Question 1

Valid evidence obtained in an audit for testing the cutoff of gross sales includes receiving reports for returned merchandise.

Accepted Answer

A) True 
 B)False

Question 2

An aging of accounts receivable is useful in estimating the reasonableness of the allowance for doubtful accounts.

Accepted Answer

A) True 
 B)False

Question 3

One of the benefits of establishing a formal credit policy for granting credit is that management does not need to perform monitoring of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 4

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

Accepted Answer

A) customer collections that are over 90 days past due. 
B) credit entries in customer accounts receivable for authorized write-offs. 
C) recurring entries in the sales journal. 
D) altered shipping documents and invoices. 
A) customer collections that are over 90 days past due. 
B) credit entries in customer accounts receivable for authorized write-offs. 
C) recurring entries in the sales journal. 
D) altered shipping documents and invoices.

Question 5

Alternative procedures that would provide evidence of the existence of receivables would include which of the following?

Accepted Answer

A) physical observation of customer facilities. 
B) review of subsequent collections. 
C) analysis of the aged trial balance. 
D) a confirmation to the client management for customer accounts. 
A) physical observation of customer facilities. 
B) review of subsequent collections. 
C) analysis of the aged trial balance. 
D) a confirmation to the client management for customer accounts.

Question 6

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

Accepted Answer

A) substantiate cutoff and the occurrence of net sales transactions. 
B) test the sufficiency of cash balances to cover refunds. 
C) monitor customer satisfaction for disclosure. 
D) assess the nature of procedures that will be performed for the next period's audit. 
A) substantiate cutoff and the occurrence of net sales transactions. 
B) test the sufficiency of cash balances to cover refunds. 
C) monitor customer satisfaction for disclosure. 
D) assess the nature of procedures that will be performed for the next period's audit.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Financial accounting personnel who do not have the proper education,experience and backgrounds may signal the auditor to the risk of financial statement fraud.

Accepted Answer

A) True 
 B)False

Question 9

The use of prenumbered sales invoices is the primary control procedure to satisfy the assertion of completeness.

Accepted Answer

A) True 
 B)False

Question 10

Estimation of the allowance for doubtful accounts is a simple management decision as it is determined as a percentage of sales.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a form of ratio analysis?

Accepted Answer

A) turnover of receivables. 
B) monthly sales analysis compared with past years. 
C) gross margin analysis. 
D) sales in last month to total sales. 
A) turnover of receivables. 
B) monthly sales analysis compared with past years. 
C) gross margin analysis. 
D) sales in last month to total sales.

Question 12

Accounts receivable confirmations usually provide strong evidence about which of the following?

Accepted Answer

A) the existence of receivables. 
B) the completeness of receivables. 
C) the presentation and disclosure of receivables. 
D) the obligations of receivables. 
A) the existence of receivables. 
B) the completeness of receivables. 
C) the presentation and disclosure of receivables. 
D) the obligations of receivables.

Question 13

Requirements for confirming accounts receivable
Confirmation of accounts receivable is required under GAAS unless certain conditions exist.Identify the conditions that will be present in an audit that does not confirm accounts receivable.

Accepted Answer

The auditor is required to confirm accou

Question 14

The auditor will come up with an independent estimation of the allowance for doubtful accounts based on a thorough understanding of the client and the client's business that is compared to the recorded allowance.

Accepted Answer

A) True 
 B)False

Question 15

The audit team typically reviews journal entries in the receivables ledger for unusual entries that may be indicators of fraudulent activity.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following processes are included in the revenue cycle?

Accepted Answer

A) Shipping products to customers. 
B) Payments to suppliers. 
C) Issuance of capital stock. 
D) Preparation of a time card. 
A) Shipping products to customers. 
B) Payments to suppliers. 
C) Issuance of capital stock. 
D) Preparation of a time card.

Question 17

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following?

Accepted Answer

A) it is an accounting estimate based upon judgment. 
B) GAAP is not clear on the calculation of the allowance. 
C) it is merely a reserve that is reversed by the client as income is needed for profitable results. 
D) the precision is determined by the results of confirmation responses. 
A) it is an accounting estimate based upon judgment. 
B) GAAP is not clear on the calculation of the allowance. 
C) it is merely a reserve that is reversed by the client as income is needed for profitable results. 
D) the precision is determined by the results of confirmation responses.

Question 18

In the audit of accounting estimates,such as the allowance for doubtful accounts,the auditor strives to provide reasonable assurance that

Accepted Answer

A) all material accounting estimates have been developed properly. 
B) the estimates are reasonable. 
C) the estimates are presented in accordance with GAAP. 
D) all of the above are true. 
A) all material accounting estimates have been developed properly. 
B) the estimates are reasonable. 
C) the estimates are presented in accordance with GAAP. 
D) all of the above are true.

Question 19

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

Accepted Answer

A) True 
 B)False

Question 20

The auditor has determined that the control risk for the existence assertion is low;therefore the auditor may reduce the number of items tested on a substantive basis.

Accepted Answer

A) True 
 B)False

Valid evidence obtained in an audit for testing the cutoff of gross sales includes receiving reports for returned merchandise.

An aging of accounts receivable is useful in estimating the reasonableness of the allowance for doubtful accounts.

One of the benefits of establishing a formal credit policy for granting credit is that management does not need to perform monitoring of accounts receivable.

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

Alternative procedures that would provide evidence of the existence of receivables would include which of the following?

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

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

Financial accounting personnel who do not have the proper education,experience and backgrounds may signal the auditor to the risk of financial statement fraud.

The use of prenumbered sales invoices is the primary control procedure to satisfy the assertion of completeness.

Estimation of the allowance for doubtful accounts is a simple management decision as it is determined as a percentage of sales.

Which of the following is not a form of ratio analysis?

Accounts receivable confirmations usually provide strong evidence about which of the following?

Requirements for confirming accounts receivable Confirmation of accounts receivable is required under GAAS unless certain conditions exist.Identify the conditions that will be present in an audit that does not confirm accounts receivable.

The auditor will come up with an independent estimation of the allowance for doubtful accounts based on a thorough understanding of the client and the client's business that is compared to the recorded allowance.

The audit team typically reviews journal entries in the receivables ledger for unusual entries that may be indicators of fraudulent activity.

Which of the following processes are included in the revenue cycle?

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following?

In the audit of accounting estimates,such as the allowance for doubtful accounts,the auditor strives to provide reasonable assurance that

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

The auditor has determined that the control risk for the existence assertion is low;therefore the auditor may reduce the number of items tested on a substantive basis.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters

Exam 10: Auditing Revenue and Related Accounts

Valid evidence obtained in an audit for testing the cutoff of gross sales includes receiving reports for returned merchandise.

An aging of accounts receivable is useful in estimating the reasonableness of the allowance for doubtful accounts.

One of the benefits of establishing a formal credit policy for granting credit is that management does not need to perform monitoring of accounts receivable.

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

Alternative procedures that would provide evidence of the existence of receivables would include which of the following?

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

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

Financial accounting personnel who do not have the proper education,experience and backgrounds may signal the auditor to the risk of financial statement fraud.

The use of prenumbered sales invoices is the primary control procedure to satisfy the assertion of completeness.

Estimation of the allowance for doubtful accounts is a simple management decision as it is determined as a percentage of sales.

Which of the following is not a form of ratio analysis?

Accounts receivable confirmations usually provide strong evidence about which of the following?

Requirements for confirming accounts receivable Confirmation of accounts receivable is required under GAAS unless certain conditions exist.Identify the conditions that will be present in an audit that does not confirm accounts receivable.

The auditor will come up with an independent estimation of the allowance for doubtful accounts based on a thorough understanding of the client and the client's business that is compared to the recorded allowance.

The audit team typically reviews journal entries in the receivables ledger for unusual entries that may be indicators of fraudulent activity.

Which of the following processes are included in the revenue cycle?

The allowance for doubtful accounts will not be precise by either the client or the auditor because of which of the following?

In the audit of accounting estimates,such as the allowance for doubtful accounts,the auditor strives to provide reasonable assurance that

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

The auditor has determined that the control risk for the existence assertion is low;therefore the auditor may reduce the number of items tested on a substantive basis.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters