Exam 9: Auditing the Revenue Cycle

In planning an audit for the revenue cycle,the auditor must consider the integrated relationship of evidence found between the accounts receivable and the notes payable accounts.

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(True/False)

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Question 1

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False

The use of data analytics tools makes the audit of the revenue cycle more effective,but not more efficient.

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Question 2

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False

Internal control over the revenue cycle White Floyd,Inc. ,a retail store,is concerned about the lack of control procedures over the recording of sales transactions.The company is concerned that the transactions might not be recorded accurately and valued properly in accordance with GAAP.Recommend control procedures to help ensure that transactions are recorded accurately and valued properly.

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Question 3

Correct Answer:

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Control procedures that should be implemented to ensure that sales transactions are properly recorded are:
∙ Sales orders are filled by authorized personnel following an authorized price catalog.
∙ Sales prices are to be maintained on the computer and access to the computer file is restricted to those authorized to change it.
∙ Internal audit department periodically should perform tests of sales invoices to see if the terms agree with authorized price lists.
∙ Executive approval should be required of all large,unusual,or complex sales transactions.
∙ Oral or written verification of prices with customers should be required for all nonstandard sales.
∙ Products shipped and billed must be checked against an existing product list.

The purpose of the bill of lading is to provide which of the following?

(Multiple Choice)

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Question 4

Management has been found involved in many fraudulent schemes;a common one is "channel stuffing." What does "channel stuffing" involve?

(Multiple Choice)

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Question 5

When lapping occurs,all or most customer account balances will be overstated at any one time,making it relatively easy for auditors to detect the scheme.

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Question 6

The aged accounts receivable report is utilized by the auditor to accomplish which of the following?

(Multiple Choice)

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Question 7

Confirmations of bank accounts may help the auditor to determine if material amounts of accounts receivable have been sold to the bank on a recourse basis.

(True/False)

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Question 8

The auditor would examine a sample of sales transactions throughout the entire period to determine if sales were recorded in the proper period when performing a sales cutoff test.

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Question 9

Which of the following criteria must be met in order to recognize revenue in the current accounting period?

(Multiple Choice)

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Question 10

The risk of material misstatement due to fraud relating to revenue recognition should be

(Multiple Choice)

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Question 11

Edge and Gregg,LLP would most likely discover a client's first-time use of channel stuffing through the use of trend analysis.

(True/False)

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Question 12

Which of the following evidences delivery of product to customers sufficient for company recording as revenues?

(Multiple Choice)

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Question 13

Sources of audit planning information may come from which of the following?

(Multiple Choice)

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Question 14

Confirmations of receivables You are performing the financial statement audit of Maple Bank.Maple has a large number of customers with consumer loan accounts.The loan accounts have balances averaging $800 in a homogeneous population and the customers usually pay close attention to their balances. Your preliminary assessment of internal control over the loan area is that control risk is low and results of tests of controls support that assessment.Inherent risk is deemed to be lower as well. Discuss the confirmation process and the types of confirmations that may be used for the audit of Maple Bank.Which confirmation type would you select for Maple and why?

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Question 15

An appropriate mix of evidence for a low-risk client could include 20% tests of details,40% analytics,and 40% tests of controls;an appropriate mix of evidence for a high-risk client could include 60% tests of details,20% analytics,and 20% tests of controls.

(True/False)

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Question 16

Which one of the following procedures would be considered improper by the auditor in the process of confirming receivables?

(Multiple Choice)

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Question 17

An example of a control over the sales cycle is the authorization of price lists by the appropriate sales and marketing manager.

(True/False)

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Question 18

Pre-numbered shipping and billing documents are examples of controls related to the completeness of sales transactions.

(True/False)

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Question 19

Substantive tests of details for revenue transactions focus primarily on the completeness assertion.

(True/False)

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Question 20

Showing 1 - 20 of 116

In planning an audit for the revenue cycle,the auditor must consider the integrated relationship of evidence found between the accounts receivable and the notes payable accounts.

The use of data analytics tools makes the audit of the revenue cycle more effective,but not more efficient.

The purpose of the bill of lading is to provide which of the following?

Management has been found involved in many fraudulent schemes;a common one is "channel stuffing." What does "channel stuffing" involve?

When lapping occurs,all or most customer account balances will be overstated at any one time,making it relatively easy for auditors to detect the scheme.

The aged accounts receivable report is utilized by the auditor to accomplish which of the following?

Confirmations of bank accounts may help the auditor to determine if material amounts of accounts receivable have been sold to the bank on a recourse basis.

The auditor would examine a sample of sales transactions throughout the entire period to determine if sales were recorded in the proper period when performing a sales cutoff test.

Which of the following criteria must be met in order to recognize revenue in the current accounting period?

The risk of material misstatement due to fraud relating to revenue recognition should be

Edge and Gregg,LLP would most likely discover a client's first-time use of channel stuffing through the use of trend analysis.

Which of the following evidences delivery of product to customers sufficient for company recording as revenues?

Sources of audit planning information may come from which of the following?

An appropriate mix of evidence for a low-risk client could include 20% tests of details,40% analytics,and 40% tests of controls;an appropriate mix of evidence for a high-risk client could include 60% tests of details,20% analytics,and 20% tests of controls.

Which one of the following procedures would be considered improper by the auditor in the process of confirming receivables?

An example of a control over the sales cycle is the authorization of price lists by the appropriate sales and marketing manager.

Pre-numbered shipping and billing documents are examples of controls related to the completeness of sales transactions.

Substantive tests of details for revenue transactions focus primarily on the completeness assertion.

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

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