Exam 10: Auditing the Revenue Process

Which of the following is a test of controls for the transaction assertion of completeness for revenue?

If the objective of a test of details is to detect the overstatement of sales, the auditor should trace transactions from the

Tracing bills of lading to sales invoices provides evidence that

When evaluating internal control of an entity that processes revenue transactions on the Internet, an auditor would be most concerned about the

An auditor would consider a cashier's job description to contain compatible duties if the cashier receives remittances from the mailroom and also

Which of the following might be detected by an auditor's review of the entity's sales cutoff?

According to the Association of Certified Fraud Examiners, there are eight common methods for committing financial statement fraud. List 4 of the 8 methods.

To achieve good internal control, which department should perform the activities of matching shipping documents with sales orders and preparing daily sales summaries?

Describe the two types of confirmations and indicate which one is more reliable and why.

The XYZ Company billing department has decided to assign one employee to each of its customers. This employee will be responsible for granting credit to the entity and then handling the billing. XYZ believes this will result in better customer service, because the entity will only have to deal with one person and that one person will be very familiar with the credit terms. As an auditor, would you agree with XYZ's decision?

Revenue must be realized (or realizable) and earned to be recognized.

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Which of the following statements is true regarding the auditor's use of confirmations?

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

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified?

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

In confirming accounts receivable, an auditor decided to confirm customers' account balances rather than individual invoices. Which of the following most likely would be included with the entity's confirmation letter?

Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipient?

Order entry is the initial function in the revenue cycle.

An auditor is reviewing sales cutoff as of March 31, 2013. All sales are shipped FOB destination and the company records sales three days after shipment. The auditor notes the following transactions: If the entity records the required adjustments, the net effect on income (in thousands of dollars) for the period ended March 31, 2013 is