Question 1

An auditor's examination of the sales account using a cutoff test would most likely detect which of the following?

Accepted Answer

A) Kiting. 
B) Sales made with improper credit terms. 
C) Lapping of accounts receivable. 
D) Sales recorded in the wrong period. 
A) Kiting. 
B) Sales made with improper credit terms. 
C) Lapping of accounts receivable. 
D) Sales recorded in the wrong period.

Question 2

One of the benefits of establishing a formal credit policy for granting credit is that management is freed from the burden of monitoring accounts receivable.

Accepted Answer

A) True 
 B)False

Question 3

Use of reasonableness tests by Bono Mullins,PC,will include relationships between financial but not non-financial data.

Accepted Answer

A) True 
 B)False

Question 4

Formal procedures for approving acceptance of returns are an appropriate control procedure for identifying and recording returned goods.

Accepted Answer

A) True 
 B)False

Question 5

Accounts receivable confirmations usually provide strong evidence about which of the following?

Accepted Answer

A) The existence of receivables. 
B) The completeness of receivables. 
C) The presentation and disclosure of receivables. 
D) The obligations of receivables. 
A) The existence of receivables. 
B) The completeness of receivables. 
C) The presentation and disclosure of receivables. 
D) The obligations of receivables.

Question 6

The allowance for doubtful accounts balance will not be a precise amount because of which of the following reasons?

Accepted Answer

A) It is an accounting estimate based upon judgment. 
B) GAAP is not clear on the calculation of the allowance. 
C) It is merely a reserve that is reversed by the client as income is needed for profitable results. 
D) The precision is determined by the results of confirmation responses. 
A) It is an accounting estimate based upon judgment. 
B) GAAP is not clear on the calculation of the allowance. 
C) It is merely a reserve that is reversed by the client as income is needed for profitable results. 
D) The precision is determined by the results of confirmation responses.

Question 7

The auditor's determination that the number of days' sales in accounts receivable increased from 44 days to 100 days would usually be found through the use of ratio analysis.

Accepted Answer

A) True 
 B)False

Question 8

When the auditor seeks evidence concerning the allowance for doubtful accounts,he or she would most likely use an aged trial balance to help identify past due balances.

Accepted Answer

A) True 
 B)False

Question 9

An auditor would test controls over the occurrence of sales transactions by sampling recorded revenues and tracing them back to invoices and shipping documents.

Accepted Answer

A) True 
 B)False

Question 10

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

Accepted Answer

A) Substantiate cutoff and the occurrence of net sales transactions. 
B) Test the sufficiency of cash balances to cover refunds. 
C) Monitor customer satisfaction for disclosure. 
D) Assess the nature of procedures that will be performed for the next period's audit. 
A) Substantiate cutoff and the occurrence of net sales transactions. 
B) Test the sufficiency of cash balances to cover refunds. 
C) Monitor customer satisfaction for disclosure. 
D) Assess the nature of procedures that will be performed for the next period's audit.

Question 11

Improper revenue recognition Historically the accounting profession has come under fire for fraudulent financial reporting due to questionable improper revenue recognition.Identify at least six examples of questionable revenue recognition practices that an auditor must consider in performing an audit engagement.

Accepted Answer

Questionable and improper revenue recogn

Question 12

Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead.

Accepted Answer

A) True 
 B)False

Question 13

The primary difference between positive and negative confirmations used in the audit of accounts receivable is which of the following?

Accepted Answer

A) The mode of response. 
B) The amount of information included. 
C) The control of the confirmation process by the auditor. 
D) The method in which accounts are selected for confirmation. 
A) The mode of response. 
B) The amount of information included. 
C) The control of the confirmation process by the auditor. 
D) The method in which accounts are selected for confirmation.

Question 14

An analysis of monthly sales compared with past years and budgets is a form of what type of testing?

Accepted Answer

A) Regression analysis. 
B) Common size analysis. 
C) Ratio analysis. 
D) Trend analysis. 
A) Regression analysis. 
B) Common size analysis. 
C) Ratio analysis. 
D) Trend analysis.

Question 15

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total.This process is performed for which purpose?

Accepted Answer

A) Drafting financial statements. 
B) Monitoring revenue transactions. 
C) Providing management reports to the controller. 
D) Providing suggestions for operational improvement. 
A) Drafting financial statements. 
B) Monitoring revenue transactions. 
C) Providing management reports to the controller. 
D) Providing suggestions for operational improvement.

Question 16

Calculating the turnover of receivables is often used in testing the sales cycle by auditors when performing which of the following?

Accepted Answer

A) Trend analysis. 
B) Ratio analysis. 
C) Reasonableness testing. 
D) Nonstatistical sampling. 
A) Trend analysis. 
B) Ratio analysis. 
C) Reasonableness testing. 
D) Nonstatistical sampling.

Question 17

An aging of accounts receivable is useful in estimating the reasonableness of the allowance for doubtful accounts.

Accepted Answer

A) True 
 B)False

Question 18

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

Accepted Answer

A) True 
 B)False

Question 19

A consistent pattern of earnings growth would eliminate the auditor's concern for fraud in revenue recognition.

Accepted Answer

A) True 
 B)False

Question 20

An auditor might test the reasonableness of the client's estimate of the allowance for doubtful accounts by developing an independent estimate of the allowance for doubtful accounts that is compared to the recorded allowance.

Accepted Answer

A) True 
 B)False

An auditor's examination of the sales account using a cutoff test would most likely detect which of the following?

One of the benefits of establishing a formal credit policy for granting credit is that management is freed from the burden of monitoring accounts receivable.

Use of reasonableness tests by Bono Mullins,PC,will include relationships between financial but not non-financial data.

Formal procedures for approving acceptance of returns are an appropriate control procedure for identifying and recording returned goods.

Accounts receivable confirmations usually provide strong evidence about which of the following?

The allowance for doubtful accounts balance will not be a precise amount because of which of the following reasons?

The auditor's determination that the number of days' sales in accounts receivable increased from 44 days to 100 days would usually be found through the use of ratio analysis.

When the auditor seeks evidence concerning the allowance for doubtful accounts,he or she would most likely use an aged trial balance to help identify past due balances.

An auditor would test controls over the occurrence of sales transactions by sampling recorded revenues and tracing them back to invoices and shipping documents.

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead.

The primary difference between positive and negative confirmations used in the audit of accounts receivable is which of the following?

An analysis of monthly sales compared with past years and budgets is a form of what type of testing?

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total.This process is performed for which purpose?

Calculating the turnover of receivables is often used in testing the sales cycle by auditors when performing which of the following?

An aging of accounts receivable is useful in estimating the reasonableness of the allowance for doubtful accounts.

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

A consistent pattern of earnings growth would eliminate the auditor's concern for fraud in revenue recognition.

An auditor might test the reasonableness of the client's estimate of the allowance for doubtful accounts by developing an independent estimate of the allowance for doubtful accounts that is compared to the recorded allowance.

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters

Exam 9: Auditing the Revenue Cycle

An auditor's examination of the sales account using a cutoff test would most likely detect which of the following?

One of the benefits of establishing a formal credit policy for granting credit is that management is freed from the burden of monitoring accounts receivable.

Use of reasonableness tests by Bono Mullins,PC,will include relationships between financial but not non-financial data.

Formal procedures for approving acceptance of returns are an appropriate control procedure for identifying and recording returned goods.

Accounts receivable confirmations usually provide strong evidence about which of the following?

The allowance for doubtful accounts balance will not be a precise amount because of which of the following reasons?

The auditor's determination that the number of days' sales in accounts receivable increased from 44 days to 100 days would usually be found through the use of ratio analysis.

When the auditor seeks evidence concerning the allowance for doubtful accounts,he or she would most likely use an aged trial balance to help identify past due balances.

An auditor would test controls over the occurrence of sales transactions by sampling recorded revenues and tracing them back to invoices and shipping documents.

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead.

The primary difference between positive and negative confirmations used in the audit of accounts receivable is which of the following?

An analysis of monthly sales compared with past years and budgets is a form of what type of testing?

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total.This process is performed for which purpose?

Calculating the turnover of receivables is often used in testing the sales cycle by auditors when performing which of the following?

An aging of accounts receivable is useful in estimating the reasonableness of the allowance for doubtful accounts.

The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department.

A consistent pattern of earnings growth would eliminate the auditor's concern for fraud in revenue recognition.

An auditor might test the reasonableness of the client's estimate of the allowance for doubtful accounts by developing an independent estimate of the allowance for doubtful accounts that is compared to the recorded allowance.

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters