receivable listing. 
C)  General ledger. 
D)  Cash receipts listing.

Question 3

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

Accepted Answer

A)  Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence. 
B)  Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off. 
C)  Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected. 
D)  Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers. 
A)  Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence. 
B)  Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off. 
C)  Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected. 
D)  Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

Question 4

When an audit team traces a sample of shipping documents to the related sales invoice copies,they are trying to find relevant evidence that

Accepted Answer

A)  Shipments to customers were invoiced. 
B)  Shipments to customers were recorded as sales. 
C)  Recorded sales were shipped. 
D)  Invoiced sales were shipped. 
A)  Shipments to customers were invoiced. 
B)  Shipments to customers were recorded as sales. 
C)  Recorded sales were shipped. 
D)  Invoiced sales were shipped.

Question 5

The aging information for accounts receivable is typically used in connection with assessing the allowance for doubtful accounts.

Accepted Answer

A) True 
 B)False

Question 6

An auditor noted that client sales had increased 10 percent for the year.At the same time,cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.The auditor is most likely concerned about

Accepted Answer

A)  Unrecorded costs. 
B)  Improper credit approvals. 
C)  Improper sales cut-off. 
D)  Fictitious sales. 
A)  Unrecorded costs. 
B)  Improper credit approvals. 
C)  Improper sales cut-off. 
D)  Fictitious sales.

Question 7

When an audit team does not receive a response on a positive accounts receivable confirmation,auditors should do all of the following except

Accepted Answer

A)  Send a second request. 
B)  Do nothing for immaterial balances. 
C)  Examine shipping documents. 
D)  Examine client correspondence files. 
A)  Send a second request. 
B)  Do nothing for immaterial balances. 
C)  Examine shipping documents. 
D)  Examine client correspondence files.

Question 8

When obtaining evidence about accounts receivable,auditors must put emphasis on the completeness and obligations assertions.

Accepted Answer

A) True 
 B)False

Question 9

The auditor selects a sample of recorded sales invoices and vouches them to shipping documents.This procedure is related to which of the following assertions?

Accepted Answer

A)  Occurrence. 
B)  Completeness. 
C)  Accuracy. 
D)  Cutoff. 
A)  Occurrence. 
B)  Completeness. 
C)  Accuracy. 
D)  Cutoff.

Question 10

Auditors sometimes use comparisons of ratios as audit evidence.An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

Accepted Answer

A)  Unrecorded purchases. 
B)  Unrecorded sales. 
C)  Merchandise purchases being charged to selling and general expense. 
D)  Fictitious sales. 
A)  Unrecorded purchases. 
B)  Unrecorded sales. 
C)  Merchandise purchases being charged to selling and general expense. 
D)  Fictitious sales.

Question 11

_________________________________ of accounts receivable records implies the power to alter them directly or enter transactions to alter them.

Accepted Answer

The answer of _________________________________ of accounts receivable records implies the...

Question 12

Cash receipts from sales on account have been misappropriated.Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

Accepted Answer

A)  Understating the sales journal. 
B)  Overstating the accounts receivable control account. 
C)  Overstating the accounts receivable subsidiary ledger. 
D)  Understating the cash receipts journal. 
A)  Understating the sales journal. 
B)  Overstating the accounts receivable control account. 
C)  Overstating the accounts receivable subsidiary ledger. 
D)  Understating the cash receipts journal.

Question 13

Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded?

Accepted Answer

A)  The billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account balances. 
B)  The accounting department supervisor independently reconciles the accounts receivable subsidiary ledger to the accounts receivable control account monthly. 
C)  The accounting department supervisor controls the mailing of monthly statements to customers and investigates any differences reported by customers. 
D)  The billing department supervisor matches prenumbered shipping documents with entries in the sales journal. 
A)  The billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account balances. 
B)  The accounting department supervisor independently reconciles the accounts receivable subsidiary ledger to the accounts receivable control account monthly. 
C)  The accounting department supervisor controls the mailing of monthly statements to customers and investigates any differences reported by customers. 
D)  The billing department supervisor matches prenumbered shipping documents with entries in the sales journal.

Question 14

Which of the following audit procedures is the most effective in testing sales for understatement?

Accepted Answer

A)  Analyze the aged trial balance of recorded accounts receivable. 
B)  Confirm recorded accounts receivable. 
C)  Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D)  Vouch a sample of recorded sales from the sales journal to shipping documents. 
A)  Analyze the aged trial balance of recorded accounts receivable. 
B)  Confirm recorded accounts receivable. 
C)  Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D)  Vouch a sample of recorded sales from the sales journal to shipping documents.

Question 15

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Accepted Answer

A)  Review the cash receipts journal for the month prior to the year-end. 
B)  Intensify the study of the internal control structure concerning the revenue cycle. 
C)  Increase the assessed level of detection risk for the existence assertion. 
D)  Inspect the shipping records documenting the merchandise sold to the debtors. 
A)  Review the cash receipts journal for the month prior to the year-end. 
B)  Intensify the study of the internal control structure concerning the revenue cycle. 
C)  Increase the assessed level of detection risk for the existence assertion. 
D)  Inspect the shipping records documenting the merchandise sold to the debtors.

Question 16

Confirmation of individual accounts receivable balances directly with debtors will,of itself,normally provide the strongest evidence concerning the

Accepted Answer

A)  Collectability of the balances confirmed. 
B)  Ownership of the balances confirmed. 
C)  Existence of the balances confirmed. 
D)  Internal control over balances confirmed. 
A)  Collectability of the balances confirmed. 
B)  Ownership of the balances confirmed. 
C)  Existence of the balances confirmed. 
D)  Internal control over balances confirmed.

Question 17

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records.

Accepted Answer

The answer of Another way to obtain information about the...

Question 18

A procedure to gather evidence on both account balances and controls is called a ______________________________________ procedure.

Accepted Answer

The answer of A procedure to gather evidence on both...

Question 19

Which of the following responses to an accounts receivable confirmation at December 31 would cause an audit team the most concern?

Accepted Answer

A)  "This amount was paid on December 30th." 
B)  "We received this shipment on January 2nd." 
C)  "These goods were returned for credit on November 15th." 
D)  "The balance does not reflect our sales discount for paying by January 5th." 
A)  "This amount was paid on December 30th." 
B)  "We received this shipment on January 2nd." 
C)  "These goods were returned for credit on November 15th." 
D)  "The balance does not reflect our sales discount for paying by January 5th."

Question 20

A price list master file contains the product unit prices that are used for billing customers.

Accepted Answer

A) True 
 B)False

A customer reply on a positive confirmation says "We dispute the $250 charge.We believe it is excessive." This confirmation

When auditing the revenue and collection cycle,auditors normally select balances to confirm from the

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

When an audit team traces a sample of shipping documents to the related sales invoice copies,they are trying to find relevant evidence that

The aging information for accounts receivable is typically used in connection with assessing the allowance for doubtful accounts.

An auditor noted that client sales had increased 10 percent for the year.At the same time,cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.The auditor is most likely concerned about

When an audit team does not receive a response on a positive accounts receivable confirmation,auditors should do all of the following except

When obtaining evidence about accounts receivable,auditors must put emphasis on the completeness and obligations assertions.

The auditor selects a sample of recorded sales invoices and vouches them to shipping documents.This procedure is related to which of the following assertions?

Auditors sometimes use comparisons of ratios as audit evidence.An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

_________________________________ of accounts receivable records implies the power to alter them directly or enter transactions to alter them.

Cash receipts from sales on account have been misappropriated.Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded?

Which of the following audit procedures is the most effective in testing sales for understatement?

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Confirmation of individual accounts receivable balances directly with debtors will,of itself,normally provide the strongest evidence concerning the

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records.

A procedure to gather evidence on both account balances and controls is called a ______________________________________ procedure.

Which of the following responses to an accounts receivable confirmation at December 31 would cause an audit team the most concern?

A price list master file contains the product unit prices that are used for billing customers.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 7: Revenue and Collection Cycle

A customer reply on a positive confirmation says "We dispute the $250 charge.We believe it is excessive." This confirmation

When auditing the revenue and collection cycle,auditors normally select balances to confirm from the

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

When an audit team traces a sample of shipping documents to the related sales invoice copies,they are trying to find relevant evidence that

The aging information for accounts receivable is typically used in connection with assessing the allowance for doubtful accounts.

An auditor noted that client sales had increased 10 percent for the year.At the same time,cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.The auditor is most likely concerned about

When an audit team does not receive a response on a positive accounts receivable confirmation,auditors should do all of the following except

When obtaining evidence about accounts receivable,auditors must put emphasis on the completeness and obligations assertions.

The auditor selects a sample of recorded sales invoices and vouches them to shipping documents.This procedure is related to which of the following assertions?

Auditors sometimes use comparisons of ratios as audit evidence.An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

_________________________________ of accounts receivable records implies the power to alter them directly or enter transactions to alter them.

Cash receipts from sales on account have been misappropriated.Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded?

Which of the following audit procedures is the most effective in testing sales for understatement?

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Confirmation of individual accounts receivable balances directly with debtors will,of itself,normally provide the strongest evidence concerning the

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records.

A procedure to gather evidence on both account balances and controls is called a ______________________________________ procedure.

Which of the following responses to an accounts receivable confirmation at December 31 would cause an audit team the most concern?

A price list master file contains the product unit prices that are used for billing customers.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters