Exam 10: Auditing Revenue and Related Accounts

Exceptions found in the confirmations of accounts receivable balances need not be projected as errors to the population as they are typically isolated errors.

Confirmations of receivables You are the auditor of Maple Bank for the year 2012.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?

Negative confirmations are used to confirm material balances.

Analytical Procedures Explain ratio analysis as an analytical procedure used by auditor.Give examples of the ratios that auditor might want to compute.

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

Improper revenue recognition Historically the accounting profession has come under fire for fraudulent financial reporting due to questionable improper revenue recognition.Identify at least six examples of questionable revenue recognition practices that an auditor must consider in performing an audit engagement.

A timing difference type of exception in the confirmation process may include a misunderstanding by the reader as to the date being confirmed.

In an audit of financial statements,the risk of the high rate of return of products sold includes that of

Which of the following audit procedures does not address the rights,presentation and disclosure assertion for pledged,discounted,assigned,and related-party accounts receivable?

An example of alternative procedures for the confirmation of accounts receivable includes which of the following?

Alternative procedures to the confirmation of receivables include review of subsequent collections and examination of supporting documents.

Unreturned positive confirmations for accounts receivable warrant which of the following by the auditor?

Which of the following provides evidence that the delivery of a product by a company to one of its customers is sufficient for the company to record revenue?

What evidence is utilized by the auditor for analytical purposes in substantiating the allowance for bad debt estimate?

Which of the following is the major risk associated with receivables?

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

The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues.

According to auditing standards,accounts receivable confirmations are required to be used

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

The use of audit software makes the audit of the revenue cycle more effective,but not more efficient.