Question 1

Which of the following most likely would give the most assurance concerning the valuation assertion for accounts receivable?

Accepted Answer

A)  Tracing amounts in the subsidiary ledger to details on shipping documents. 
B)  Comparing receivable turnover ratios to industry statistics for reasonableness. 
C)  Inquiring about receivables pledged under loan agreements. 
D)  Assessing the allowance for uncollectible accounts for reasonableness. 
A)  Tracing amounts in the subsidiary ledger to details on shipping documents. 
B)  Comparing receivable turnover ratios to industry statistics for reasonableness. 
C)  Inquiring about receivables pledged under loan agreements. 
D)  Assessing the allowance for uncollectible accounts for reasonableness.

Question 2

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared.This test is performed to assess the assertion of

Accepted Answer

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

Question 3

Explain how revenue recognition is important to the audit of the revenue process.

Accepted Answer

To determine whether the financial state

Question 4

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

Accepted Answer

A)  The credit manager's opinion. 
B)  An aging schedule of past due accounts. 
C)  Subsequent year collections of amounts in accounts receivable at the balance sheet date. 
D)  Ratios calculated showing the past relationship of the valuation allowance to net credit sales. 
A)  The credit manager's opinion. 
B)  An aging schedule of past due accounts. 
C)  Subsequent year collections of amounts in accounts receivable at the balance sheet date. 
D)  Ratios calculated showing the past relationship of the valuation allowance to net credit sales.

Question 5

To reduce the risks associated with accepting e-mail responses to requests for confirmation of accounts receivable,an auditor most likely would

Accepted Answer

A)  Request the senders to mail the original forms to the auditor or the auditor may follow up with a telephone call to verify the response. 
B)  Examine subsequent cash receipts for the accounts in question. 
C)  Consider the e-mail responses to the confirmations to be exceptions. 
D)  Mail second requests to the e-mail respondents. 
A)  Request the senders to mail the original forms to the auditor or the auditor may follow up with a telephone call to verify the response. 
B)  Examine subsequent cash receipts for the accounts in question. 
C)  Consider the e-mail responses to the confirmations to be exceptions. 
D)  Mail second requests to the e-mail respondents.

Question 6

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

Accepted Answer

A)  Classification. 
B)  Cutoff. 
C)  Occurrence. 
D)  Authorization and accuracy. 
A)  Classification. 
B)  Cutoff. 
C)  Occurrence. 
D)  Authorization and accuracy.

Question 7

When reviewing bank confirmations for any liens on receivables,the auditor is testing the ______________ assertion.

Accepted Answer

A)  Valuation and allocation. 
B)  Rights and obligations. 
C)  Existence. 
D)  Completeness. 
A)  Valuation and allocation. 
B)  Rights and obligations. 
C)  Existence. 
D)  Completeness.

Question 8

An aged trial balance of accounts receivable is normally used by the auditor to

Accepted Answer

A)  Verify the existence of recorded receivables. 
B)  Ensure that all accounts are promptly credited. 
C)  Evaluate the results of tests of controls. 
D)  Evaluate the provision for bad debts. 
A)  Verify the existence of recorded receivables. 
B)  Ensure that all accounts are promptly credited. 
C)  Evaluate the results of tests of controls. 
D)  Evaluate the provision for bad debts.

Question 9

Identify whether the following tests are tests of controls,substantive analytical procedures,tests of details of transactions,or tests of details of account balances:
1)Select a sample of customer receivables and send positive confirmations to each customer.
2)Examine monthly bank reconciliations for the internal auditors' initials indicating internal verification and review of the reconciliation.
3)Select a sample of entries in the sales journal and trace each to the shipping documents.
4)Compute receivable turnover and compare with previous years.
5)For a sample of new customers,determine whether credit approval was properly administered and documented.
6)Compare the dates on a sample of sales invoices with the dates of shipment and the dates the transactions were recorded in the sales journal.

Accepted Answer

1)Tests of details of account

Question 10

Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment,the CPA would be likely to

Accepted Answer

A)  Increase the balance in the allowance for bad debts account. 
B)  Review the going concern ramifications. 
C)  Require the client to tighten their credit policy. 
D)  Expand tests regarding the collectability of receivables. 
A)  Increase the balance in the allowance for bad debts account. 
B)  Review the going concern ramifications. 
C)  Require the client to tighten their credit policy. 
D)  Expand tests regarding the collectability of receivables.

Question 11

Which of the following strategies most likely could improve the response rate of the confirmation of accounts receivable?

Accepted Answer

A)  Including a monthly statement of the customer's account with the confirmation. 
B)  Restricting the selection of accounts to be confirmed to those customers with relatively large balances. 
C)  Requesting customers to respond to the confirmation requests directly to the auditor by fax or e-mail. 
D)  Notifying the recipients that second requests will be mailed if they fail to respond in a timely manner. 
A)  Including a monthly statement of the customer's account with the confirmation. 
B)  Restricting the selection of accounts to be confirmed to those customers with relatively large balances. 
C)  Requesting customers to respond to the confirmation requests directly to the auditor by fax or e-mail. 
D)  Notifying the recipients that second requests will be mailed if they fail to respond in a timely manner.

Question 12

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because

Accepted Answer

A)  Many customers merely sign and return the confirmation without verifying its details. 
B)  Recipients usually respond only if they disagree with the information on the request. 
C)  Customers may not be inclined to report understatement errors in their accounts. 
D)  Auditors typically select many accounts with low recorded balances to be confirmed. 
A)  Many customers merely sign and return the confirmation without verifying its details. 
B)  Recipients usually respond only if they disagree with the information on the request. 
C)  Customers may not be inclined to report understatement errors in their accounts. 
D)  Auditors typically select many accounts with low recorded balances to be confirmed.

Question 13

Revenue must be realized (or realizable)and earned to be recognized.

Accepted Answer

A) True 
 B)False

Question 14

When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents,the auditor is testing the ____________ assertion.

Accepted Answer

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

Question 15

To determine whether the system of internal control operated effectively to minimize errors of failure to invoice a shipment,the auditor would select a sample of transactions from the population represented by the

Accepted Answer

A)  Customer order file. 
B)  Bills of lading file. 
C)  Open invoice file. 
D)  Sales invoice file. 
A)  Customer order file. 
B)  Bills of lading file. 
C)  Open invoice file. 
D)  Sales invoice file.

Question 16

A negative confirmation requests that customers respond whether they agree or not with the amount due to the client stated in the confirmation.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following misstatements is not related to the completeness assertion for revenue?

Accepted Answer

A)  Goods are shipped, but revenue is not recorded. 
B)  This year's revenue is recorded next year. 
C)  Next year's revenue is recorded this year. 
D)  Revenue is not recognized for services that have been performed. 
A)  Goods are shipped, but revenue is not recorded. 
B)  This year's revenue is recorded next year. 
C)  Next year's revenue is recorded this year. 
D)  Revenue is not recognized for services that have been performed.

Question 18

An auditor is reviewing sales cutoff as of March 31,2010.All sales are shipped FOB destination and the company records sales three days after shipment.The auditor notes the following transactions: $$\begin{array} { | l | l | r | r | } 
\hline \text { Date Shipped } & \text { Month Recorded } & \text { Selling Price (000's) } & \text { Cost (000's) } \
\hline \text { March 28 } & \text { March } & \$ 192 & \$ 200 \
\hline \text { March 29 } & \text { March } & 44 & 40 \
\hline \text { March 30 } & \text { April } & 77 & 81 \
\hline \text { April 2 } & \text { March } & 208 & 220 \
\hline \text { April 5 } & \text { April } &92 & 84\
\hline
\end{array}$$ If the client records the required adjustments,the net effect on income in thousands of dollars for the period ended March 31,2011 is

Accepted Answer

A)  An increase of 12. 
B)  An increase of 8. 
C)  A decrease of 12. 
D)  A decrease of 8. 
A)  An increase of 12. 
B)  An increase of 8. 
C)  A decrease of 12. 
D)  A decrease of 8.

Question 19

Tracing copies of sales invoices to shipping documents will provide evidence that all

Accepted Answer

A)  Shipments to customers were recorded as receivables. 
B)  Billed sales were shipped. 
C)  Accounts receivable ledger is complete. 
D)  Shipments to customers were billed. 
A)  Shipments to customers were recorded as receivables. 
B)  Billed sales were shipped. 
C)  Accounts receivable ledger is complete. 
D)  Shipments to customers were billed.

Question 20

Which of the following is not an inherent risk factor for the revenue process?

Accepted Answer

A)  Complexity of revenue recognition issues. 
B)  Difficulty of auditing transactions. 
C)  Special industry practices. 
D)  The client does not follow its stated policies for sales order approvals. 
A)  Complexity of revenue recognition issues. 
B)  Difficulty of auditing transactions. 
C)  Special industry practices. 
D)  The client does not follow its stated policies for sales order approvals.

Which of the following most likely would give the most assurance concerning the valuation assertion for accounts receivable?

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared.This test is performed to assess the assertion of

Explain how revenue recognition is important to the audit of the revenue process.

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

To reduce the risks associated with accepting e-mail responses to requests for confirmation of accounts receivable,an auditor most likely would

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

When reviewing bank confirmations for any liens on receivables,the auditor is testing the ______________ assertion.

An aged trial balance of accounts receivable is normally used by the auditor to

Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment,the CPA would be likely to

Which of the following strategies most likely could improve the response rate of the confirmation of accounts receivable?

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because

Revenue must be realized (or realizable)and earned to be recognized.

When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents,the auditor is testing the ____________ assertion.

To determine whether the system of internal control operated effectively to minimize errors of failure to invoice a shipment,the auditor would select a sample of transactions from the population represented by the

A negative confirmation requests that customers respond whether they agree or not with the amount due to the client stated in the confirmation.

Which of the following misstatements is not related to the completeness assertion for revenue?

Tracing copies of sales invoices to shipping documents will provide evidence that all

Which of the following is not an inherent risk factor for the revenue process?

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 most likely would give the most assurance concerning the valuation assertion for accounts receivable?

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared.This test is performed to assess the assertion of

Explain how revenue recognition is important to the audit of the revenue process.

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

To reduce the risks associated with accepting e-mail responses to requests for confirmation of accounts receivable,an auditor most likely would

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

When reviewing bank confirmations for any liens on receivables,the auditor is testing the ______________ assertion.

An aged trial balance of accounts receivable is normally used by the auditor to

Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment,the CPA would be likely to

Which of the following strategies most likely could improve the response rate of the confirmation of accounts receivable?

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because

Revenue must be realized (or realizable)and earned to be recognized.

When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents,the auditor is testing the ____________ assertion.

To determine whether the system of internal control operated effectively to minimize errors of failure to invoice a shipment,the auditor would select a sample of transactions from the population represented by the

A negative confirmation requests that customers respond whether they agree or not with the amount due to the client stated in the confirmation.

Which of the following misstatements is not related to the completeness assertion for revenue?

Tracing copies of sales invoices to shipping documents will provide evidence that all

Which of the following is not an inherent risk factor for the revenue process?

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