Exam 11: The Revenues, Receivables, and Receipts Process and Cash Account Balance

Infotech is a small software company with few billings. It sends out invoices to clients using the preparation date as the invoice number. As a result, which of the following assertions about billings cannot be tested?

Auditors ordinarily send a standard bank confirmation to all banks with which the client has done business during the year under audit, regardless of whether the client has closed its account. One reason for doing so is to ________.

Substantive procedures for the audit of cash would include which of the following?

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and recalculating the cross totals of quantities and prices is ________.

What is two-direction testing?

What are the general internal control objectives for the revenue cycle?

To determine whether sales transactions have been recorded in the proper accounting period, the auditor performs cutoff tests. Which of the following best describes the overall approach used when performing cutoff tests?

In testing controls related to a client's processing of credit sales transactions, auditors need to define "deviations" in advance. Give six examples of deviations from control objectives.

Which of the following procedures would best lead to an understanding of the transaction flow in the revenue and collection cycle?

The primary consideration when planning to confirm accounts receivable before the balance sheet date is the ________.

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates exceptions and comments noted by respondents. By this procedure, the auditor is most likely to learn of which of the following?

Typical source documents involved in the revenue and collection cycle would be ________.

Selecting a sample of recorded sales invoices from the sales journal and comparing the quantity billed to the quantity shipped is an example of a test to satisfy the control objective of accuracy.

The control objective associated with selecting a sample of cash receipts remittance lists (or daily cash reports) and tracing them through to the cash receipts journal is ________.

A lock box system is an effective way to segregate the custody of cash.

Evidence of ownership can be obtained by studying the title documents for assets.

Which of the following is most likely to be detected by an auditor's review of a client's sales cut off?

Tracing bills of lading to sales invoices provides evidence that ________.

The most frequent reconciliation is the comparison of the sum of customers' unpaid balances with the accounts receivable control account total. Usually, this reconciliation is done with a(n) ________.

An auditor is most likely to review an entity's practice of periodically accounting for the numerical sequence of shipping documents and invoices as evidence and support for management's financial statement assertion of ________.