Exam 10: Auditing the Revenue Process

When comparing prices and terms on a sample of sales invoices with the authorized price list and terms of trade, the auditor is testing the ____________ assertion.

Immediately upon receipt of cash, a responsible employee should

Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the receivables'

An auditor tests an entity's policy of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of

When reviewing bank confirmations for any liens on receivables, the auditor is testing the ______________ assertion.

An auditor most likely would limit substantive tests of sales transactions when control risk is assessed as low for the existence or occurrence assertions concerning sales transactions and the auditor has already gathered evidence supporting

Some firms that dispose of only a small part of their total output by consignment shipments fail to make any distinction between consignment shipments and regular sales. Which of the following would suggest that goods have been shipped on consignment?

Channel stuffing is an improper practice used to boost sales by inducing distributors to buy more inventory than they can promptly resell.

Explain how revenue recognition is important to the audit of the revenue process.

Tracing shipping documents to prenumbered sales invoices provides evidence that

In general, revenue is recognized when

Assume you are working on a 12/31 year-end audit. It is now March 31^st and the 12/31 accounts receivable aging shows a large receivable that was outstanding on 12/31 for 120 days. Further, the entity's receivables are typically collected in less than 45 days. You anticipate that the entity's allowance for doubtful account should be increased and inform the entity about your disposition. Management disagrees. Is there an alternative substantive procedure that you could perform that would provide convincing evidence that this balance is collectible? If so, explain.

According to the SEC's SAB No. 101, which of the following is not necessary for revenue recognition?

For the most effective internal control, monthly bank statements should be received directly from the banks and reviewed by the

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

In connection with the examination of financial statements by an independent auditor, management suggests that members of the internal audit staff be utilized to minimize audit costs. Which of the following tasks could most appropriately be delegated to the internal audit staff?

You are auditing the allowance for doubtful accounts (ADA) and perform the analytical procedures shown below. Assume that no significant changes have occurred during the year in either the entity's credit policies or customer base. What concerns, if any, about adjusting the ADA should the auditor have based on the information shown below?

Upon receipt of customers' checks in the mailroom, a responsible employee should prepare a listing of remittances that is forwarded to the cashier. A copy of the listing should be sent to the

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

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