Exam 11: Revenues, Receivables, and Receipts Process

Define the response rate as it pertains to positive accounts receivable confirmations.Describe methods which can be utilized to increase the response rate.

In the audit of accounts receivable, the negative form of confirmation request is most likely to be used when

An auditor is most likely to review an entity's practice of periodically accounting for the numerical sequence of shipping documents and invoices as evidence and support for management's financial statement assertion of

The open (or pending) sales order file can be reviewed for evidence of the completeness of recorded sales.

If an auditor selects a sample of customer accounts receivable and traces payment credits to remittance worksheets and bank deposits, the auditor is testing the control objective of completeness.

In-Line Company records accounts receivable from customers arising from both the sale of in-line skates and the provision of repair service.The CA firm of King & King is auditing the financial statements of In-Line Company.Lyon, the audit manager, is aware that the confirmation of customer accounts receivable is a substantive procedure normally used in the audit of accounts receivable.Selected balances from In-Line's financial statements are as follows: accounts receivable, $7,000; current assets, $322,000; total assets, $630,000; shareholders' equity, $570,000; net income, $190,000. Required: A) How can Lyon justify deciding not to confirm In-Line's accounts receivable? B) Briefly describe two types of positive confirmation Lyon could send to In-Line's customers. C) What alternative procedures can Lyon perform if In-Line's customers fail to respond to the confirmation requests?

Tracing bills of lading to sales invoices provides evidence that

In determining the adequacy of the allowance for uncollectible accounts, the least valuable evidence would be obtained from

A charity sells raffle tickets at community events.One ticket will be chosen to win a prize.The charity could reduce the risk of employee misappropriation of cash best by:

What are the general internal control objectives for the revenue cycle?

A cut off bank statement is a special statement printed by the bank which does not include all paid cheques and deposit slips.

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when

Typical source documents involved in the revenue and collection cycle would be:

Which of the following procedures would best lead to an understanding of the transaction flow in the revenue and collection cycle?

The packing slip authorizes the transfer of inventory from the warehouse to the shipping department and to then to the customer.

Cash receipts procedures should include steps for authorizing and recording discounts when the customer takes them.

In a manual data processing system, the custody of cash and the recording of cash receipts in the cash journal should be combined for maximum control.

Upon receipt of customer cheques in the mailroom, a responsible employee should prepare a remittance listing and forward it to the cashier.A copy of the listing should be sent to the

In the course of examining the cut off bank statement for a client, an auditor is puzzled to discover that none of the cheques listed as outstanding on the year-end bank reconciliation has cleared the bank.This could be an indication that the client:

The most effective audit procedure for determining if an account receivable will be collected is: