Question 1

An aged trial balance of accounts receivable is normally used by the auditor to

Accepted Answer

A)  Verify the existence of recorded receivables. 
B)  Ensure that all accounts are promptly credited. 
C)  Evaluate the results of tests of controls. 
D)  Evaluate the provision for bad debts. 
A)  Verify the existence of recorded receivables. 
B)  Ensure that all accounts are promptly credited. 
C)  Evaluate the results of tests of controls. 
D)  Evaluate the provision for bad debts.

Question 2

Which is not a key segregation of duties for the revenue process? Different parties should

Accepted Answer

A)  Prepare shipping orders and prepare bills of lading. 
B)  Perform the credit and billing functions. 
C)  Perform the shipping and billing function. 
D)  Receive cash and adjust accounts receivable. 
A)  Prepare shipping orders and prepare bills of lading. 
B)  Perform the credit and billing functions. 
C)  Perform the shipping and billing function. 
D)  Receive cash and adjust accounts receivable.

Question 3

Which of the following internal control activities most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

Accepted Answer

A)  Daily sales summaries are compared to daily postings to the accounts receivable ledger. 
B)  Each sales invoice is supported by a prenumbered shipping document. 
C)  The accounts receivable ledger is reconciled daily to the control account in the general ledger. 
D)  Each shipment on credit is supported by a prenumbered sales invoice. 
A)  Daily sales summaries are compared to daily postings to the accounts receivable ledger. 
B)  Each sales invoice is supported by a prenumbered shipping document. 
C)  The accounts receivable ledger is reconciled daily to the control account in the general ledger. 
D)  Each shipment on credit is supported by a prenumbered sales invoice.

Question 4

Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?

Accepted Answer

A)  Employees responsible for authorizing sales and bad debt write-offs are denied access to cash. 
B)  Shipping documents and sales invoices are matched by an employee who does not have authority to write-off bad debts. 
C)  Employees involved in the credit-granting function are separated from the sales function. 
D)  Subsidiary accounts receivable records are reconciled to the control account by an employee independent of the authorization of credit. 
A)  Employees responsible for authorizing sales and bad debt write-offs are denied access to cash. 
B)  Shipping documents and sales invoices are matched by an employee who does not have authority to write-off bad debts. 
C)  Employees involved in the credit-granting function are separated from the sales function. 
D)  Subsidiary accounts receivable records are reconciled to the control account by an employee independent of the authorization of credit.

Question 5

Which of the following strategies most likely could improve the response rate of the confirmation of accounts receivable?

Accepted Answer

A)  Including a monthly statement of the customer's account with the confirmation. 
B)  Restricting the selection of accounts to be confirmed to those customers with relatively large balances. 
C)  Requesting customers to respond to the confirmation requests directly to the auditor by fax or e-mail. 
D)  Notifying the recipients that second requests will be mailed if they fail to respond in a timely manner. 
A)  Including a monthly statement of the customer's account with the confirmation. 
B)  Restricting the selection of accounts to be confirmed to those customers with relatively large balances. 
C)  Requesting customers to respond to the confirmation requests directly to the auditor by fax or e-mail. 
D)  Notifying the recipients that second requests will be mailed if they fail to respond in a timely manner.

Question 6

Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate control activities over the invoicing function allow goods to be shipped that are not invoiced. The inadequate control activities could cause an

Accepted Answer

A)  Understatement of revenues, receivables, and inventory. 
B)  Overstatement of revenues and receivables and an understatement of inventory. 
C)  Understatement of revenues and receivables and an overstatement of inventory. 
D)  Overstatement of revenues, receivables, and inventory. 
A)  Understatement of revenues, receivables, and inventory. 
B)  Overstatement of revenues and receivables and an understatement of inventory. 
C)  Understatement of revenues and receivables and an overstatement of inventory. 
D)  Overstatement of revenues, receivables, and inventory.

Question 7

Listed below are six assertions regarding the financial presentations made in the revenue process. For each, give an example of how an auditor could use one of the types of documents contained in the revenue process to test the assertion.
Occurrence
Completeness
Authorization
Accuracy
Cutoff
Classification

Accepted Answer

Student Answers will vary, but here are

Question 8

Smith is engaged in the audit of a cable TV firm that services a rural community. All receivable balances are small, customers are billed monthly, and internal control is effective. To determine the existence of the accounts receivable balances at the balance sheet date, Smith would most likely

Accepted Answer

A)  Send positive confirmation requests. 
B)  Send negative confirmation requests. 
C)  Examine evidence of subsequent cash receipts instead of sending confirmation requests. 
D)  Use statistical sampling instead of sending confirmation requests. 
A)  Send positive confirmation requests. 
B)  Send negative confirmation requests. 
C)  Examine evidence of subsequent cash receipts instead of sending confirmation requests. 
D)  Use statistical sampling instead of sending confirmation requests.

Question 9

When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents, the auditor is testing the ____________ assertion.

Accepted Answer

A)  Cutoff 
B)  Authorization 
C)  Completeness 
D)  Occurrence 
A)  Cutoff 
B)  Authorization 
C)  Completeness 
D)  Occurrence

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Identify whether the following tests are tests of controls, substantive analytical procedures, tests of details of transactions, or tests of details of account balances:

Accepted Answer

1) Select a sample of customer receivabl

Question 12

Which of the following is not an issue related to the valuation of accounts receivable?

Accepted Answer

A)  The valuation of revenue that makes up the detail of accounts receivable. 
B)  A proper allowance for doubtful accounts. 
C)  The net realizable value of accounts receivable. 
D)  Proper cutoff. 
A)  The valuation of revenue that makes up the detail of accounts receivable. 
B)  A proper allowance for doubtful accounts. 
C)  The net realizable value of accounts receivable. 
D)  Proper cutoff.

Question 13

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

Accepted Answer

A)  Randomly select a representative sample of accounts for confirmation. 
B)  Seek to obtain positive confirmations for at least 50% of the total dollar amount of the receivables. 
C)  Require confirmation of all receivables from agencies of the federal government. 
D)  Require that confirmation requests be sent within one month of the fiscal year-end. 
A)  Randomly select a representative sample of accounts for confirmation. 
B)  Seek to obtain positive confirmations for at least 50% of the total dollar amount of the receivables. 
C)  Require confirmation of all receivables from agencies of the federal government. 
D)  Require that confirmation requests be sent within one month of the fiscal year-end.

Question 14

Identify four of the seven primary functions in the revenue cycle and describe each function.

Accepted Answer

Answer sho

Question 15

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

Accepted Answer

A)  Granting of credit. 
B)  Shipment of goods. 
C)  Determination of discounts. 
D)  Selling of goods for cash. 
A)  Granting of credit. 
B)  Shipment of goods. 
C)  Determination of discounts. 
D)  Selling of goods for cash.

Question 16

Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment, the CPA would be likely to

Accepted Answer

A)  Increase the balance in the allowance for bad debts account. 
B)  Review the going concern ramifications. 
C)  Require the entity to tighten its credit policy. 
D)  Expand tests regarding the collectability of receivables. 
A)  Increase the balance in the allowance for bad debts account. 
B)  Review the going concern ramifications. 
C)  Require the entity to tighten its credit policy. 
D)  Expand tests regarding the collectability of receivables.

Question 17

What inherent risk factors should an auditor consider when auditing the revenue process of a computer manufacturer?

Accepted Answer

The auditor will want to consider indust

Question 18

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

Accepted Answer

A)  Proper segregation of duties to ensure that sales discounts taken were earned. 
B)  Credit memos should be approved by someone other than whoever initiated it. 
C)  Credit memos should be supported by a receiving document for returned goods. 
D)  Proper segregation of duties between access to customer records and authorizing credit memos. 
A)  Proper segregation of duties to ensure that sales discounts taken were earned. 
B)  Credit memos should be approved by someone other than whoever initiated it. 
C)  Credit memos should be supported by a receiving document for returned goods. 
D)  Proper segregation of duties between access to customer records and authorizing credit memos.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to assess the assertion of

Accepted Answer

A)  Authorization and accuracy. 
B)  Completeness. 
C)  Cutoff. 
D)  Occurrence. 
A)  Authorization and accuracy. 
B)  Completeness. 
C)  Cutoff. 
D)  Occurrence.

An aged trial balance of accounts receivable is normally used by the auditor to

Which is not a key segregation of duties for the revenue process? Different parties should

Which of the following internal control activities most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?

Which of the following strategies most likely could improve the response rate of the confirmation of accounts receivable?

Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate control activities over the invoicing function allow goods to be shipped that are not invoiced. The inadequate control activities could cause an

Smith is engaged in the audit of a cable TV firm that services a rural community. All receivable balances are small, customers are billed monthly, and internal control is effective. To determine the existence of the accounts receivable balances at the balance sheet date, Smith would most likely

When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents, the auditor is testing the ____________ assertion.

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

Identify whether the following tests are tests of controls, substantive analytical procedures, tests of details of transactions, or tests of details of account balances:

Which of the following is not an issue related to the valuation of accounts receivable?

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

Identify four of the seven primary functions in the revenue cycle and describe each function.

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment, the CPA would be likely to

What inherent risk factors should an auditor consider when auditing the revenue process of a computer manufacturer?

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

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

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to assess the assertion of

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 10: Auditing the Revenue Process

An aged trial balance of accounts receivable is normally used by the auditor to

Which is not a key segregation of duties for the revenue process? Different parties should

Which of the following internal control activities most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?

Which of the following strategies most likely could improve the response rate of the confirmation of accounts receivable?

Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate control activities over the invoicing function allow goods to be shipped that are not invoiced. The inadequate control activities could cause an

Smith is engaged in the audit of a cable TV firm that services a rural community. All receivable balances are small, customers are billed monthly, and internal control is effective. To determine the existence of the accounts receivable balances at the balance sheet date, Smith would most likely

When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents, the auditor is testing the ____________ assertion.

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

Identify whether the following tests are tests of controls, substantive analytical procedures, tests of details of transactions, or tests of details of account balances:

Which of the following is not an issue related to the valuation of accounts receivable?

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

Identify four of the seven primary functions in the revenue cycle and describe each function.

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment, the CPA would be likely to

What inherent risk factors should an auditor consider when auditing the revenue process of a computer manufacturer?

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

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

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to assess the assertion of

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters