Exam 11: Accounts Receivable, Notes Receivable, and Revenue

Confirmation of accounts receivable is presumptively mandatory audit procedure.In performing this procedure,auditors use positive confirmation requests or negative confirmation requests or a combination of both. a.Describe three conditions which should exist for the auditors to use the negative form of request. b.If a response is not received to an initial positive confirmation request,describe the action that should be taken by the auditors,including a discussion of alternative auditing procedures.

Confirmation of accounts receivable provides some assurance that no lapping or other manipulation affecting accounts receivable is being carried on.

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

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

Which of the following is not true about the auditors' verification of notes receivable?

When scheduling the audit work to be performed on an engagement,the auditors should consider confirming accounts receivable balances at an interim date if:

A client might overstate December 31 accounts receivable balances by dating and recording January transactions in December.Such entries recorded in which journal are most likely to achieve this end?

Which of the following is least likely to be typically considered to be an alternate procedure for handling nonreplies to accounts receivable confirmation requests?

An audit basically consists of having the auditor form an opinion regarding management's financial statement assertions.The auditor therefore develops general and specific program steps to apply to the accounts and transactions.In a particular case,s/he might do this by:

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 revenue related transactions is not linked to the accounts indicated?

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

Accounts receivable that are written-off should not be turned over to a collection agency.

Which of the following sets of duties would ordinarily be considered basically incompatible in terms of good internal control?

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when:

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.

Which of the following manipulations would understate receivables on the financial statements?

When control risk for the existence assertion is assessed at a high level,which of the following is a likely effect with respect to the auditors' confirmation of receivables?

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:

When there are a large number of relatively small account receivable balances,negative confirmation requests may be appropriate if the combination of inherent risk and control risk is: