Exam 11: Accounts Receivable, notes Receivable, and Revenue

Fraudulent sales are occasionally recorded at year-end as a means of overstating financial results.As examples,companies may engage in inappropriate bill and hold transactions or channel stuffing. a.Describe two conditions that might indicate the recording of fraudulent sales. b.Define bill and hold transactions and describe the audit significance of such transactions. c.Define channel stuffing and describe the audit significance of this practice.

Your client performed the physical count of inventory as of November 30,one month prior to year-end.Subsequently,your client closed the sales journal on 12/29/XX,two days before year-end,and reported those two days' credit sales in January of the next year.Assuming the client uses a perpetual inventory system,which of the following is most likely to be overstated relating to the year XX financial statements?

After the CPAs have selected particular accounts receivable for confirmation:

When it is impossible to confirm accounts receivable,the auditors may be able to satisfy themselves as to the existence of accounts receivable by alternative procedures.

Material accounts receivable from related parties should be stated separately from other receivables.

Confirmation of accounts receivable by direct communication with the debtor tests the existence of accounts receivable.

It is sometimes impossible for the auditors to use normal accounts receivable confirmation procedures.In such situations,the best alternative procedure the auditors might resort to would be:

The individual looking for guidance on revenue recognition is most likely to appropriately review:

Cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of

To test the existence assertion for recorded receivables,an auditor would select a sample from the:

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable.Of the following,which combination is it most likely that the auditors will use?

Which of the following is not true about the confirmation of accounts receivable?

Analytical procedures are used by auditors to gain evidence about the adequacy of the allowance for uncollectible accounts.

The audit working papers often include a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.This aging is best used by the auditors to:

Which of the following is a likely procedure to test the adequacy of the allowance for doubtful accounts?

Which of the following procedures would probably be most effective in identifying duplicate billing of customers during the year?

Which of the following is not one of the criteria for revenue recognition?

Recognizing a loan received as revenue instead of as a liability has a positive effect on the reported financial statements for all of the following except:

Which procedure would be of most assistance to an auditor discovering a large credit sale that has erroneously been recorded twice?

If the objective of a test of details is to detect overstatements of sales,the auditor should trace transactions from the