Question 1

What procedures should an auditor perform for a positive confirmation that is not returned by the client's customer?

Accepted Answer

Auditors have to perform alternative pro

Question 2

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

Accepted Answer

A) Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence. 
B) Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off. 
C) Write-offs must be approved by the cashier who is in a position to know if the receivables have,in fact,been collected. 
D) Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers. 
A) Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence. 
B) Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off. 
C) Write-offs must be approved by the cashier who is in a position to know if the receivables have,in fact,been collected. 
D) Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

Question 3

The sum of customers' unpaid balances that is compared to the general ledger balance comes from

Accepted Answer

A) a total of sales invoices. 
B) a total of shipping orders. 
C) the sales journal. 
D) the accounts receivable trial balance. 
A) a total of sales invoices. 
B) a total of shipping orders. 
C) the sales journal. 
D) the accounts receivable trial balance.

Question 4

Which of the following most likely would be detected by an auditor's review of a client's sales cutoff?

Accepted Answer

A) Shipments lacking sales invoices and shipping documents. 
B) Excessive write-offs of accounts receivable. 
C) Unrecorded sales at year-end. 
D) Lapping of year-end accounts receivable. 
A) Shipments lacking sales invoices and shipping documents. 
B) Excessive write-offs of accounts receivable. 
C) Unrecorded sales at year-end. 
D) Lapping of year-end accounts receivable.

Question 5

If the auditor obtains sufficient competent evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable,the auditor's opinion should be unqualified and could be expected to

Accepted Answer

A) disclose the fact that alternative procedures were used due to client-imposed scope limitation. 
B) disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. 
C) avoid mentioning the alternative procedures. 
D) include an explanatory paragraph that discloses the performance of alternative procedures. 
A) disclose the fact that alternative procedures were used due to client-imposed scope limitation. 
B) disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. 
C) avoid mentioning the alternative procedures. 
D) include an explanatory paragraph that discloses the performance of alternative procedures.

Question 6

For each of the tests of controls for sales and receivables,indicate the assertion that is supported by placing the correct letter in the blank. 
_____A. Scan sales invoices for missing numbers in sequence.       1. Accuracy
______B. Perform arithmetic recalculation of a sample of                 2. Completeness recorded sales invoices.
______C. For a sample of recorded sales, determine whether           3. Oecurrence credit was approved.
_______D. Trace a sample of credit memos to postings in                  4. Completeness customers' accounts.
_______E. Select a sample of customer accounts and vouch                5. Accuracy debits to sales invoices.

Accepted Answer

The answer of For each of the tests of controls...

Question 7

What is dual direction testing?

Accepted Answer

Dual direction testing involves samples

Question 8

When a sample of customer accounts receivable is selected for vouching debits,auditors will vouch them to

Accepted Answer

A) sales invoices with shipping documents. 
B) records of accounts receivable write-offs. 
C) cash remittance lists and bank deposit slips. 
D) credit files and reports. 
A) sales invoices with shipping documents. 
B) records of accounts receivable write-offs. 
C) cash remittance lists and bank deposit slips. 
D) credit files and reports.

Question 9

Which of the following controls is designed to meet the completeness assertion?

Accepted Answer

A) Prenumbering invoices,shipping documents,and sales orders. 
B) Sales orders are approved by the credit department prior to shipping goods. 
C) The sale is to a customer on the approved customer list. 
D) Sales are dated by the computer to ensure it is included in the proper period. 
A) Prenumbering invoices,shipping documents,and sales orders. 
B) Sales orders are approved by the credit department prior to shipping goods. 
C) The sale is to a customer on the approved customer list. 
D) Sales are dated by the computer to ensure it is included in the proper period.

Question 10

Alpha Brewery Corporation recorded sales through January 4,2018,dating them December 31,2017.This situation is an example of a violation of which of the following assertions?

Accepted Answer

A) Existence or occurrence. 
B) Completeness. 
C) Classification. 
D) Accuracy. 
A) Existence or occurrence. 
B) Completeness. 
C) Classification. 
D) Accuracy.

Question 11

In evaluating the adequacy of the allowance for doubtful accounts,an auditor most likely reviews the entity's aging of receivables to support management's financial statement assertion of

Accepted Answer

A) existence. 
B) valuation or allocation. 
C) completeness. 
D) rights and obligations. 
A) existence. 
B) valuation or allocation. 
C) completeness. 
D) rights and obligations.

Question 12

Auditors sometimes use comparisons of ratios as audit evidence.An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

Accepted Answer

A) Unrecorded purchases. 
B) Unrecorded sales. 
C) Merchandise purchases being charged to selling and general expense. 
D) Fictitious sales. 
A) Unrecorded purchases. 
B) Unrecorded sales. 
C) Merchandise purchases being charged to selling and general expense. 
D) Fictitious sales.

Question 13

Vouching debits from a sample selection of customers' accounts receivable records to supporting sales invoices is an audit procedure designed to obtain evidence about the assertion of

Accepted Answer

A) occurrence. 
B) completeness. 
C) classification. 
D) accuracy. 
A) occurrence. 
B) completeness. 
C) classification. 
D) accuracy.

Question 14

Internal control assessment is important because it governs the ________________________________,_________________________________ and _________________________________ of substantive procedures.
Question also found in study guide

Accepted Answer

nature ; t

Question 15

Revenues are normally considered to have been earned when

Accepted Answer

A) all possibility of return has expired. 
B) the company has substantially accomplished what it must to be entitled to the benefits. 
C) the cash is collected. 
D) goods have been shipped. 
A) all possibility of return has expired. 
B) the company has substantially accomplished what it must to be entitled to the benefits. 
C) the cash is collected. 
D) goods have been shipped.

Question 16

Accountants should be under orders to record sales and accounts receivable when

Accepted Answer

A) the customer's order is received. 
B) all supporting documentation of shipping is in order. 
C) the item has been paid for. 
D) the terms are agreed upon. 
A) the customer's order is received. 
B) all supporting documentation of shipping is in order. 
C) the item has been paid for. 
D) the terms are agreed upon.

Question 17

The document that generates recording of a sale is the

Accepted Answer

A) customer order. 
B) shipping order. 
C) invoice. 
D) purchase order. 
A) customer order. 
B) shipping order. 
C) invoice. 
D) purchase order.

Question 18

Inquiries of management usually do not provide very convincing evidence about the existence and rights assertions.
Question also found in study guide

Accepted Answer

A) True 
 B)False

Question 19

You are the auditor for Wilson Wholesale Products Inc.As part of the audit of accounts receivable,Wilson has provided you an electronic file representing its accounts receivable as of its fiscal year-end.The file includes the customer name,customer address,customer number,sales invoice number,sales invoice date,and amount.
Required:
Describe three or more substantive audit procedures you might perform using computer-assisted audit tools and techniques (CAATs)with this computer file.

Accepted Answer

The following substantive tests could be

Question 20

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Accepted Answer

A) Move detailed analytical procedures from year end to interim. 
B) Increase the dollar threshold of vouching customer invoices. 
C) Send negative accounts receivable confirmations instead of positive accounts receivable confirmations. 
D) Use more experienced audit team members to perform year-end testing. 
A) Move detailed analytical procedures from year end to interim. 
B) Increase the dollar threshold of vouching customer invoices. 
C) Send negative accounts receivable confirmations instead of positive accounts receivable confirmations. 
D) Use more experienced audit team members to perform year-end testing.

What procedures should an auditor perform for a positive confirmation that is not returned by the client's customer?

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

The sum of customers' unpaid balances that is compared to the general ledger balance comes from

Which of the following most likely would be detected by an auditor's review of a client's sales cutoff?

If the auditor obtains sufficient competent evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable,the auditor's opinion should be unqualified and could be expected to

What is dual direction testing?

When a sample of customer accounts receivable is selected for vouching debits,auditors will vouch them to

Which of the following controls is designed to meet the completeness assertion?

Alpha Brewery Corporation recorded sales through January 4,2018,dating them December 31,2017.This situation is an example of a violation of which of the following assertions?

In evaluating the adequacy of the allowance for doubtful accounts,an auditor most likely reviews the entity's aging of receivables to support management's financial statement assertion of

Auditors sometimes use comparisons of ratios as audit evidence.An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

Vouching debits from a sample selection of customers' accounts receivable records to supporting sales invoices is an audit procedure designed to obtain evidence about the assertion of

Internal control assessment is important because it governs the ________________,_ and _________________ of substantive procedures. Question also found in study guide

Revenues are normally considered to have been earned when

Accountants should be under orders to record sales and accounts receivable when

The document that generates recording of a sale is the

Inquiries of management usually do not provide very convincing evidence about the existence and rights assertions. Question also found in study guide

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 7: Revenue and Collection Cycle

What procedures should an auditor perform for a positive confirmation that is not returned by the client's customer?

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

The sum of customers' unpaid balances that is compared to the general ledger balance comes from

Which of the following most likely would be detected by an auditor's review of a client's sales cutoff?

If the auditor obtains sufficient competent evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable,the auditor's opinion should be unqualified and could be expected to

What is dual direction testing?

When a sample of customer accounts receivable is selected for vouching debits,auditors will vouch them to

Which of the following controls is designed to meet the completeness assertion?

Alpha Brewery Corporation recorded sales through January 4,2018,dating them December 31,2017.This situation is an example of a violation of which of the following assertions?

In evaluating the adequacy of the allowance for doubtful accounts,an auditor most likely reviews the entity's aging of receivables to support management's financial statement assertion of

Auditors sometimes use comparisons of ratios as audit evidence.An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

Vouching debits from a sample selection of customers' accounts receivable records to supporting sales invoices is an audit procedure designed to obtain evidence about the assertion of

Internal control assessment is important because it governs the ________________________________,_________________________________ and _________________________________ of substantive procedures. Question also found in study guide

Revenues are normally considered to have been earned when

Accountants should be under orders to record sales and accounts receivable when

The document that generates recording of a sale is the

Inquiries of management usually do not provide very convincing evidence about the existence and rights assertions. Question also found in study guide

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Internal control assessment is important because it governs the ________________,_ and _________________ of substantive procedures. Question also found in study guide