Question 1

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

Accepted Answer

A)  delivering goods, billing customer, granting credit, and performing collection activities. 
B)  customer ordering, delivering goods, granting credit, and billing customers. 
C)  processing customer orders, granting credit, delivering goods, and billing customers. 
D)  granting credit, billing customers, delivering goods, and processing cash receipts. 
A)  delivering goods, billing customer, granting credit, and performing collection activities. 
B)  customer ordering, delivering goods, granting credit, and billing customers. 
C)  processing customer orders, granting credit, delivering goods, and billing customers. 
D)  granting credit, billing customers, delivering goods, and processing cash receipts.

Question 2

To be recognized,revenues must also be realized or realizable and

Accepted Answer

A)  foreseeable. 
B)  collected. 
C)  earned. 
D)  shipped. 
A)  foreseeable. 
B)  collected. 
C)  earned. 
D)  shipped.

Question 3

Audit documentation often includes a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.The audit team uses this aging primarily to

Accepted Answer

A)  evaluate internal control over credit sales. 
B)  test the accuracy of recorded charge sales. 
C)  estimate credit losses. 
D)  verify the existence of the recorded receivables. 
A)  evaluate internal control over credit sales. 
B)  test the accuracy of recorded charge sales. 
C)  estimate credit losses. 
D)  verify the existence of the recorded receivables.

Question 4

Elm Tree Inc.has a December 31 year end.On October 15,the auditor evaluated and tested Elm Tree's internal control procedures over the sales recording process and finds the controls to be effective.At a minimum,the auditor's year-end procedures for testing internal control procedures must include

Accepted Answer

A)  confirmations of year-end accounts that were examined on October 15. 
B)  test the client's internal control procedures from October 15 through the year end. 
C)  tests of compliance with internal control for a random sample of transactions throughout the audit period. 
D)  a comparison of the responses to the auditor's internal control questionnaire with a detailed flowchart of control procedures at year end. 
A)  confirmations of year-end accounts that were examined on October 15. 
B)  test the client's internal control procedures from October 15 through the year end. 
C)  tests of compliance with internal control for a random sample of transactions throughout the audit period. 
D)  a comparison of the responses to the auditor's internal control questionnaire with a detailed flowchart of control procedures at year end.

Question 5

Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations?

Accepted Answer

A)  The balance is immaterial. 
B)  Confirmations would be ineffective. 
C)  The client requests alternative procedures be performed instead. 
D)  Other procedures provide sufficient competent evidence. 
A)  The balance is immaterial. 
B)  Confirmations would be ineffective. 
C)  The client requests alternative procedures be performed instead. 
D)  Other procedures provide sufficient competent evidence.

Question 6

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Accepted Answer

A)  Review the cash receipts journal for the month prior to the year-end. 
B)  Intensify the study of the internal control structure concerning the revenue cycle. 
C)  Increase the assessed level of detection risk for the existence assertion. 
D)  Inspect the shipping records documenting the merchandise sold to the debtors. 
A)  Review the cash receipts journal for the month prior to the year-end. 
B)  Intensify the study of the internal control structure concerning the revenue cycle. 
C)  Increase the assessed level of detection risk for the existence assertion. 
D)  Inspect the shipping records documenting the merchandise sold to the debtors.

Question 7

Internal control assessment is important because it governs the ________________________________,_________________________________ and _________________________________ of substantive procedures.
Question also found in study guide

Accepted Answer

nature ; t

Question 8

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Accepted Answer

A)  Move detailed analytical procedures from year end to interim. 
B)  Increase the dollar threshold of vouching customer invoices. 
C)  Send negative accounts receivable confirmations instead of positive accounts receivable confirmations. 
D)  Use more experienced audit team members to perform year-end testing. 
A)  Move detailed analytical procedures from year end to interim. 
B)  Increase the dollar threshold of vouching customer invoices. 
C)  Send negative accounts receivable confirmations instead of positive accounts receivable confirmations. 
D)  Use more experienced audit team members to perform year-end testing.

Question 9

"Bill and hold" refers to an arrangement where

Accepted Answer

A)  sales are recorded but are not shipped. 
B)  sales are shipped but are not recorded. 
C)  sales are billed but not collected. 
D)  inventory is held but not billed. 
A)  sales are recorded but are not shipped. 
B)  sales are shipped but are not recorded. 
C)  sales are billed but not collected. 
D)  inventory is held but not billed.

Question 10

The SEC requires all of the following for revenue to be recognized except

Accepted Answer

A)  cash is collected. 
B)  persuasive evidence of an arrangement exists. 
C)  delivery has occurred or services have been rendered. 
D)  the seller's price to the buyer is fixed or determinable. 
A)  cash is collected. 
B)  persuasive evidence of an arrangement exists. 
C)  delivery has occurred or services have been rendered. 
D)  the seller's price to the buyer is fixed or determinable.

Question 11

If control risk is assessed very low,the substantive audit procedures on account balances must be expanded.
Question also found in study guide

Accepted Answer

A) True 
 B)False

Question 12

In confirming a client's accounts receivable in prior years,an auditor discovered many differences between recorded account balances and confirmation replies.These differences were resolved and were not misstatements.In defining the sampling unit for the current year's audit,the auditor most likely would choose

Accepted Answer

A)  customers with credit balances. 
B)  small account balances. 
C)  individual overdue balances. 
D)  individual invoices. 
A)  customers with credit balances. 
B)  small account balances. 
C)  individual overdue balances. 
D)  individual invoices.

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

To be recognized,revenues must also be realized or realizable and

Audit documentation often includes a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.The audit team uses this aging primarily to

Elm Tree Inc.has a December 31 year end.On October 15,the auditor evaluated and tested Elm Tree's internal control procedures over the sales recording process and finds the controls to be effective.At a minimum,the auditor's year-end procedures for testing internal control procedures must include

Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations?

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Internal control assessment is important because it governs the ________________,_ and _________________ of substantive procedures. Question also found in study guide

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

"Bill and hold" refers to an arrangement where

The SEC requires all of the following for revenue to be recognized except

If control risk is assessed very low,the substantive audit procedures on account balances must be expanded. Question also found in study guide

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 7: Revenue and Collection Cycle

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

To be recognized,revenues must also be realized or realizable and

Audit documentation often includes a client-prepared,aged trial balance of accounts receivable as of the balance sheet date.The audit team uses this aging primarily to

Elm Tree Inc.has a December 31 year end.On October 15,the auditor evaluated and tested Elm Tree's internal control procedures over the sales recording process and finds the controls to be effective.At a minimum,the auditor's year-end procedures for testing internal control procedures must include

Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations?

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Internal control assessment is important because it governs the ________________________________,_________________________________ and _________________________________ of substantive procedures. Question also found in study guide

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

"Bill and hold" refers to an arrangement where

The SEC requires all of the following for revenue to be recognized except

If control risk is assessed very low,the substantive audit procedures on account balances must be expanded. Question also found in study guide

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Internal control assessment is important because it governs the ________________,_ and _________________ of substantive procedures. Question also found in study guide