Question 1

Monthly statements provide a detailed list of the customer's activity for the previous month and a statement of all open items.

Accepted Answer

A) True 
 B)False

Question 2

Current auditing standards do not require the confirmation of receivables if accounts receivable are not material.

Accepted Answer

A) True 
 B)False

Question 3

According to auditing standards,accounts receivable confirmations are required to be used in which of the following situations?

Accepted Answer

A) On every audit engagement. 
B) If the client agrees in writing to the procedure. 
C) If the accounts receivable balance is material. 
D) If environmental risk is low. 
A) On every audit engagement. 
B) If the client agrees in writing to the procedure. 
C) If the accounts receivable balance is material. 
D) If environmental risk is low.

Question 4

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

Accepted Answer

A) True 
 B)False

Question 5

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

Accepted Answer

A) Customer collections that are over 90 days past due. 
B) Credit entries in customer accounts receivable for authorized write-offs. 
C) Recurring entries in the sales journal. 
D) Altered shipping documents and invoices. 
A) Customer collections that are over 90 days past due. 
B) Credit entries in customer accounts receivable for authorized write-offs. 
C) Recurring entries in the sales journal. 
D) Altered shipping documents and invoices.

Question 6

The auditor of the revenue cycle of ABC Company computes an estimate of ABC's allowance for doubtful accounts and compares it to the estimate provided by ABC's management.The purpose for this procedure is to substantiate which assertion?

Accepted Answer

A) Existence of receivables. 
B) Cutoff of receivables. 
C) Valuation of receivables. 
D) Rights to receivables. 
A) Existence of receivables. 
B) Cutoff of receivables. 
C) Valuation of receivables. 
D) Rights to receivables.

Question 7

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Accepted Answer

A) Shipping documents and tracing them to the sales journal. 
B) Accounts receivable and tracing them to cash receipts. 
C) Recorded sales transactions and tracing them to the general ledger. 
D) Inventory records and tracing them to the shipping documents. 
A) Shipping documents and tracing them to the sales journal. 
B) Accounts receivable and tracing them to cash receipts. 
C) Recorded sales transactions and tracing them to the general ledger. 
D) Inventory records and tracing them to the shipping documents.

Question 8

Fraud related to revenue recognition will most likely be identified by the auditor through which of the following independent situations?

Accepted Answer

A) Sales have increased 5% in the current period over the previous period and is consistent with the results of competitors. 
B) Gross margin is equivalent in the current period to previous periods and is below that of the industry. 
C) Sales are higher in the month preceding each quarter end. 
D) Sales of a revolutionary new product are increasing beyond that of the competition in the periods immediately following its introduction. 
A) Sales have increased 5% in the current period over the previous period and is consistent with the results of competitors. 
B) Gross margin is equivalent in the current period to previous periods and is below that of the industry. 
C) Sales are higher in the month preceding each quarter end. 
D) Sales of a revolutionary new product are increasing beyond that of the competition in the periods immediately following its introduction.

Question 9

An example of alternative procedures for the confirmation of accounts receivable includes which of the following actions?

Accepted Answer

A) Inquiry of management. 
B) Tracing source documents to recorded amounts. 
C) Review of subsequent collections on account by the client. 
D) Providing an estimate of the allowance for doubtful accounts to be recorded by the client. 
A) Inquiry of management. 
B) Tracing source documents to recorded amounts. 
C) Review of subsequent collections on account by the client. 
D) Providing an estimate of the allowance for doubtful accounts to be recorded by the client.

Question 10

Which of the following is a formal document that conveys responsibility for shipped merchandise to the shipper?

Accepted Answer

A) Sales invoice. 
B) Receiving report. 
C) Bill of lading. 
D) Purchase order. 
A) Sales invoice. 
B) Receiving report. 
C) Bill of lading. 
D) Purchase order.

Question 11

If control risk is assessed high,the auditor may send significantly fewer confirmations for a sample of accounts receivable than if the control risk is assessed low.

Accepted Answer

A) True 
 B)False

Question 12

In a control risk assessment questionnaire,each negative (or "No")answer to a question represents a potential internal control deficiency.

Accepted Answer

A) True 
 B)False

Question 13

The auditor traces recorded sales to invoices,sales orders,and shipping documents in order to substantiate which assertion?

Accepted Answer

A) Cutoff. 
B) Completeness. 
C) Legality. 
D) Occurrence. 
A) Cutoff. 
B) Completeness. 
C) Legality. 
D) Occurrence.

Question 14

A company that ships a large quantity of its products from its manufacturing plant to a warehouse that it leases until the customer is ready for the product should record the delivery to the warehouse as revenue.

Accepted Answer

A) True 
 B)False

Question 15

The use of prenumbered sales invoices is the primary control procedure to satisfy the objective of authorization.

Accepted Answer

A) True 
 B)False

Question 16

Customer complaints noted in returned accounts receivable confirmations may be an indicator of fraud.

Accepted Answer

A) True 
 B)False

Monthly statements provide a detailed list of the customer's activity for the previous month and a statement of all open items.

Current auditing standards do not require the confirmation of receivables if accounts receivable are not material.

According to auditing standards,accounts receivable confirmations are required to be used in which of the following situations?

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

The auditor of the revenue cycle of ABC Company computes an estimate of ABC's allowance for doubtful accounts and compares it to the estimate provided by ABC's management.The purpose for this procedure is to substantiate which assertion?

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Fraud related to revenue recognition will most likely be identified by the auditor through which of the following independent situations?

An example of alternative procedures for the confirmation of accounts receivable includes which of the following actions?

Which of the following is a formal document that conveys responsibility for shipped merchandise to the shipper?

If control risk is assessed high,the auditor may send significantly fewer confirmations for a sample of accounts receivable than if the control risk is assessed low.

In a control risk assessment questionnaire,each negative (or "No")answer to a question represents a potential internal control deficiency.

The auditor traces recorded sales to invoices,sales orders,and shipping documents in order to substantiate which assertion?

A company that ships a large quantity of its products from its manufacturing plant to a warehouse that it leases until the customer is ready for the product should record the delivery to the warehouse as revenue.

The use of prenumbered sales invoices is the primary control procedure to satisfy the objective of authorization.

Customer complaints noted in returned accounts receivable confirmations may be an indicator of fraud.

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

Monthly statements provide a detailed list of the customer's activity for the previous month and a statement of all open items.

Current auditing standards do not require the confirmation of receivables if accounts receivable are not material.

According to auditing standards,accounts receivable confirmations are required to be used in which of the following situations?

An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion.

A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following?

The auditor of the revenue cycle of ABC Company computes an estimate of ABC's allowance for doubtful accounts and compares it to the estimate provided by ABC's management.The purpose for this procedure is to substantiate which assertion?

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Fraud related to revenue recognition will most likely be identified by the auditor through which of the following independent situations?

An example of alternative procedures for the confirmation of accounts receivable includes which of the following actions?

Which of the following is a formal document that conveys responsibility for shipped merchandise to the shipper?

If control risk is assessed high,the auditor may send significantly fewer confirmations for a sample of accounts receivable than if the control risk is assessed low.

In a control risk assessment questionnaire,each negative (or "No")answer to a question represents a potential internal control deficiency.

The auditor traces recorded sales to invoices,sales orders,and shipping documents in order to substantiate which assertion?

A company that ships a large quantity of its products from its manufacturing plant to a warehouse that it leases until the customer is ready for the product should record the delivery to the warehouse as revenue.

The use of prenumbered sales invoices is the primary control procedure to satisfy the objective of authorization.

Customer complaints noted in returned accounts receivable confirmations may be an indicator of fraud.

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