Question 1

In the audit of cash the auditor obtains a bank cut off statement primarily to

Accepted Answer

A) Identify old outstanding cheques that the client may exclude from the year-end bank reconciliation in order to misappropriate cash. 
B) Obtain sufficient information to reconcile the client's bank account as at the year end. 
C) Obtain direct confirmation of the client's bank balances as at the year end. 
D) Test the propriety of items appearing on the client's year-end bank reconciliation. 
A) Identify old outstanding cheques that the client may exclude from the year-end bank reconciliation in order to misappropriate cash. 
B) Obtain sufficient information to reconcile the client's bank account as at the year end. 
C) Obtain direct confirmation of the client's bank balances as at the year end. 
D) Test the propriety of items appearing on the client's year-end bank reconciliation.

Question 2

Which of the following controls helps to achieve the accuracy objective over sales invoices?

Accepted Answer

A) Recorded sales in the sales journal are supported by invoices. 
B) Invoices, shipping documents, and sales orders are pre-numbered and the numerical sequence is checked. 
C) Sales are recognized in accordance with generally accepted accounting principles. 
D) Quantities invoiced are agreed to quantities shipped and quantities ordered by the customer as evidenced in source documentation. 
A) Recorded sales in the sales journal are supported by invoices. 
B) Invoices, shipping documents, and sales orders are pre-numbered and the numerical sequence is checked. 
C) Sales are recognized in accordance with generally accepted accounting principles. 
D) Quantities invoiced are agreed to quantities shipped and quantities ordered by the customer as evidenced in source documentation.

Question 3

A lock box system is an effective way to segregate the custody of cash.

Accepted Answer

A) True 
 B)False

Question 4

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and recalculating the cross totals of quantities and prices:

Accepted Answer

A) Authorization 
B) Completeness 
C) Validity 
D) Accuracy 
A) Authorization 
B) Completeness 
C) Validity 
D) Accuracy

Question 5

A customer replies to a positive confirmation as follows: "We dispute the $250 charge from your client as the goods were never received." This confirmation

Accepted Answer

A) Provides evidence of existence but not valuation. 
B) Does not provide evidence of existence so valuation is irrelevant. 
C) Provides evidence that the goods were never shipped. 
D) Provides evidence that the account should be written off. 
A) Provides evidence of existence but not valuation. 
B) Does not provide evidence of existence so valuation is irrelevant. 
C) Provides evidence that the goods were never shipped. 
D) Provides evidence that the account should be written off.

Question 6

When the credit manager decides a customer's account is considered to be uncollectible, the decision should be reviewed by the controller to:

Accepted Answer

A) Ensure the bad debts account is within budget. 
B) Ensure the credit manager has not written off the account as a favour to a friend. 
C) Begin a lawsuit to collect the money. 
D) Inform the police. 
A) Ensure the bad debts account is within budget. 
B) Ensure the credit manager has not written off the account as a favour to a friend. 
C) Begin a lawsuit to collect the money. 
D) Inform the police.

Question 7

If it is impracticable to confirm accounts receivable but the auditor obtains sufficient, appropriate evidence to verify the receivable balance by performing alternative procedures, the auditor's opinion should be unqualified.The audit report should

Accepted Answer

A) Disclose the fact that alternative procedures were used because of a client-imposed scope limitation. 
B) Disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. 
C) Not mention the alternative procedures. 
D) Include an explanatory paragraph that discloses the performance of alternative procedures. 
A) Disclose the fact that alternative procedures were used because of a client-imposed scope limitation. 
B) Disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. 
C) Not mention the alternative procedures. 
D) Include an explanatory paragraph that discloses the performance of alternative procedures.

Question 8

In evaluating the adequacy of the allowance for doubtful accounts, an auditor is most likely to review the aging of receivables as evidence and support for management's financial statement assertion of

Accepted Answer

A) Existence or occurrence. 
B) Valuation or allocation. 
C) Completeness. 
D) Rights and obligations. 
A) Existence or occurrence. 
B) Valuation or allocation. 
C) Completeness. 
D) Rights and obligations.

Question 9

The revenue and collection process includes activities from preparing the initial sales order through recording the transaction in the sales journal.

Accepted Answer

A) True 
 B)False

Question 10

Cash receipts from sales on account terms of 2/10, net 30 have been misappropriated.Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

Accepted Answer

A) Understating the sales journal. 
B) Overstating the accounts receivable subsidiary ledger. 
C) Understating the accounts receivable subsidiary ledger. 
D) Understating the cash receipts journal. 
A) Understating the sales journal. 
B) Overstating the accounts receivable subsidiary ledger. 
C) Understating the accounts receivable subsidiary ledger. 
D) Understating the cash receipts journal.

Question 11

The most frequent reconciliation is the comparison of the sum of customers' unpaid balances with the accounts receivable control account total.Usually, this reconciliation is done with:

Accepted Answer

A) An aged trial balance. 
B) A capital asset sub-ledger. 
C) A bank statement 
D) A customer statement. 
A) An aged trial balance. 
B) A capital asset sub-ledger. 
C) A bank statement 
D) A customer statement.

Question 12

The control objective associated with selecting a sample of cash receipts remittance lists
(or daily cash reports) and tracing them through to the cash receipts journal is:

Accepted Answer

A) Validity 
B) Completeness 
C) Existence 
D) Authorization 
A) Validity 
B) Completeness 
C) Existence 
D) Authorization

Question 13

An unrecorded cheque issued during the last week of the year would most likely be discovered by the auditor when the

Accepted Answer

A) Cheque register for the last month is reviewed. 
B) Cut-off bank statement is reconciled. 
C) Bank confirmation is reviewed. 
D) Search for unrecorded liabilities is performed. 
A) Cheque register for the last month is reviewed. 
B) Cut-off bank statement is reconciled. 
C) Bank confirmation is reviewed. 
D) Search for unrecorded liabilities is performed.

Question 14

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

Accepted Answer

A) Verify that extensions and footings on the entity's sales invoices and monthly customer statements have been recomputed. 
B) Inspect the entity's reports of pre-numbered shipping documents that have not been recorded in the sales journal. 
C) Compare the invoiced prices on pre-numbered sales invoices to the entity's authorized price list. 
D) Inquire about the entity 
A) Verify that extensions and footings on the entity's sales invoices and monthly customer statements have been recomputed. 
B) Inspect the entity's reports of pre-numbered shipping documents that have not been recorded in the sales journal. 
C) Compare the invoiced prices on pre-numbered sales invoices to the entity's authorized price list. 
D) Inquire about the entity

Question 15

An auditor should trace cancelled cheques and cleared deposits for the last part of the current audit period and the first part of the subsequent period to detect whether

Accepted Answer

A) The cash receipts journal was held open for a few days after the year-end. 
B) The last cheques recorded before the year-end actually mailed by the year-end. 
C) Cash balances were overstated because of kiting. 
D) Any unusual payments to or receipts from related parties occurred. 
A) The cash receipts journal was held open for a few days after the year-end. 
B) The last cheques recorded before the year-end actually mailed by the year-end. 
C) Cash balances were overstated because of kiting. 
D) Any unusual payments to or receipts from related parties occurred.

Question 16

Which of the following lists outlines the best order for a typical sequence of activities in the revenue and collection cycle?

Accepted Answer

A) Delivering goods, billing customers, credit granting, collection activity. 
B) Customer ordering, delivering goods, billing customer, cash receipts. 
C) Customer ordering, delivering goods, credit granting, collection activity. 
D) Credit granting, billing customers, delivering goods, cash receipts. 
A) Delivering goods, billing customers, credit granting, collection activity. 
B) Customer ordering, delivering goods, billing customer, cash receipts. 
C) Customer ordering, delivering goods, credit granting, collection activity. 
D) Credit granting, billing customers, delivering goods, cash receipts.

Question 17

Which of the following audit procedures is the most effective when testing sales for understatement?

Accepted Answer

A) Scrutinize the accounts receivable aged trial balance. 
B) Confirm a sample of recorded accounts receivable. 
C) Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D) Vouch a sample of recorded sales from the sales journal to shipping documents. 
A) Scrutinize the accounts receivable aged trial balance. 
B) Confirm a sample of recorded accounts receivable. 
C) Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D) Vouch a sample of recorded sales from the sales journal to shipping documents.

Question 18

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of

Accepted Answer

A) Validity. 
B) Completeness. 
C) Authorization. 
D) Accuracy. 
A) Validity. 
B) Completeness. 
C) Authorization. 
D) Accuracy.

Question 19

The primary consideration when planning to confirm accounts receivable before the balance sheet date is the

Accepted Answer

A) Type of confirmation to be used. 
B) Client's internal control over transactions affecting receivables. 
C) Availability of staff auditors. 
D) Number of customer accounts. 
A) Type of confirmation to be used. 
B) Client's internal control over transactions affecting receivables. 
C) Availability of staff auditors. 
D) Number of customer accounts.

Question 20

One of the key assertions to consider in obtaining evidence about accounts receivable is completeness.

Accepted Answer

A) True 
 B)False

In the audit of cash the auditor obtains a bank cut off statement primarily to

Which of the following controls helps to achieve the accuracy objective over sales invoices?

A lock box system is an effective way to segregate the custody of cash.

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and recalculating the cross totals of quantities and prices:

A customer replies to a positive confirmation as follows: "We dispute the $250 charge from your client as the goods were never received." This confirmation

When the credit manager decides a customer's account is considered to be uncollectible, the decision should be reviewed by the controller to:

If it is impracticable to confirm accounts receivable but the auditor obtains sufficient, appropriate evidence to verify the receivable balance by performing alternative procedures, the auditor's opinion should be unqualified.The audit report should

In evaluating the adequacy of the allowance for doubtful accounts, an auditor is most likely to review the aging of receivables as evidence and support for management's financial statement assertion of

The revenue and collection process includes activities from preparing the initial sales order through recording the transaction in the sales journal.

Cash receipts from sales on account terms of 2/10, net 30 have been misappropriated.Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

The most frequent reconciliation is the comparison of the sum of customers' unpaid balances with the accounts receivable control account total.Usually, this reconciliation is done with:

The control objective associated with selecting a sample of cash receipts remittance lists (or daily cash reports) and tracing them through to the cash receipts journal is:

An unrecorded cheque issued during the last week of the year would most likely be discovered by the auditor when the

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

An auditor should trace cancelled cheques and cleared deposits for the last part of the current audit period and the first part of the subsequent period to detect whether

Which of the following lists outlines the best order for a typical sequence of activities in the revenue and collection cycle?

Which of the following audit procedures is the most effective when testing sales for understatement?

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of

The primary consideration when planning to confirm accounts receivable before the balance sheet date is the

One of the key assertions to consider in obtaining evidence about accounts receivable is completeness.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters

Exam 11: Revenues, Receivables, and Receipts Process

In the audit of cash the auditor obtains a bank cut off statement primarily to

Which of the following controls helps to achieve the accuracy objective over sales invoices?

A lock box system is an effective way to segregate the custody of cash.

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and recalculating the cross totals of quantities and prices:

A customer replies to a positive confirmation as follows: "We dispute the $250 charge from your client as the goods were never received." This confirmation

When the credit manager decides a customer's account is considered to be uncollectible, the decision should be reviewed by the controller to:

If it is impracticable to confirm accounts receivable but the auditor obtains sufficient, appropriate evidence to verify the receivable balance by performing alternative procedures, the auditor's opinion should be unqualified.The audit report should

In evaluating the adequacy of the allowance for doubtful accounts, an auditor is most likely to review the aging of receivables as evidence and support for management's financial statement assertion of

The revenue and collection process includes activities from preparing the initial sales order through recording the transaction in the sales journal.

Cash receipts from sales on account terms of 2/10, net 30 have been misappropriated.Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

The most frequent reconciliation is the comparison of the sum of customers' unpaid balances with the accounts receivable control account total.Usually, this reconciliation is done with:

The control objective associated with selecting a sample of cash receipts remittance lists (or daily cash reports) and tracing them through to the cash receipts journal is:

An unrecorded cheque issued during the last week of the year would most likely be discovered by the auditor when the

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

An auditor should trace cancelled cheques and cleared deposits for the last part of the current audit period and the first part of the subsequent period to detect whether

Which of the following lists outlines the best order for a typical sequence of activities in the revenue and collection cycle?

Which of the following audit procedures is the most effective when testing sales for understatement?

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of

The primary consideration when planning to confirm accounts receivable before the balance sheet date is the

One of the key assertions to consider in obtaining evidence about accounts receivable is completeness.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters