Question 1

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

Accepted Answer

A)  Preparation of monthly statements to customers and maintenance of the accounts receivable subsidiary ledger. 
B)  Posting to the general ledger and approval of additions and terminations relating to the payroll. 
C)  Custody of unmailed signed checks and maintenance of expense subsidiary ledgers. 
D)  Collection of receipts on account and maintaining accounts receivable records. 
A)  Preparation of monthly statements to customers and maintenance of the accounts receivable subsidiary ledger. 
B)  Posting to the general ledger and approval of additions and terminations relating to the payroll. 
C)  Custody of unmailed signed checks and maintenance of expense subsidiary ledgers. 
D)  Collection of receipts on account and maintaining accounts receivable records.

Question 2

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

Accepted Answer

A)  Granting of credit. 
B)  Shipment of goods. 
C)  Determination of discounts. 
D)  Selling of goods for cash. 
A)  Granting of credit. 
B)  Shipment of goods. 
C)  Determination of discounts. 
D)  Selling of goods for cash.

Question 3

For the most effective internal control,monthly bank statements should be received directly from the banks and reviewed by the

Accepted Answer

A)  Controller. 
B)  Cash receipts accountant. 
C)  Cash disbursement accountant. 
D)  Internal auditor. 
A)  Controller. 
B)  Cash receipts accountant. 
C)  Cash disbursement accountant. 
D)  Internal auditor.

Question 4

Assume you are working on a 12/31 year-end audit.It is now March 31st and the 12/31 accounts receivable aging shows a large receivable that was outstanding on 12/31 for 120 days.Further,the client's receivables are typically collected in less than 45 days.You anticipate that the client's allowance for doubtful account should be increased and inform the client about your disposition.The client disagrees.Is there an alternative substantive procedure that you could perform that would provide convincing evidence that this balance is collectible?
 If so,explain.

Accepted Answer

Determining that the balance w

Question 5

Which is not a key segregation of duties for the revenue process? Different parties should

Accepted Answer

A)  Prepare shipping orders and prepare bills of lading. 
B)  Perform the credit and billing functions. 
C)  Perform the shipping and billing function. 
D)  Receive cash and adjust accounts receivable. 
A)  Prepare shipping orders and prepare bills of lading. 
B)  Perform the credit and billing functions. 
C)  Perform the shipping and billing function. 
D)  Receive cash and adjust accounts receivable.

Question 6

Which of the following control activities may prevent the failure to bill customers for some shipments?

Accepted Answer

A)  Each shipment should be supported by a prenumbered sales invoice that is accounted for. 
B)  Each sales order should be approved by authorized personnel. 
C)  Sales journal entries should be reconciled to daily sales summaries. 
D)  Each sales invoice should be supported by a shipping document. 
A)  Each shipment should be supported by a prenumbered sales invoice that is accounted for. 
B)  Each sales order should be approved by authorized personnel. 
C)  Sales journal entries should be reconciled to daily sales summaries. 
D)  Each sales invoice should be supported by a shipping document.

Question 7

When comparing prices and terms on a sample of sales invoices with the authorized price list and terms of trade,the auditor is testing the ____________ assertion.

Accepted Answer

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

Question 8

Which of the following procedures would ordinarily be expected to best reveal improper cutoff of sales at the balance sheet date?

Accepted Answer

A)  Compare shipping documents with sales records. 
B)  Apply gross profit rates to inventory disposed of during the period. 
C)  Trace payments received subsequent to the balance sheet date. 
D)  Send accounts receivable confirmation requests. 
A)  Compare shipping documents with sales records. 
B)  Apply gross profit rates to inventory disposed of during the period. 
C)  Trace payments received subsequent to the balance sheet date. 
D)  Send accounts receivable confirmation requests.

Question 9

Channel stuffing is an improper practice used to boost sales by inducing distributors to buy more inventory than they can promptly resell.

Accepted Answer

A) True 
 B)False

Question 10

Smith is engaged in the audit of a cable TV firm that services a rural community.All receivable balances are small,customers are billed monthly,and internal control is effective.To determine the existence of the accounts receivable balances at the balance sheet date,Smith would most likely

Accepted Answer

A)  Send positive confirmation requests. 
B)  Send negative confirmation requests. 
C)  Examine evidence of subsequent cash receipts instead of sending confirmation requests. 
D)  Use statistical sampling instead of sending confirmation requests. 
A)  Send positive confirmation requests. 
B)  Send negative confirmation requests. 
C)  Examine evidence of subsequent cash receipts instead of sending confirmation requests. 
D)  Use statistical sampling instead of sending confirmation requests.

Question 11

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

Accepted Answer

A)  Billing. 
B)  Shipping. 
C)  Credit. 
D)  Sales Order. 
A)  Billing. 
B)  Shipping. 
C)  Credit. 
D)  Sales Order.

Question 12

Which of the following is not an issue related to the valuation of accounts receivable?

Accepted Answer

A)  The valuation of revenue that makes up the detail of accounts receivable. 
B)  A proper allowance for doubtful accounts. 
C)  The net realizable value of accounts receivable. 
D)  Proper cut-off. 
A)  The valuation of revenue that makes up the detail of accounts receivable. 
B)  A proper allowance for doubtful accounts. 
C)  The net realizable value of accounts receivable. 
D)  Proper cut-off.

Question 13

A remittance advice is used to track purchases.

Accepted Answer

A) True 
 B)False

Question 14

The return of vendor purchases is a part of the revenue process.

Accepted Answer

A) True 
 B)False

Question 15

Order entry is the initial function in the revenue cycle.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

The two types of confirmations are posit

Question 17

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

Accepted Answer

A)  Test a sample of sales invoices for authorized customer orders. 
B)  Review sales orders for proper credit approval. 
C)  Trace shipping documents to sales invoices and the sales journal. 
D)  Examine reconciliation of subsidiary ledger to general ledger control account. 
A)  Test a sample of sales invoices for authorized customer orders. 
B)  Review sales orders for proper credit approval. 
C)  Trace shipping documents to sales invoices and the sales journal. 
D)  Examine reconciliation of subsidiary ledger to general ledger control account.

Question 18

Tracing shipping documents to prenumbered sales invoices provides evidence that

Accepted Answer

A)  No duplicate shipments or billings occurred. 
B)  Shipments to customers were properly billed. 
C)  All goods ordered by customers were shipped. 
D)  All prenumbered sales invoices were accounted for. 
A)  No duplicate shipments or billings occurred. 
B)  Shipments to customers were properly billed. 
C)  All goods ordered by customers were shipped. 
D)  All prenumbered sales invoices were accounted for.

Question 19

Tracing bills of lading to sales invoices provides evidence that

Accepted Answer

A)  Shipments to customers were properly authorized. 
B)  Recorded sales were shipped. 
C)  Billed sales were shipped. 
D)  Shipments to customers were billed. 
A)  Shipments to customers were properly authorized. 
B)  Recorded sales were shipped. 
C)  Billed sales were shipped. 
D)  Shipments to customers were billed.

Question 20

Immediately upon receipt of cash,a responsible employee should

Accepted Answer

A)  Record the amount in the cash receipts journal. 
B)  Prepare a listing of remittances. 
C)  Update the subsidiary accounts receivable records. 
D)  Prepare a deposit slip in triplicate. 
A)  Record the amount in the cash receipts journal. 
B)  Prepare a listing of remittances. 
C)  Update the subsidiary accounts receivable records. 
D)  Prepare a deposit slip in triplicate.

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

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

For the most effective internal control,monthly bank statements should be received directly from the banks and reviewed by the

Which is not a key segregation of duties for the revenue process? Different parties should

Which of the following control activities may prevent the failure to bill customers for some shipments?

When comparing prices and terms on a sample of sales invoices with the authorized price list and terms of trade,the auditor is testing the ____________ assertion.

Which of the following procedures would ordinarily be expected to best reveal improper cutoff of sales at the balance sheet date?

Channel stuffing is an improper practice used to boost sales by inducing distributors to buy more inventory than they can promptly resell.

Smith is engaged in the audit of a cable TV firm that services a rural community.All receivable balances are small,customers are billed monthly,and internal control is effective.To determine the existence of the accounts receivable balances at the balance sheet date,Smith would most likely

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

Which of the following is not an issue related to the valuation of accounts receivable?

A remittance advice is used to track purchases.

The return of vendor purchases is a part of the revenue process.

Order entry is the initial function in the revenue cycle.

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

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

Tracing shipping documents to prenumbered sales invoices provides evidence that

Tracing bills of lading to sales invoices provides evidence that

Immediately upon receipt of cash,a responsible employee should

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

Filters

Exam 10: Auditing the Revenue Process

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

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

For the most effective internal control,monthly bank statements should be received directly from the banks and reviewed by the

Which is not a key segregation of duties for the revenue process? Different parties should

Which of the following control activities may prevent the failure to bill customers for some shipments?

When comparing prices and terms on a sample of sales invoices with the authorized price list and terms of trade,the auditor is testing the ____________ assertion.

Which of the following procedures would ordinarily be expected to best reveal improper cutoff of sales at the balance sheet date?

Channel stuffing is an improper practice used to boost sales by inducing distributors to buy more inventory than they can promptly resell.

Smith is engaged in the audit of a cable TV firm that services a rural community.All receivable balances are small,customers are billed monthly,and internal control is effective.To determine the existence of the accounts receivable balances at the balance sheet date,Smith would most likely

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

Which of the following is not an issue related to the valuation of accounts receivable?

A remittance advice is used to track purchases.

The return of vendor purchases is a part of the revenue process.

Order entry is the initial function in the revenue cycle.

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

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

Tracing shipping documents to prenumbered sales invoices provides evidence that

Tracing bills of lading to sales invoices provides evidence that

Immediately upon receipt of cash,a responsible employee should

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

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