Exam 10: Auditing the Revenue Process

In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon which of the following?

What is channel stuffing?

Which of the following sets of duties would ordinarily be considered basically incompatible in terms of effective internal control?

Credit authorization is used to determine if a customer is able to pay for goods.

Mill Company uses a batch processing method to process its sales transactions. Data on Mill's sales transaction tapes are electronically sorted by customer number and are subjected to programmed edit checks in preparing its invoices, sales journals, and updated customer account balances. One of the direct outputs of the creation of these tapes most likely would be a

Tests designed to detect credit sales made after the end of the year that have been recorded in the current year provide assurance about management's assertion of

Which of the following procedures most likely would not be an internal control activity designed to reduce the risk of errors in the billing process?

Auditors sometimes use ratios as audit evidence. For example, an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates respondents' exceptions and comments. By this procedure, the auditor would be most likely to learn about which of the following?

Which of the following most likely would be the result of ineffective internal control policies and procedures in the revenue process?

When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger, the auditor is testing the _____________ assertion.

A remittance advice is used to track purchases.

Assume an account receivable confirmation is returned with a note to the auditor describing a difference between your client's records and the customer's records. Clearly describe below two potential non-misstatement timing differences that could cause a discrepancy between a client's receivable records and his/her customer's records. The timing differences you describe should be such that after investigation you would determine that your client's receivable balance is not misstated due to these differences.

Data Corporation has just computerized its billing and accounts receivable record keeping. You want to make maximum use of the new computer in your audit of Data Corporation. Which of the following audit techniques could not be performed through a computer program?