Exam 11: Accounts Receivable, Notes Receivable, and Revenue

Which of the following is not true about the auditors' verification of notes receivable?

The confirmation process may be performed using a(n): Paper form Electronic form A. Yes Yes B. Yes No C. No Yes D. No No

A client might overstate December 31 accounts receivable balances by dating and recording January transactions in December. Such entries recorded in which journal are most likely to achieve this end?

Your client performed the physical count of inventory as of November 30, one month prior to year-end. Subsequently, your client closed the sales journal on 12/29/XX, two days before year-end, and reported those two days' credit sales in January of the next year. Assuming the client uses a perpetual inventory system, which of the following is most likely to be overstated relating to the year XX financial statements?

Fraudulent sales are occasionally recorded at year-end as a means of overstating financial results. As examples, companies may engage in inappropriate bill and hold transactions or channel stuffing. a. Describe two conditions that might indicate the recording of fraudulent sales. b. Define bill and hold transactions and describe the audit significance of such transactions. c. Define channel stuffing and describe the audit significance of this practice.

Tracing recorded sales transactions to the bills of lading provides evidence about the:

The audit working papers often include a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. This aging is best used by the auditors to:

Which of the following is not a primary objective of the auditors in the examination of accounts receivable?

When control risk for the existence assertion is assessed at a high level, which of the following is a likely effect with respect to the auditors' confirmation of receivables?

An auditor who uses a transaction cycle approach to assessing control risk most likely would test control activities related to transactions involving the sale of goods to customers with the:

In your review of ABC Company's financials, you note that Receivables have increased approximately 200% from the previous year, while Cash has declined. Further investigation reveals that 70% of ABC's receivables were booked within 7 days of the end of the quarter. If financial statement fraud is involved, which type is most likely?

What type of error is the CPA most likely to discover when he/she examines all shipping reports dated in January of 20X1, shipped FOB shipping point, which were recorded in December of 20X0 as credit sales?

Material accounts receivable from related parties should be stated separately from other receivables.

Accounts receivable that are written off should not be turned over to a collection agency.

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Of the following, which combination is it most likely that the auditors will use?

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

Internal control over sales transactions is very important to the effectiveness of an organization. a. For effective control over credit sales, describe four major functions that should be segregated. b. In addition to adequate segregation of duties, describe two other internal controls over sales transactions.

An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This may indicate that:

Which of the following does not meet the definition of an external confirmation in the context of accounts receivable?

Analytical procedures are used by auditors to gain evidence about the adequacy of the allowance for uncollectible accounts.