Exam 14: Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Who is generally responsible for opening receipts when a company uses a lockbox to speed the handling of cash receipts?

A ________ is a document that indicates a request for merchandise by a customer.

Which of the following is not one of the five classes of transactions included in the sales and collection cycle?

Prenumbered documents are intended to help:

Transaction-related audit objectives are essentially the same for processing credit memos as for sales with certain differences. Which of the following are two key differences?

A bill of lading is a written contract between the seller and the buyer.

Tests of controls should never be performed using the client's computer system; that is, all tests of control should be performed either using the auditor's computers or performed manually by the auditor.

When posting items from the sales journal, details of the journal and journal totals are posted to which items?

The receipt of a customer order from a customer is the starting point for the entire sales and collection cycle.

Some companies have customers send payments directly to a post office box address maintained by a bank. This is called a(n) ________ system.

The document that accompanies the customer's payment is the:

In the sales and collection cycle when is, generally, the earliest point at which revenue can be recognized?

Which of the following procedures performed for the billing function may provide evidence that the accounts receivable subsidiary ledger is in agreement with the accounts receivable control account?

Which one of the following best describes the auditors responsibilities regarding appropriate authorizations in the sales/collections cycle?

Smith Manufacturing Company's accounts receivable clerk has a friend who is also a Smith's customer. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to:

The auditor would expect that an account receivable from a customer would be written off by the client when which of the following occurs:

In a lockbox system, bank employees are responsible for opening cash receipts and maintaining records of all payments made by customers at the lockbox address.

Credit should be approved before a customer's order is received.

When auditors evaluate sales returns and allowances, a primary emphasis is on the objective of occurrence.

A credit memo is a document used internally that indicates authority to write-off an account receivable as uncollectible.