Exam 12: Audit of the Revenue Cycle

Which of the following control procedures may prevent the failure to bill customers for some shipments?

Which of the following is an example of a data entry input edit that could be used to improve the accuracy of online data entry of sales orders?

Zhang Corporation returned $6000 of defective goods to Meli Inc. Meli has a strict policy of no cash refund. Meli should

Positive accounts receivable confirmations were circularized, and there were many differences where the client stated that the goods had not been received as of the date of the confirmation. In addition to the possibility that the goods were not received by the client, this type of reported difference could be an indication of

A) Describe the four business functions that result in sales transactions in a typical sales and collection cycle and state the key documents and records involved in each function. B) State the five classes of transactions that comprise the sales and collection cycle. C) The sales and collections cycle is comprised of nine business functions. The first four functions result in sales transactions. Discuss the remaining five business functions that occur after sales transactions and identify the key documents and records involved in each of the five functions.

Certain internal controls satisfy more than one objective. It is desirable to consider

A) An auditor is concerned that accounts receivable may be understated due to sales to customers that have been omitted from the sales journal and from the accounts receivable master file. Describe the procedure(s) the auditor should perform in these circumstances. B) Describe how the auditor tests the classification objective for accounts receivable.

Most companies recognize sales when

Comparison of individual customer balances with previous years will detect what type of possible misstatement?

The document that is used to prepare and reconcile the deposit of cash and improve control over the custody of assets (cash) is the

A) Assuming the client's internal controls are adequate, describe how the auditor can verify proper cutoff of sales transactions. B) Describe how the auditor tests the rights objective for accounts receivable.

Poor controls over credit limit approval or in changing the credit limit in the master file may result in

There are two important assumptions that underly the auditor's use of external confirmations. The first is that the person returning the confirmation is independent of the company and so will provide an unbiased response. The second is that

A document that describes which accounts receivable accounts are to be written off and why is called a(n)

A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, credit memo issued, and the ending balance is the

Beltrand, a PA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent property taxes or receivables over the due date. The internal controls at the municipality are weak. To determine the existence of the accounts receivable balances at the balance sheet date, Beltrand would most likely

Analytical procedures are substantive tests and if the results of the analytical procedures are favourable they will reduce

Which of the following internal control procedures will most likely prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable?

A risk of material misstatement in accounts receivable associated with the rights and obligations balance-related audit objective is that "consignment goods are recorded as revenue, overstating both revenue and accounts receivable." Which of the following tests of detail of balances would respond to this risk?

The auditor obtains corroborating audit evidence for accounts receivable by using positive or negative confirmation requests. Under which of the following circumstances might the negative form of the accounts receivable confirmation be useful?