Question 1

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

Accepted Answer

A)  A majority of recipients usually lacks the willingness to respond objectively. 
B)  Some recipients may report incorrect balances that require extensive follow up. 
C)  The auditor cannot infer that all nonrespondents have verified their account information. 
D)  Negative confirmations do not produce evidential matter that is statistically quantifiable. 
A)  A majority of recipients usually lacks the willingness to respond objectively. 
B)  Some recipients may report incorrect balances that require extensive follow up. 
C)  The auditor cannot infer that all nonrespondents have verified their account information. 
D)  Negative confirmations do not produce evidential matter that is statistically quantifiable.

Question 2

Which of the following is not an alternative procedure when a confirmation is not received?

Accepted Answer

A)  Examine sales invoices and vouch them to underlying shipping documents. 
B)  Examine payments received before the end of the period. 
C)  Examine customer purchase orders. 
D)  Examine client correspondence with the customer. 
A)  Examine sales invoices and vouch them to underlying shipping documents. 
B)  Examine payments received before the end of the period. 
C)  Examine customer purchase orders. 
D)  Examine client correspondence with the customer.

Question 3

"Bill and hold" refers to an arrangement where

Accepted Answer

A)  Sales are recorded but are not shipped. 
B)  Sales are shipped but are not recorded. 
C)  Sales are billed but not collected. 
D)  Inventory is held but not billed. 
A)  Sales are recorded but are not shipped. 
B)  Sales are shipped but are not recorded. 
C)  Sales are billed but not collected. 
D)  Inventory is held but not billed.

Question 4

The ____________________________ confirmation form is used when individual balances are ____________________________ or accounts are in ______________________________.

Accepted Answer

positive;

Question 5

Is the confirmation of cash and accounts receivable required according to auditing standards? Explain.

Accepted Answer

In general,the use of confirmations for

Question 6

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

Accepted Answer

A)  Delivering goods, billing customer, granting credit, and performing collection activities. 
B)  Customer ordering, delivering goods, granting credit, and billing customers. 
C)  Processing customer orders, granting credit, delivering goods, and billing customers. 
D)  Granting credit, billing customers, delivering goods, and processing cash receipts. 
A)  Delivering goods, billing customer, granting credit, and performing collection activities. 
B)  Customer ordering, delivering goods, granting credit, and billing customers. 
C)  Processing customer orders, granting credit, delivering goods, and billing customers. 
D)  Granting credit, billing customers, delivering goods, and processing cash receipts.

Question 7

An objective for an audit is to obtain evidence related to management's financial statement assertions.

Accepted Answer

A) True 
 B)False

Question 8

The auditor maintains control of the mailing and receipt of confirmations by typically performing all of the following except

Accepted Answer

A)  Preparing the confirmation letters. 
B)  Mailing the confirmation letters. 
C)  Receiving the confirmation letters. 
D)  None of the above. 
A)  Preparing the confirmation letters. 
B)  Mailing the confirmation letters. 
C)  Receiving the confirmation letters. 
D)  None of the above.

Question 9

Which of the following is an example of a control activity that satisfies the accuracy control objective for sales invoices?

Accepted Answer

A)  Recorded sales in the sales journal are supported by invoices. 
B)  Invoices, shipping documents, and sales orders are prenumbered and the numerical sequence is checked. 
C)  Sales are recorded in the proper account. 
D)  Invoice quantities are compared to shipment and customer order quantities. 
A)  Recorded sales in the sales journal are supported by invoices. 
B)  Invoices, shipping documents, and sales orders are prenumbered and the numerical sequence is checked. 
C)  Sales are recorded in the proper account. 
D)  Invoice quantities are compared to shipment and customer order quantities.

Question 10

If control risk is assessed very low,the substantive audit procedures on account balances must be expanded.

Accepted Answer

A) True 
 B)False

Question 11

The positive form of confirmation is best used when

Accepted Answer

A)  Account balances are relatively large. 
B)  Account balances are small in amount but numerous. 
C)  Accounts are not in dispute. 
D)  Internal control is considered effective. 
A)  Account balances are relatively large. 
B)  Account balances are small in amount but numerous. 
C)  Accounts are not in dispute. 
D)  Internal control is considered effective.

Question 12

An auditor should normally 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)  Collectability 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)  Collectability of the receivables is in doubt. 
D)  Pledging of the receivables is probable.

Question 13

To be recognized,revenues must also be realized or realizable and

Accepted Answer

A)  Foreseeable. 
B)  Collected. 
C)  Earned. 
D)  Shipped. 
A)  Foreseeable. 
B)  Collected. 
C)  Earned. 
D)  Shipped.

Question 14

Which of the following internal control activities most likely would deter lapping of collections from customers?

Accepted Answer

A)  Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries. 
B)  Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval. 
C)  Separation of duties between receiving cash and posting the accounts receivable ledger. 
D)  Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries. 
A)  Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries. 
B)  Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval. 
C)  Separation of duties between receiving cash and posting the accounts receivable ledger. 
D)  Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.

Question 15

Alpha Brewery Corporation recorded sales through January 4,2005,dating them December 31,2004.This situation is an example of a violation of which of the following assertions?

Accepted Answer

A)  Existence or occurrence. 
B)  Completeness. 
C)  Classification. 
D)  Accuracy. 
A)  Existence or occurrence. 
B)  Completeness. 
C)  Classification. 
D)  Accuracy.

Question 16

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

Accepted Answer

A)  Many customers merely sign and return the confirmation without verifying its details. 
B)  Recipients usually respond only if they disagree with the information on the request. 
C)  Customers may not be inclined to report understatement errors in their accounts. 
D)  Auditors typically select many accounts with low recorded balances to be confirmed. 
A)  Many customers merely sign and return the confirmation without verifying its details. 
B)  Recipients usually respond only if they disagree with the information on the request. 
C)  Customers may not be inclined to report understatement errors in their accounts. 
D)  Auditors typically select many accounts with low recorded balances to be confirmed.

Question 17

A comparison of checks listed on a sample of deposit slips to the detail of customer credits posted to customer accounts receivable can be an audit test for lapping.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is correct concerning the use of negative confirmation requests?

Accepted Answer

A)  Unreturned negative confirmation requests rarely provide significant explicit evidence. 
B)  Negative confirmation requests are effective when detection risk is low. 
C)  Unreturned negative confirmation requests indicate that alternative procedures are necessary. 
D)  Negative confirmation requests are effective when understatements of account balances are suspected. 
A)  Unreturned negative confirmation requests rarely provide significant explicit evidence. 
B)  Negative confirmation requests are effective when detection risk is low. 
C)  Unreturned negative confirmation requests indicate that alternative procedures are necessary. 
D)  Negative confirmation requests are effective when understatements of account balances are suspected.

Question 19

What is dual direction testing?

Accepted Answer

Dual direction testing involves samples

Question 20

Credit checks should be performed by the sales department before credit is approved.

Accepted Answer

A) True 
 B)False

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

Which of the following is not an alternative procedure when a confirmation is not received?

"Bill and hold" refers to an arrangement where

The confirmation form is used when individual balances are or accounts are in __.

Is the confirmation of cash and accounts receivable required according to auditing standards? Explain.

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

An objective for an audit is to obtain evidence related to management's financial statement assertions.

The auditor maintains control of the mailing and receipt of confirmations by typically performing all of the following except

Which of the following is an example of a control activity that satisfies the accuracy control objective for sales invoices?

If control risk is assessed very low,the substantive audit procedures on account balances must be expanded.

The positive form of confirmation is best used when

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

To be recognized,revenues must also be realized or realizable and

Which of the following internal control activities most likely would deter lapping of collections from customers?

Alpha Brewery Corporation recorded sales through January 4,2005,dating them December 31,2004.This situation is an example of a violation of which of the following assertions?

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

A comparison of checks listed on a sample of deposit slips to the detail of customer credits posted to customer accounts receivable can be an audit test for lapping.

Which of the following statements is correct concerning the use of negative confirmation requests?

What is dual direction testing?

Credit checks should be performed by the sales department before credit is approved.

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

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

Which of the following is not an alternative procedure when a confirmation is not received?

"Bill and hold" refers to an arrangement where

The ____________________________ confirmation form is used when individual balances are ____________________________ or accounts are in ______________________________.

Is the confirmation of cash and accounts receivable required according to auditing standards? Explain.

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

An objective for an audit is to obtain evidence related to management's financial statement assertions.

The auditor maintains control of the mailing and receipt of confirmations by typically performing all of the following except

Which of the following is an example of a control activity that satisfies the accuracy control objective for sales invoices?

If control risk is assessed very low,the substantive audit procedures on account balances must be expanded.

The positive form of confirmation is best used when

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

To be recognized,revenues must also be realized or realizable and

Which of the following internal control activities most likely would deter lapping of collections from customers?

Alpha Brewery Corporation recorded sales through January 4,2005,dating them December 31,2004.This situation is an example of a violation of which of the following assertions?

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

A comparison of checks listed on a sample of deposit slips to the detail of customer credits posted to customer accounts receivable can be an audit test for lapping.

Which of the following statements is correct concerning the use of negative confirmation requests?

What is dual direction testing?

Credit checks should be performed by the sales department before credit is approved.

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

The confirmation form is used when individual balances are or accounts are in __.