Question 1

Analytical procedures

Accepted Answer

A) are only done during the planning of the audit and when performing detailed tests. 
B) performed during the detailed testing phase are done before tests of details of balances. 
C) performed during the detailed testing phase are done before the balance sheet date. 
D) are performed only on accounts receivable,not on the entire sales and collection cycle. 
A) are only done during the planning of the audit and when performing detailed tests. 
B) performed during the detailed testing phase are done before tests of details of balances. 
C) performed during the detailed testing phase are done before the balance sheet date. 
D) are performed only on accounts receivable,not on the entire sales and collection cycle.

Question 2

Auditors are especially concerned with three aspects of internal control for the sales and collection cycle.Which of the following is not one of their major concerns?

Accepted Answer

A) controls over cutoff 
B) controls that prevent or detect embezzlements 
C) controls over sales discounts 
D) controls related to the allowance for uncollectible accounts 
A) controls over cutoff 
B) controls that prevent or detect embezzlements 
C) controls over sales discounts 
D) controls related to the allowance for uncollectible accounts

Question 3

Which of the following audit procedures would not likely detect a client's decision to pledge or factor accounts receivable?

Accepted Answer

A) a review of the minutes of the board of directors' meetings 
B) discussions with the client 
C) confirmation of receivables 
D) examination of correspondence files 
A) a review of the minutes of the board of directors' meetings 
B) discussions with the client 
C) confirmation of receivables 
D) examination of correspondence files

Question 4

Cutoff misstatements occur

Accepted Answer

A) either by error or fraud. 
B) by error only. 
C) by fraud only. 
D) randomly without causes related to errors or fraud. 
A) either by error or fraud. 
B) by error only. 
C) by fraud only. 
D) randomly without causes related to errors or fraud.

Question 5

Assuming the client's internal controls are effective,describe how the auditor can verify proper cutoff of sales transactions.

Accepted Answer

Assuming the client's internal controls

Question 6

The most reliable evidence from confirmations is obtained when they are sent

Accepted Answer

A) as close to the balance sheet date as possible. 
B) at various times throughout the year to different segments of the sample,so that the entire sample is representative of account balances scattered throughout the year. 
C) several months before the year-end,so the auditor will have adequate time to perform alternate procedures if they are required. 
D) at various times throughout the year to the same group in the sample,so that the sample will not have a time bias. 
A) as close to the balance sheet date as possible. 
B) at various times throughout the year to different segments of the sample,so that the entire sample is representative of account balances scattered throughout the year. 
C) several months before the year-end,so the auditor will have adequate time to perform alternate procedures if they are required. 
D) at various times throughout the year to the same group in the sample,so that the sample will not have a time bias.

Question 7

Describe the differences between positive and negative confirmations.Which type is generally viewed as more reliable?

Accepted Answer

A positive confirmation is a letter,addr

Question 8

Analytical procedures are substantive tests and,if the results of the analytical procedures are favorable,the auditor would normally

Accepted Answer

A) reduce the extent of tests of details of balances. 
B) reduce the extent of tests of controls. 
C) reduce the tests of transactions. 
D) reduce all of the other tests. 
A) reduce the extent of tests of details of balances. 
B) reduce the extent of tests of controls. 
C) reduce the tests of transactions. 
D) reduce all of the other tests.

Question 9

Because of its central role in auditing of accounts receivable,which of the following would normally be one of the first items tested?

Accepted Answer

A) accounts receivable master file 
B) customer file 
C) aged trial balance 
D) sales register 
A) accounts receivable master file 
B) customer file 
C) aged trial balance 
D) sales register

Question 10

A customer mails and records a check to a client for payment of an unpaid account on December 30.The client receives and records the amount on January 2.The records of the two organizations will be different on December 31.This represents

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 11

Which of the following is the principle "weakness" of using negative confirmations for the tests of details of balances for accounts receivable?

Accepted Answer

A) They can only be used for large balance accounts. 
B) They cannot not be used when account balances "bunch" around a mean value. 
C) Conclusions drawn from receiving no reply may not be correct. 
D) Response rates are generally too low to draw any conclusions. 
A) They can only be used for large balance accounts. 
B) They cannot not be used when account balances "bunch" around a mean value. 
C) Conclusions drawn from receiving no reply may not be correct. 
D) Response rates are generally too low to draw any conclusions.

Question 12

When designing tests of details of balances,an important point to remember is

Accepted Answer

A) auditors emphasize income statement accounts. 
B) the audit procedures selected depends heavily on whether planned evidence for a given objective is low,medium,or high. 
C) if accounts receivable are overstated,then sales will be understated. 
D) sales cutoff is the most important test of details of accounts receivable. 
A) auditors emphasize income statement accounts. 
B) the audit procedures selected depends heavily on whether planned evidence for a given objective is low,medium,or high. 
C) if accounts receivable are overstated,then sales will be understated. 
D) sales cutoff is the most important test of details of accounts receivable.

Question 13

To test for the completeness balance-related audit objective,the auditor should review the accounts receivable trail balance for large or unusual items.

Accepted Answer

A) True 
 B)False

Question 14

Which audit procedure would the auditor use to test for the cutoff balance-related audit objective?

Accepted Answer

A) Review minutes of the board of directors meetings. 
B) Review the accounts receivable trial balance for large items. 
C) Use audit software to foot and cross-foot the aged trial balance. 
D) Select the last 20 sales transaction from the current year's sales journal and the first 20 from the subsequent year's and trace each to the related shipping documents. 
A) Review minutes of the board of directors meetings. 
B) Review the accounts receivable trial balance for large items. 
C) Use audit software to foot and cross-foot the aged trial balance. 
D) Select the last 20 sales transaction from the current year's sales journal and the first 20 from the subsequent year's and trace each to the related shipping documents.

Question 15

Confirmation of accounts receivable balances normally provides evidence concerning the

Accepted Answer

A) valuation of the balances. 
B) rights of the balances. 
C) existence of the balances. 
D) completeness of the balances. 
A) valuation of the balances. 
B) rights of the balances. 
C) existence of the balances. 
D) completeness of the balances.

Question 16

A procedure to test for a cash receipts cutoff error is

Accepted Answer

A) reconciling the bank statement. 
B) performing a four-column proof-of-cash. 
C) observing the counting of cash at the balance sheet date. 
D) tracing recorded cash receipts to subsequent period bank deposits on the bank statement. 
A) reconciling the bank statement. 
B) performing a four-column proof-of-cash. 
C) observing the counting of cash at the balance sheet date. 
D) tracing recorded cash receipts to subsequent period bank deposits on the bank statement.

Question 17

Which of the following types of receivables would not deserve the special attention of the auditor?

Accepted Answer

A) accounts receivables with credit balances 
B) accounts that have been outstanding for a long time 
C) receivables from related parties 
D) each of the above would receive special attention. 
A) accounts receivables with credit balances 
B) accounts that have been outstanding for a long time 
C) receivables from related parties 
D) each of the above would receive special attention.

Question 18

It is common to use a combination of positive and negative confirmations by sending the latter to accounts with large balances and the former to those with small balances.

Accepted Answer

A) True 
 B)False

Question 19

Recording a sale that did not occur violates the occurrence transaction-related audit objective and the existence balance-related audit objective.

Accepted Answer

A) True 
 B)False

Question 20

List three of the major factors affecting sample size for confirming accounts receivable.

Accepted Answer

The factors include:
•performance materi

Exam 16: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Analytical procedures

Auditors are especially concerned with three aspects of internal control for the sales and collection cycle.Which of the following is not one of their major concerns?

Which of the following audit procedures would not likely detect a client's decision to pledge or factor accounts receivable?

Cutoff misstatements occur

Assuming the client's internal controls are effective,describe how the auditor can verify proper cutoff of sales transactions.

The most reliable evidence from confirmations is obtained when they are sent

Describe the differences between positive and negative confirmations.Which type is generally viewed as more reliable?

Analytical procedures are substantive tests and,if the results of the analytical procedures are favorable,the auditor would normally

Because of its central role in auditing of accounts receivable,which of the following would normally be one of the first items tested?

A customer mails and records a check to a client for payment of an unpaid account on December 30.The client receives and records the amount on January 2.The records of the two organizations will be different on December 31.This represents

Which of the following is the principle "weakness" of using negative confirmations for the tests of details of balances for accounts receivable?

When designing tests of details of balances,an important point to remember is

To test for the completeness balance-related audit objective,the auditor should review the accounts receivable trail balance for large or unusual items.

Which audit procedure would the auditor use to test for the cutoff balance-related audit objective?

Confirmation of accounts receivable balances normally provides evidence concerning the

A procedure to test for a cash receipts cutoff error is

Which of the following types of receivables would not deserve the special attention of the auditor?

It is common to use a combination of positive and negative confirmations by sending the latter to accounts with large balances and the former to those with small balances.

Recording a sale that did not occur violates the occurrence transaction-related audit objective and the existence balance-related audit objective.

List three of the major factors affecting sample size for confirming accounts receivable.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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