Deck 4: Auditing the Revenue Business Process

Question 1

For the revenue process,management asserts that accounts receivable exist at the balance sheet date and that sales transactions recorded in the revenue process occurred during the year (existence and occurrence).

Answer 1

True

Question 2

The tests that an auditor uses to gather evidence relating to income statement transactions are

A)substantive tests of balances
B)tests of controls
C)substantive tests of transactions
D)substantive tests of accounts

Answer 2

C

Question 3

The totals in the balance sheet accounts reflect which of the following?

A)They reflect all the transactions recorded during the year.
B)They reflect only the totals in the accounts on the last day of the year.
C)They do not reflect the net amount of the transactions recorded during the year.
D)They reflect the total that the auditor is responsible for gathering evidence to support.

Answer 3

B

Question 4

Some of the documents that the auditor may find useful for gathering evidence in the revenue business process are

A)Purchase requisition
B)Accounts Payable Subsidiary Ledger
C)Aged Trial Balance for Accounts Receivable
D)Receiving document
E)Adjusting Journal Entry Report
F)Both A and B
G)Both C and D
Both C and E

Question 5

Which of the following would an auditor do to consider misstatements that might occur in a business process?

A)review internal controls to ensure the controls are in place and operating effectively
B)understand what is likely to go wrong in a process
C)plan the audit to determine the nature,timing,and extent of evidence to gather
D)increase the amount of internal control testing in the risky accounts
E)increase the extent of analytical procedures in the risky accounts
F)both A and B
G)both B and C
H)both D and E

Question 6

According to SEC Staff Accounting Bulletin: No.101 - Revenue Recognition in Financial Statements,revenue is realized when certain criteria are met.Which of the following is not one of those criteria?

A)Persuasive evidence of an arrangement exists.
B)Delivery has occurred or services have been rendered.
C)The seller has invoiced the buyer for the price of the goods.
D)The seller's price to the buyer is fixed or determinable.
E)Collectivity is reasonably assured.

Question 7

The higher the likelihood of misstatement in a business process,the more likely the auditor is to do more control testing at year-end than if the likelihood of misstatement is less.

Question 8

The auditor is responsible for determining if the ending balances in the balance sheet accounts are prepared in accordance with the applicable financial reporting framework.

Question 9

To evaluate the presentation and disclosure assertions made by management,the auditor should review the financial statements and the disclosures made in the "Management's Discussion and Analysis" section to determine if they are presented in accordance with an applicable financial reporting framework.

Question 10

Which of the following accounts are included in the revenue process on the balance sheet?

A)Accounts receivable.
B)Sales revenue.
C)Bad debt expense.
D)Sales returns and allowances.
E)Allowance for doubtful accounts.F.both A and E
G)both B and C

Question 11

The revenue business process involves both income statement and balance sheet accounts.

Question 12

Which of the following accounts are included in the revenue process on the income statement?

A)Accounts receivable
B)Increases to the cash account
C)Bad debt expense
D)Sales returns and allowances
E)Allowance for doubtful accounts
F)both A and B
G)both C and D
H)both A and E

Question 13

What assumption does a company make when it recognizes sales revenue?

A)all accounts receivable will be collected
B)a service has been rendered
C)goods have been delivered
D)all customers will be billed

Question 14

According to FASB Concept Statement No.5,revenue is recognized when it is recorded (the service has been scheduled or the goods have been selected for shipping).

Question 15

Analytical procedures are used by the auditor to focus his attention on accounts that should have changed from the prior year.

Question 16

A shipping document is a document prepared by the customer to indicate the quantity and type of goods shipped to the customer.

Question 17

The auditor is required to gather audit evidence to support all assertions for all accounts for each business process.

Question 18

Confirmation letters are prepared by the auditor on the letterhead of the company and mailed by the auditor.

Question 19

The decision to test internal controls for a financial statement audit is always based on whether it is an efficient way to gather evidence for the business process.

Question 20

When revenues are overstated,what is the effect on information that outsiders receive about the company?

A)Outsiders receive inaccurate predictions about future earnings and dividends.
B)Outsiders receive accurate information about the capability of a company to continue as a going concern.
C)Outsiders receive incorrect information about the amount of future cash flow generated by the company.
D)Outsiders receive incorrect information about the current expenses incurred by the company.

Question 21

Which of the following are assertions about the revenue process?

A)existence or occurrence - for both classes of transactions and account balances
B)completeness - for both classes of transactions and account balances
C)valuation and allocation - for classes of transactions and account balances
D)rights and obligations - for classes of transactions and account balances
E)accuracy - for classes of transactions and account balances
F)both A and B
G)both C and D
H)both D and E

Question 22

The auditor should plan the audit of the revenue business process with the following presumption

A)that there is a risk of material misstatement due to fraud relating to revenue recognition.
B)that professional skepticism is necessary to find misstatements.
C)that evidence gathering and planning the audit require a questioning mind.
D)that the general environment or tone in the company may allow management to rationalize committing fraud.

Question 23

Which of the following are assertions about the revenue process?

A)existence or occurrence - for account balances
B)completeness - for account balances
C)valuation and allocation - for account balances
D)rights and obligations - for account balances
E)accuracy - for classes of transactions and account balances
F)both A and B
G)both C and D

Question 24

Which of the following is not a method to overstate revenues and receivables?

A)recording fictitious sales,recognizing revenue on shipments that were not made.
B)early recognition of sales,recognizing revenue in the current year even though shipment of goods or providing the service occurs in the following year.
C)recognizing cost of goods sold before the goods are invoiced.
D)shipment of a larger quantity of goods than the customer ordered.
E)recognition of revenue based on a swap (exchange)transactions,when the customer and the client exchanged products or services and both parties recognize revenue based on the exchange.

Question 25

Which of the following are IT controls that the auditor might expect in the revenue business process?

A)The accounting system matches the information on the sales order and the shipping document with the sales invoice before revenue is recognized
B)Sales revenue is recognized based on the date on the invoice document
C)IT system prepares reports listing sales orders that have been shipped,and shipments that have been billed
D)IT system restricts access to individuals authorized to read sales orders,shipping documents,and sales invoices
E)Goods are shipped only to customers with valid sales orders
F)Both A and E
G)Both B and D

Question 26

Management often uses internal controls in the revenue process because

A)the revenue process is highly susceptible to fraud
B)this makes evidence gathering easier for the auditor
C)of the large number of transactions in the process
D)management is required by SAS 99 to use internal controls

Question 27

Which of the following are assertions about the revenue process?

A)existence or occurrence - for account balances
B)completeness - for both classes of transactions and account balances
C)valuation and allocation - for classes of transactions and account balances
D)rights and obligations - for classes of transactions and account balances
E)accuracy - for classes of transactions
F)both A and B
G)both C and D
Both B and E

Question 28

Which of the following is not a method to overstate revenues and receivables?

A)recording fictitious sales,recognizing revenue on shipments that were not made.
B)early recognition of sales,recognizing revenue early in the month even though shipment of goods or providing the service occurs late in the month.
C)early shipment of goods,recognizing revenue before the customer requests delivery.
D)shipment of a larger quantity of goods than the customer ordered.
E)recognition of revenue based on a swap (exchange)transactions,when the customer and the client exchanged products or services and both parties recognize revenue based on the exchange.

Question 29

Which of the following are IT controls that the auditor might expect in the revenue business process?

A)The accounting system matches the information on the sales order and the shipping document with the sales invoice before revenue is recognized
B)Sales revenue is recognized based on the date on the invoice document
C)IT system prepares reports listing sales orders that have been shipped,and shipments that have been billed
D)IT system restricts access to individuals authorized to input sales orders,shipping documents,and sales invoices
E)Goods are shipped only to customers with valid addresses
F)Both A and C
G)Both A and D
H)Both B and E

Question 30

Which of the following are IT controls that the auditor might expect in the revenue business process?

A)The accounting system matches the information on the sales order with the sales invoice before revenue is recognized
B)Sales revenue is recognized based on the date on the shipping document
C)IT system prepares reports listing sales orders that have been shipped,and shipments that have been billed
D)IT system restricts access to individuals authorized to input sales orders,shipping documents,and sales invoices
E)Goods are shipped only to customers with valid addresses
F)Both A and C
G)Both B and D
H)Both C and E

Question 31

Because the most likely misstatement in the revenue process is an overstatement misstatement,in many companies the most important assertions are:

A)rights and obligations
B)completeness and accuracy
C)cutoff and classification
D)existence and valuation

Question 32

At the end of the audit,the auditor will decide whether the accounts in the revenue business process are presented in accordance with the applicable financial reporting framework.If they are not,the auditor will:

A)issue a "subject to" audit report citing the incorrect accounts
B)issue an adverse report citing a GAAP non-compliance
C)propose audit adjustments to correct the accounts
D)assist the client in making adjustments to correct the accounts

Question 33

Which of the following are assertions about the revenue process?

A)existence or occurrence - for both classes of transactions and account balances
B)completeness - account balances
C)valuation and allocation - for account balances
D)rights and obligations - for classes of transactions and account balances
E)accuracy - for classes of transactions and account balances
F)both A and C
G)both B and D

Question 34

Which of the following are IT controls that the auditor might expect in the revenue business process?

A)The accounting system matches the information on the sales order with the sales invoice before revenue is recognized
B)Sales revenue is recognized based on the date on the invoice document
C)IT system prepares reports listing sales orders that have not been shipped,and shipments that have not been billed
D)IT system restricts access to individuals authorized to read sales orders,shipping documents,and sales invoices
E)Goods are shipped only to customers with valid sales orders
F)both A and B
G)both C and E

Question 35

Which of the following is not a method to overstate revenues and receivables?

A)failing to record sales revenue at year-end.
B)early recognition of sales,recognizing revenue in the current year even though shipment of goods or providing the service occurs in the following year.
C)early shipment of goods,recognizing revenue before the customer requests delivery.
D)shipment of a larger quantity of goods than the customer ordered.
E)recognition of revenue based on a swap (exchange)transactions,when the customer and the client exchanged products or services and both parties recognize revenue based on the exchange.

Question 36

According to SAS 99,what is the auditor's responsibility for detecting fraud in an audit?

A)The auditor has the responsibility to prevent or detect all material misstatements.
B)The auditor has the responsibility to test any account that may have a material misstatement.
C)The auditor has a responsibility to perform tests to obtain reasonable assurance that the financial statements are free of material misstatement.
D)The auditor has the responsibility to plan the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

Question 37

Frauds may be concealed from the auditors by all but one of the following methods:

A)misrepresenting information
B)withholding evidence
C)falsifying documentation
D)accusing another party of the fraud

Question 38

Which of the following is not a method to overstate revenues and receivables?

A)recording fictitious sales,recognizing revenue on shipments that were not made.
B)early recognition of sales,recognizing revenue in the current year even though shipment of goods or providing the service occurs in the following year.
C)early shipment of goods,recognizing revenue before the customer requests delivery.
D)shipment of a larger quantity of goods than the customer ordered.
E)recognition of revenue based on swap (exchange)transactions,when the customer and the client exchanged different products or different services and both parties recognize revenue based on the exchange.

Question 39

Which of the following are assertions about the revenue process?

A)existence or occurrence - account balances
B)completeness - account balances
C)valuation and allocation - for classes of transactions
D)rights and obligations - for account balances
E)accuracy - for classes of transactions
F)both A and B
G)both C and D
Both D and E

Question 40

Which of the following is not a method to overstate revenues and receivables?

A)recording fictitious sales,recognizing revenue on shipments that were not made.
B)early recognition of sales,recognizing revenue in the current year even though shipment of goods or providing the service occurs in the following year.
C)early shipment of goods,recognizing revenue before the customer requests delivery.
D)shipment of a larger quantity of goods by combining customer orders.
E)recognition of revenue based on a swap (exchange)transactions,when the customer and the client exchanged products or services and both parties recognize revenue based on the exchange.

Question 41

In the revenue business process,the auditor might perform the following analytical procedures:

A)Compare sales revenue,accounts receivable,sales discounts,bad debt expense,and allowance for uncollectible accounts for the current year to the prior year.Investigate all changes.
B)Compare sales revenue,accounts payable,sales returns and allowance,bad debt expense,and allowance for uncollectible accounts for the current year to the prior year.Investigate changes from the auditor's expectations that appear to be unreasonable.
C)Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts receivable for the current and prior years.Investigate a change from the auditor's expectations if it appears to be unreasonable.
D)Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts payable for the current and prior years.Investigate a change from the auditor's expectations if it appears to be unreasonable.
E)Consider the number of customer accounts for the current year and the prior year and new accounts added and lost in each year.F.both A and B
G)both C and E

Question 42

Which of the following are key control procedures for the revenue business process?

A)segregation of transaction trails
B)authorization procedures
C)documented duties
D)independent transaction trails
E)physical controls that limit access to assets
F)both A and B
G)both C and D
Both B and E

Question 43

If the control procedures are not designed properly or are not operating properly,the auditor will need to

A)develop a fraud risk factor for the missing internal control
B)design additional test of controls for mitigating factors
C)design substantive tests to determine whether the missing internal controls have led to misstatements in the financial statements
D)determine whether the existing internal controls effectively prevent misstatements or detect misstatements in the financial statements

Question 44

Which of the following are key control procedures for the revenue business process?

A)segregation of procedures
B)authorization of duties
C)documented transaction trails
D)independent reconciliations
E)physical controls that limit access to liabilities
F)both A and B
G)both C and D

Question 45

Segregation of duties is tested by the auditor

A)through inquiry and observation
B)by selecting transactions for substantive testing
C)through confirmation and assessment
D)reviewing the job descriptions of the personnel assigned to the department

Question 46

At the end of internal control testing,the auditor may conclude that

A)internal controls are effective in preventing or detecting misstatements for the accounts in the business process
B)internal controls are effectively designed to prevent or detect misstatements for the significant accounts in the business process
C)internal controls are not effectively designed for the significant accounts in the business process
D)internal controls are not effective for the relevant assertions tested for the significant accounts in the business process

Question 47

The auditor can test controls that are

A)in place
B)operating as designed
C)operating effectively
D)documented

Question 48

For an auditor to make the decision about whether a change noted in analytical procedures is unreasonable he needs knowledge of

A)the client's industry
B)current political conditions
C)current economic conditions
D)the client's competitors
E)the prior year's audit
F)both A and C
G)both B and D
H)both B and E

Question 49

Auditors perform test of controls to determine whether

A)the control procedures designed by management are developed effectively
B)the control procedures are operating
C)the control procedures developed by management are designed effectively and if the controls are operating
D)the control activities are being properly monitored

Question 50

For an auditor to make the decision about whether a change noted in analytical procedures is unreasonable he needs

A)knowledge of the client's inventory
B)knowledge of current political conditions
C)knowledge of current economic conditions
D)an understanding of the client's competitors
E)an understanding of the business under audit
F)both A and C
G)both B and D
Both C and E

Question 51

Which of the following are IT controls that the auditor might expect in the revenue business process?

A)The accounting system matches the information on the sales order with the sales invoice before revenue is recognized
B)Sales revenue is recognized based on the date on the shipping document
C)IT system prepares reports listing sales orders that have not been shipped,and shipments that have not been billed
D)IT system restricts access to individuals authorized to read sales orders,shipping documents,and sales invoices
E)Goods are shipped only to customers with valid addresses
F)Both A and B
G)Both B and C
H)Both D and E

Question 52

At the end of internal control testing,the auditor may conclude that

A)internal controls are effective in preventing or detecting misstatements for the assertions tested for the significant accounts in the business process
B)internal controls are effectively designed to prevent or detect misstatements for the significant accounts in the business process
C)internal controls are not effectively designed for the significant accounts in the business process
D)internal controls are not effective for the procedures tested for the significant accounts in the business process

Question 53

For an auditor to make the decision about whether a change noted in analytical procedures is unreasonable he needs

A)knowledge of the client's industry
B)knowledge of current political conditions
C)knowledge of prior economic conditions
D)an understanding of the client's competitors
E)an understanding of the business under audit
F)both A and E
G)both B and C

Question 54

Which of the following are the main types of analytical procedures used by auditors?

A)the auditor calculates the financial statement numbers for the current year and the previous year
B)the auditor compares the financial statement transactions for the current year to the previous year
C)the auditor compares the financial statement numbers for the current year to the previous year
D)the auditor calculates financial ratios for the current balance sheet and compares them to ratios for the prior year income statement
E)the auditor calculates financial ratios for the current financial statements and compares them to ratios for the prior year financial statements
F)both A and B
G)both C and E
H)both D and E

Question 55

After testing internal controls,how will the auditor determine whether the internal control is effective?

A)The decision is made based on whether the controls are in place.
B)The decision is made based on the number of deviations the auditor finds in the internal controls.
C)The decision is made based on whether the controls are operating effectively.
D)The decision is made based on whether internal controls effectively prevent misstatements or detect misstatements in the financial statements.

Question 56

Whether the auditor chooses to test or not to test internal controls,the auditor is required to

A)obtain an understanding of internal controls relevant to the audit
B)perform substantive test of transactions
C)perform analytical procedures
D)perform substantive test of balances

Question 57

In the revenue business process,the auditor might perform the following analytical procedures:

A)Compare sales revenue,accounts receivable,sales returns and allowance,bad debt expense,and allowance for uncollectible accounts for the current year to the prior year.Investigate changes from the auditor's expectations that appear to be unreasonable.
B)Compare sales revenue,accounts payable,sales returns and allowance,bad debt expense,and allowance for uncollectible accounts for the current year to the prior year.Investigate changes from the auditor's expectations that appear to be unreasonable.
C)Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts receivable for the current and prior years.Investigate a change from the auditor's expectations if it appears to be unreasonable.
D)Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts payable for the current and prior years.Investigate a change from the auditor's expectations if it appears to be unreasonable.
E)Consider the number of vendor accounts for the current year and the prior year and new accounts added and lost in each year.F.both A and C
G)both B and E

Question 58

Which of the following are key control procedures for the revenue business process?

A)segregation of duties
B)authorization procedures
C)documented reconciliations
D)independent transaction trails
E)physical controls that limit access to liabilities
F)both A and B
G)both C and D

Question 59

If the auditor determines that internal controls are not effective,he will gather evidence about whether the accounts in the business process are prepared in accordance with applicable financial reporting framework

A)using substantive testing and control testing
B)using only substantive testing
C)using only substantive testing of transactions
D)using only substantive testing of balances

Question 60

An auditor often uses analytical procedures

A)to identify internal controls that might be tested
B)to confirm that internal controls are in place and operating as intended
C)as evidence for whether the financial statement accounts are prepared in accordance with an applicable financial reporting framework
D)to compare the client's performance to an industry benchmark

Question 61

How does the auditor gather evidence using the confirmation process?

A)The client selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he is owed by the audit client at year-end
C)The auditor can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to management if the balance is correct or incorrect
E)Negative confirmations request the customer to return the confirmation directly to the auditor only if the balance is incorrect
F)Both A and B
G)Both B and C
Both C and E

Question 62

Early substantive testing of balances is only done when

A)the client has a good system of internal controls relating to expense account balances
B)the client has good policies and procedures relating to the expense account balances
C)the client has a good system of internal controls relating to the account balances
D)the client has good policies and procedures relating to the account balances

Question 63

The auditing standards presume that the auditor will request confirmation of the accounts receivable balances unless

A)the balance in accounts receivable is immaterial
B)the use of confirmations would be effective if the amounts were significant
C)the auditor can reduce the risk of issuing an audit opinion to an acceptable low level without confirming accounts receivable
D)the client believes that confirmations are not necessary

Question 64

After the auditor has completed the substantive tests of transactions for the revenue process,he or she determines

A)whether the balance sheet accounts in the revenue process are prepared in accordance with the applicable financial reporting framework
B)whether the income statement accounts in the revenue process are prepared in accordance with the applicable financial reporting framework
C)whether the balance sheet accounts in the revenue process are audited in accordance with the applicable financial reporting framework
D)whether the income statement accounts in the revenue process are audited in accordance with the applicable financial reporting framework

Question 65

If the auditor uses positive confirmations and determines that a response is necessary to obtain sufficient appropriate evidence,but does not receive a response

A)the auditor should perform alternative procedures
B)the auditor should consult with management about performing alternative tests
C)the auditor should issue an adverse audit report
D)alternative audit procedures will not provide the audit evidence the auditor needs

Question 66

How does the auditor gather evidence using the confirmation process?

A)The client selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he owes the audit client at year-end
C)The auditor can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to management if the balance is correct or incorrect
E)Negative confirmations request the customer to return the confirmation directly to management only if the balance is incorrect
F)Both A and B
G)Both B and C
H)Both D and E

Question 67

The auditor uses substantive tests of transactions to

A)gather evidence for income statement accounts in the business process
B)gather evidence for balance sheet accounts in the business process
C)determine the valuation of income statement accounts in the business process
D)determine the valuation for balance sheet accounts in the business process

Question 68

How does the auditor gather evidence using the confirmation process?

A)The auditor selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he is owed by the audit client at year-end
C)Management can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to the auditor if the balance is correct or incorrect
E)Negative confirmations request the customer to return the confirmation directly to management only if the balance is incorrect
F)Both A and D
G)Both A and E

Question 69

The auditor may perform substantive tests of transactions for revenue as part of the audit of the internal controls.The auditor does this by:

A)testing controls that have a monetary value
B)using dual-purpose tests
C)using tests on how revenue is recorded in the system
D)selecting a sample of balances and performing tests on them

Question 70

How does the auditor gather evidence using the confirmation process?

A)The auditor selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he is owed by the audit client at year-end
C)Management can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to management if the balance is correct or incorrect
E)Negative confirmations request the customer to return the confirmation directly to the auditor only if the balance is incorrect
F)Both A and E
G)Both B and D
H)Both C and E

Question 71

The balance sheet accounts in the revenue business process are

A)cash and allowance for uncollectible accounts
B)cash and accounts receivable
C)accounts receivable and allowance for uncollectible accounts
D)accounts receivable and revenue

Question 72

The auditing standards presume that the auditor will request confirmation of accounts receivable balances unless

A)the transactions in accounts receivable are immaterial
B)the use of confirmations would be effective if the amount were significant
C)the auditor can reduce the risk of issuing the wrong audit opinion to an acceptable low level without confirming accounts receivable
D)the client believes that confirmations are not necessary

Question 73

Which of the following are alternative tests the auditor can perform for customer balances when the confirmation is not returned?

A)Determine if the account has been paid this year
B)Determine if the account has been paid in the following year
C)Examine the purchase orders associated with the accounts receivable
D)Examine the invoices and shipping documents associated with the accounts receivable
E)Examine the receiving reports associated with the accounts receivable
F)Both A and C
G)Both B and D

Question 74

The auditing standards presume that the auditor will request confirmation of accounts receivable balances unless

A)the transactions in accounts receivable are immaterial
B)the use of confirmations would be ineffective
C)the auditor can reduce the risk of issuing an audit opinion to an acceptable low level without confirming accounts receivable
D)the client believes that confirmations are not necessary

Question 75

The auditor uses substantive tests of balances to

A)gather evidence for income statement accounts in the business process
B)gather evidence for balance sheet accounts in the business process
C)determine the valuation of income statement accounts in the business process
D)determine the valuation for balance sheet accounts in the business process

Question 76

How does the auditor gather evidence using the confirmation process?

A)The client selects a sample of customer balances from the year-end accounts receivable subsidiary ledger
B)Each of the customers selected for confirmation will be sent a letter asking him to confirm the balance that he owes the audit client at year-end
C)Management can choose to send either positive or negative confirmations
D)Positive confirmations request the customer to return the confirmation directly to the auditor if the balance is correct or incorrect
E)Negative confirmations request the customer to return the confirmation directly to management only if the balance is incorrect
F)Both A and B
G)Both B and D
H)Both A and C

Question 77

An accounts receivable balance is immaterial when

A)knowing the correct balance would not change the decision of an outside user of the financial statements
B)the balance has been paid in a subsequent period
C)collection of the balance is assured
D)the cash balance exceeds the accounts receivable balance

Question 78

In sales cut-off testing,the auditor uses the inspection procedure of vouching and tracing to gather evidence about which assertion(s)?

A)existence and occurrence
B)accuracy
C)valuation or allocation
D)completeness
E)presentation and disclosure
F)both A and B
G)both A and D

Question 79

Analytical procedures are used by the auditor:

A)only at the beginning of the audit
B)only as a substantive audit procedure during the audit
C)to focus his attention on accounts where procedures are inadequate
D)to focus his attention on accounts that have changed more than expected from the prior year

Question 80

One way a company might increase sales revenue is to

A)extend credit to customers that are lower credit risks.
B)extend credit to customers that are greater credit risks.
C)extend credit to vendors that are greater credit risks.
D)fail to write off uncollectible accounts.
E)reduce bad debt expense.