Exam 7: Revenue and Collection Cycle

In tests of controls auditing,auditors need to define "deviations" in advance.Give seven examples of control compliance deviations related to a client's processing of credit sales transactions and the related assertion that was violated.

Which of the following would be the best protection for a company that wishes to prevent the "lapping" of trade accounts receivable?

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records. Question also found in study guide

Scanning sales invoices for missing numbers in the sequence would be an activity intended to satisfy what assertion?

Smith Manufacturing Company's accounts receivable clerk has a friend who is also Smith's customer.The accounts receivable clerk,on occasion,has issued fictitious credit memorandums to his friend for goods supposedly returned (these returns did not exist).The most effective control for preventing this activity is to

The most effective audit procedure for determining the collectability of an account receivable is the

A client has a separate sales group for its largest "preferred" customers.This is a select group of customers that normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million.Which of the following audit procedures would the auditor most likely perform?

Confirmation of individual accounts receivable balances directly with debtors will,of itself,normally provide the strongest evidence concerning the

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

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

Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations?

The assertion that auditors will probably emphasize in the revenue and collection cycle is

The accountants who record cash receipts and credits to customer accounts should not handle the cash. Question also found in study guide

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

An auditor noted that client sales had increased 10 percent for the year.At the same time,cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.The auditor interviewed the sales manager who stated that the increase in sales without a corresponding increase in cost of goods sold was due to a price increase enacted by the company during the year.How would the auditor best test the sales manager's representation?

In the revenue and collection cycle,the auditor checks the numerical sequence of shipping documents.This procedure is related to which of the following assertions?

The aging information for accounts receivable is typically used in connection with assessing the allowance for doubtful accounts. Question also found in study guide

Which of the following questions included in an internal control questionnaire would evaluate the valuation objective of revenues?

An objective for an audit is to obtain evidence related to management's financial statement assertions. Question also found in study guide

The following question appeared on an internal control questionnaire for sales.Next to each of the questions indicate the related assertion.