Question 1

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 2

Alpha Company uses its sales invoices for posting perpetual inventory records.Inadequate control activities over the invoicing function allow goods to be invoiced that are not shipped.The inadequate control activities could cause an

Accepted Answer

A)  understatement of revenues, receivables, and inventory. 
B)  overstatement of revenues and receivables and an understatement of inventory. 
C)  understatement of revenues and receivables and an overstatement of inventory. 
D)  overstatement of revenues, receivables, and inventory. 
A)  understatement of revenues, receivables, and inventory. 
B)  overstatement of revenues and receivables and an understatement of inventory. 
C)  understatement of revenues and receivables and an overstatement of inventory. 
D)  overstatement of revenues, receivables, and inventory.

Question 3

Auditors sometimes use ratios as audit evidence.For example,an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?

Accepted Answer

A)  Fictitious purchases. 
B)  Fictitious sales. 
C)  Selling and general expenses erroneously being recorded as merchandise purchases. 
D)  Unrecorded sales. 
A)  Fictitious purchases. 
B)  Fictitious sales. 
C)  Selling and general expenses erroneously being recorded as merchandise purchases. 
D)  Unrecorded sales.

Question 4

Assume an account receivable confirmation is returned with a note to the auditor describing a difference between your client's records and the customer's records.Clearly describe below two potential non-misstatement timing differences that could cause a discrepancy between a client's receivable records and his/her customer's records.The timing differences you describe should be such that after investigation you would determine that your client's receivable balance is not misstated due to these differences.

Accepted Answer

1.Entity shipped to customer b

Question 5

According to the Association of Certified Fraud Examiners,there are eight common methods for committing financial statement fraud.List 4 of the 8 methods.

Accepted Answer

1.Early revenue recognition
2.Holding th

Question 6

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 7

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 8

A CPA auditing an electric utility wishes to determine whether all customers are being billed.The CPA's best direction of test is from the

Accepted Answer

A)  meter department records to the billing (sales) register. 
B)  billing (sales) register to the meter department records. 
C)  accounts receivable ledger to the billing (sales) register. 
D)  billing (sales) register to the accounts receivable ledger. 
A)  meter department records to the billing (sales) register. 
B)  billing (sales) register to the meter department records. 
C)  accounts receivable ledger to the billing (sales) register. 
D)  billing (sales) register to the accounts receivable ledger.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Order entry is the initial function in the revenue cycle.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

Accepted Answer

A)  Scan the sales journal for sequential and unusual entries. 
B)  Examine shipping documents for matching sales invoices. 
C)  Compare the accounts receivable ledger to daily sales summaries. 
D)  Inspect unused sales invoices for consecutive prenumbering. 
A)  Scan the sales journal for sequential and unusual entries. 
B)  Examine shipping documents for matching sales invoices. 
C)  Compare the accounts receivable ledger to daily sales summaries. 
D)  Inspect unused sales invoices for consecutive prenumbering.

Question 14

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 15

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 16

When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger,the auditor is testing the _____________ assertion.

Accepted Answer

A)  classification 
B)  cutoff 
C)  existence 
D)  completeness 
A)  classification 
B)  cutoff 
C)  existence 
D)  completeness

Question 17

Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipient?

Accepted Answer

A)  "This is not a request for payment; remittances should not be sent to our auditors in the enclosed envelope." 
B)  "Report any differences on the enclosed statement directly to our auditors; no reply is necessary if this amount agrees with your records." 
C)  "If you do not report any differences within 15 days, it will be assumed that this statement is correct." 
D)  "The following invoices have been selected for confirmation and represent amounts that are overdue." 
A)  "This is not a request for payment; remittances should not be sent to our auditors in the enclosed envelope." 
B)  "Report any differences on the enclosed statement directly to our auditors; no reply is necessary if this amount agrees with your records." 
C)  "If you do not report any differences within 15 days, it will be assumed that this statement is correct." 
D)  "The following invoices have been selected for confirmation and represent amounts that are overdue."

Question 18

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 19

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 20

Match the test of controls described below to the appropriate assertion it is used to test:

Accepted Answer

The answer of Match the test of controls described below...

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

Alpha Company uses its sales invoices for posting perpetual inventory records.Inadequate control activities over the invoicing function allow goods to be invoiced that are not shipped.The inadequate control activities could cause an

Auditors sometimes use ratios as audit evidence.For example,an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?

According to the Association of Certified Fraud Examiners,there are eight common methods for committing financial statement fraud.List 4 of the 8 methods.

Tracing shipping documents to prenumbered sales invoices provides evidence that

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

A CPA auditing an electric utility wishes to determine whether all customers are being billed.The CPA's best direction of test is from the

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

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.

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

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

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

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

When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger,the auditor is testing the _____________ assertion.

Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipient?

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

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

Match the test of controls described below to the appropriate assertion it is used to test:

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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters

Exam 10: Auditing the Revenue Process

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

Alpha Company uses its sales invoices for posting perpetual inventory records.Inadequate control activities over the invoicing function allow goods to be invoiced that are not shipped.The inadequate control activities could cause an

Auditors sometimes use ratios as audit evidence.For example,an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?

According to the Association of Certified Fraud Examiners,there are eight common methods for committing financial statement fraud.List 4 of the 8 methods.

Tracing shipping documents to prenumbered sales invoices provides evidence that

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

A CPA auditing an electric utility wishes to determine whether all customers are being billed.The CPA's best direction of test is from the

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

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.

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

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

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

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

When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger,the auditor is testing the _____________ assertion.

Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipient?

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

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

Match the test of controls described below to the appropriate assertion it is used to test:

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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters