Exam 10: Auditing the Revenue Process

Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the receivables'

Which of the following most likely would be the result of ineffective internal control policies and procedures in the revenue process?

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

Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?

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

The XYZ Company billing department has decided to assign one employee to each of its customers.This employee will be responsible for granting credit to the entity and then handling the billing.XYZ believes this will result in better customer service,because the entity will only have to deal with one person and that one person will be very familiar with the credit terms.As an auditor,would you agree with XYZ's decision?

In connection with the examination of financial statements by an independent auditor,management suggests that members of the internal audit staff be utilized to minimize audit costs.Which of the following tasks could most appropriately be delegated to the internal audit staff?

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

In the confirmation of accounts receivable,the auditor would most likely

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?

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

In confirming accounts receivable,an auditor decided to confirm customers' account balances rather than individual invoices.Which of the following most likely would be included with the entity's confirmation letter?

According to the SEC's SAB No.101,which of the following is not necessary for revenue recognition?

An auditor is reviewing sales cutoff as of March 31,2013.All sales are shipped FOB destination and the company records sales three days after shipment.The auditor notes the following transactions: Date Shipped Month Recorded Selling Price (OOO's) Cost (OOO's) March 28 March $192 $200 March 29 March 44 40 March 30 April 77 81 April 2 March 208 220 April 5 April 92 84 If the entity records the required adjustments,the net effect on income (in thousands of dollars)for the period ended March 31,2013 is

Which of the following might be detected by an auditor's review of the entity's sales cutoff?

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

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

In general,revenue is recognized when

Credit authorization is used to determine if a customer is able to pay for goods.

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