Question 1

In determining the adequacy of the allowance for uncollectible accounts,the least valuable evidence would be obtained from

Accepted Answer

A) an aging schedule of past due accounts that the auditor has tested. 
B) correspondence with the client's collection agency. 
C) financial statements of individual customers. 
D) no reply to negative confirmations. 
A) an aging schedule of past due accounts that the auditor has tested. 
B) correspondence with the client's collection agency. 
C) financial statements of individual customers. 
D) no reply to negative confirmations.

Question 2

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 of which of the following?

Accepted Answer

A) One of the cashiers has been covering a personal embezzlement by lapping. 
B) One of the sales clerks has not been preparing charge slips for credit sales to family and friends. 
C) One of the IT control clerks has been removing all sales invoices applicable to his account from the data file. 
D) The credit manager has misappropriated remittances from customers whose accounts have been written off. 
A) One of the cashiers has been covering a personal embezzlement by lapping. 
B) One of the sales clerks has not been preparing charge slips for credit sales to family and friends. 
C) One of the IT control clerks has been removing all sales invoices applicable to his account from the data file. 
D) The credit manager has misappropriated remittances from customers whose accounts have been written off.

Question 3

The use of confirmations to test accounts receivable is considered a generally accepted audit procedure.
Question also found in study guide

Accepted Answer

A) True 
 B)False

Question 4

When auditing the revenue and collection cycle,auditors normally select balances to confirm from the

Accepted Answer

A) sales journal. 
B) accounts receivable listing. 
C) general ledger. 
D) cash receipts listing. 
A) sales journal. 
B) accounts receivable listing. 
C) general ledger. 
D) cash receipts listing.

Question 5

In confirming a client's accounts receivable in prior years,an auditor discovered many differences between recorded account balances and confirmation replies.These differences were resolved and were not misstatements.In defining the sampling unit for the current year's audit,the auditor most likely would choose

Accepted Answer

A) customers with credit balances. 
B) small account balances. 
C) individual overdue balances. 
D) individual invoices. 
A) customers with credit balances. 
B) small account balances. 
C) individual overdue balances. 
D) individual invoices.

Question 6

A confirmation procedure scheduled on the year-end date with a large sample of customer account balances is necessary if tests of controls reveal control weaknesses.
Question also found in study guide

Accepted Answer

A) True 
 B)False

Question 7

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 8

Which of the following accounts is not normally part of the revenue and collection cycle?

Accepted Answer

A) Sales. 
B) Accounts Receivable. 
C) Cash. 
D) Purchases Returns and Allowances. 
A) Sales. 
B) Accounts Receivable. 
C) Cash. 
D) Purchases Returns and Allowances.

Question 9

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

Accepted Answer

A) a majority of recipients usually lacks the willingness to respond objectively. 
B) some recipients may report incorrect balances that require extensive follow up. 
C) the auditor cannot infer that all nonrespondents have verified their account information. 
D) negative confirmations do not produce evidential matter that is statistically quantifiable. 
A) a majority of recipients usually lacks the willingness to respond objectively. 
B) some recipients may report incorrect balances that require extensive follow up. 
C) the auditor cannot infer that all nonrespondents have verified their account information. 
D) negative confirmations do not produce evidential matter that is statistically quantifiable.

Question 10

The financial records of the Movitz Company show that Mr.Dennis owes $4,100 on an account receivable.An independent audit is being carried out and the auditors send a positive confirmation to Mr.Dennis.What is the most likely reason as to why a positive confirmation rather than a negative confirmation was used here?

Accepted Answer

A) Control risk was particularly low for accounts receivable. 
B) Inherent risk was particularly high for accounts receivable. 
C) Mr.Dennis's account was not yet due. 
D) Mr.Dennis's account was not with a related party. 
A) Control risk was particularly low for accounts receivable. 
B) Inherent risk was particularly high for accounts receivable. 
C) Mr.Dennis's account was not yet due. 
D) Mr.Dennis's account was not with a related party.

Question 11

The auditor selects a sample of recorded sales invoices and vouches them to shipping documents.This procedure is related to which of the following assertions?

Accepted Answer

A) Occurrence. 
B) Completeness. 
C) Accuracy. 
D) Cutoff. 
A) Occurrence. 
B) Completeness. 
C) Accuracy. 
D) Cutoff.

Question 12

Confirmations provide evidence of _________________________________ and,to a limited extent,________________________________ of accounts and notes receivable.
Question also found in study guide

Accepted Answer

existence

Question 13

To determine whether sales transactions have been recorded in the proper accounting period,the auditor performs cutoff tests.Which of the following best describes the overall approach used when performing cutoff tests?

Accepted Answer

A) Ascertain that management has included in the representation letter a statement that transactions have been accounted for in the proper accounting period. 
B) Analyze transactions occurring within a few days before and after year-end. 
C) Confirm year-end transactions with regular customers. 
D) Examine cash receipts in the subsequent period. 
A) Ascertain that management has included in the representation letter a statement that transactions have been accounted for in the proper accounting period. 
B) Analyze transactions occurring within a few days before and after year-end. 
C) Confirm year-end transactions with regular customers. 
D) Examine cash receipts in the subsequent period.

Question 14

In the audit of accounts receivable,the most important emphasis should be on the

Accepted Answer

A) completeness assertion. 
B) existence assertion. 
C) rights and obligations assertion. 
D) presentation and disclosure assertion. 
A) completeness assertion. 
B) existence assertion. 
C) rights and obligations assertion. 
D) presentation and disclosure assertion.

Question 15

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

Accepted Answer

A) delivering goods,billing customer,granting credit,and performing collection activities. 
B) customer ordering,delivering goods,granting credit,and billing customers. 
C) processing customer orders,granting credit,delivering goods,and billing customers. 
D) granting credit,billing customers,delivering goods,and processing cash receipts. 
A) delivering goods,billing customer,granting credit,and performing collection activities. 
B) customer ordering,delivering goods,granting credit,and billing customers. 
C) processing customer orders,granting credit,delivering goods,and billing customers. 
D) granting credit,billing customers,delivering goods,and processing cash receipts.

Question 16

The composition of Oak and Company's accounts receivable are as follows: Over $250,000 - 5 accounts
Between $25,000 and $250,000 - 80 accounts
Less than $25,000 - 200 accounts
The best confirmation strategy for the auditor is:

Accepted Answer

A) Positive confirmations on a sample of all 285 accounts. 
B) Positive confirmations on all a sample of all accounts over $25,000; negative confirmations on a sample of accounts less than $25,000. 
C) Positive confirmations on all 5 accounts over $250,000; positive confirmations on a sample of the accounts between $25,000 and $25,000; negative confirmations on a sample of accounts less than $25,000. 
D) Positive confirmations on all 5 accounts over $250,000; negative confirmations on a sample of the accounts less than $250,000. 
A) Positive confirmations on a sample of all 285 accounts. 
B) Positive confirmations on all a sample of all accounts over $25,000; negative confirmations on a sample of accounts less than $25,000. 
C) Positive confirmations on all 5 accounts over $250,000; positive confirmations on a sample of the accounts between $25,000 and $25,000; negative confirmations on a sample of accounts less than $25,000. 
D) Positive confirmations on all 5 accounts over $250,000; negative confirmations on a sample of the accounts less than $250,000.

Question 17

When an auditor decides to confirm accounts receivable balances rather than individual invoices,it most likely would be beneficial to include with the confirmations

Accepted Answer

A) copies of the client's shipping documents that support the account balances. 
B) lists of the customers' recent payments that the client has already recorded. 
C) client-prepared statements of account that show the details of the account balances. 
D) copies of the customers' purchase orders that support the account balances. 
A) copies of the client's shipping documents that support the account balances. 
B) lists of the customers' recent payments that the client has already recorded. 
C) client-prepared statements of account that show the details of the account balances. 
D) copies of the customers' purchase orders that support the account balances.

Question 18

Audit documentation often includes a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.The audit team uses this aging primarily to

Accepted Answer

A) evaluate internal control over credit sales. 
B) test the accuracy of recorded charge sales. 
C) estimate credit losses. 
D) verify the existence of the recorded receivables. 
A) evaluate internal control over credit sales. 
B) test the accuracy of recorded charge sales. 
C) estimate credit losses. 
D) verify the existence of the recorded receivables.

Question 19

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the

Accepted Answer

A) type of confirmation to be used. 
B) client's internal control over transactions affecting receivables. 
C) availability of staff auditors. 
D) number of customer accounts. 
A) type of confirmation to be used. 
B) client's internal control over transactions affecting receivables. 
C) availability of staff auditors. 
D) number of customer accounts.

Question 20

Sales are normally recorded on the date of the

Accepted Answer

A) customer purchase order. 
B) bill of lading. 
C) sales invoice. 
D) payment check. 
A) customer purchase order. 
B) bill of lading. 
C) sales invoice. 
D) payment check.

In determining the adequacy of the allowance for uncollectible accounts,the least valuable evidence would be obtained from

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 of which of the following?

The use of confirmations to test accounts receivable is considered a generally accepted audit procedure. Question also found in study guide

When auditing the revenue and collection cycle,auditors normally select balances to confirm from the

A confirmation procedure scheduled on the year-end date with a large sample of customer account balances is necessary if tests of controls reveal control weaknesses. Question also found in study guide

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 accounts is not normally part of the revenue and collection cycle?

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

The auditor selects a sample of recorded sales invoices and vouches them to shipping documents.This procedure is related to which of the following assertions?

Confirmations provide evidence of _ and,to a limited extent, of accounts and notes receivable. Question also found in study guide

To determine whether sales transactions have been recorded in the proper accounting period,the auditor performs cutoff tests.Which of the following best describes the overall approach used when performing cutoff tests?

In the audit of accounts receivable,the most important emphasis should be on the

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

The composition of Oak and Company's accounts receivable are as follows: Over $250,000 - 5 accounts Between $25,000 and $250,000 - 80 accounts Less than $25,000 - 200 accounts The best confirmation strategy for the auditor is:

When an auditor decides to confirm accounts receivable balances rather than individual invoices,it most likely would be beneficial to include with the confirmations

Audit documentation often includes a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.The audit team uses this aging primarily to

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the

Sales are normally recorded on the date of the

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

In determining the adequacy of the allowance for uncollectible accounts,the least valuable evidence would be obtained from

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 of which of the following?

The use of confirmations to test accounts receivable is considered a generally accepted audit procedure. Question also found in study guide

When auditing the revenue and collection cycle,auditors normally select balances to confirm from the

A confirmation procedure scheduled on the year-end date with a large sample of customer account balances is necessary if tests of controls reveal control weaknesses. Question also found in study guide

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 accounts is not normally part of the revenue and collection cycle?

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

The auditor selects a sample of recorded sales invoices and vouches them to shipping documents.This procedure is related to which of the following assertions?

Confirmations provide evidence of _________________________________ and,to a limited extent,________________________________ of accounts and notes receivable. Question also found in study guide

To determine whether sales transactions have been recorded in the proper accounting period,the auditor performs cutoff tests.Which of the following best describes the overall approach used when performing cutoff tests?

In the audit of accounts receivable,the most important emphasis should be on the

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

The composition of Oak and Company's accounts receivable are as follows: Over $250,000 - 5 accounts Between $25,000 and $250,000 - 80 accounts Less than $25,000 - 200 accounts The best confirmation strategy for the auditor is:

When an auditor decides to confirm accounts receivable balances rather than individual invoices,it most likely would be beneficial to include with the confirmations

Audit documentation often includes a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.The audit team uses this aging primarily to

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the

Sales are normally recorded on the date of the

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

Confirmations provide evidence of _ and,to a limited extent, of accounts and notes receivable. Question also found in study guide