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

In the audit of accounts receivable, the negative form of confirmation request is most likely to be used when ________.

In determining the adequacy of the allowance for uncollectible accounts, the least valuable evidence would be obtained from ________.

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

The revenue and collection process includes activities from preparing the initial sales order through recording the transaction in the sales journal.

Scanning sales invoices to determine whether there are any numbers missing in the sequence is a control over which of the following objectives?

Selecting a sample of debits from customer accounts receivable records and vouching them to supporting sales invoices is an audit procedure designed to obtain evidence about the control objective of ________.

Cash receipts from sales on account terms of 2/10, net 30 have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

Upon receipt of customer cheques in the mailroom, a responsible employee should prepare a remittance listing and forward it to the cashier. A copy of the listing should be sent to the ________.

In the audit of cash, the auditor obtains a bank cutoff statement primarily to ________.

The accountant who records cash receipts and credits to customer accounts should also handle the cash received and the bank deposits.

The findings of risk assessments are the basis for the selection of appropriate substantive tests and procedures.

Substantive procedures are designed to obtain direct evidence about the dollar amounts in account balances.

In the analysis of financial statements, a continuity schedule is a working paper that shows the movements in the account balances and the other financial statements amounts that should tie with them.

The packing slip authorizes the transfer of inventory from the warehouse to the shipping department and to then to the customer.

In the audit of accounts receivable, negative confirmations are not normally used if ________.

In-Line Company records accounts receivable from customers arising from both the sale of in-line skates and the provision of repair service. The CPA firm of King & King is auditing the financial statements of In-Line Company. Lyon, the audit manager, is aware that the confirmation of customer accounts receivable is a substantive procedure normally used in the audit of accounts receivable. Selected balances from In-Line's financial statements are as follows: accounts receivable, $7,000; current assets, $322,000; total assets, $630,000; shareholders' equity, $570,000; net income, $190,000. Required: A) How can Lyon justify deciding not to confirm In-Line's accounts receivable? B) Briefly describe two types of positive confirmation Lyon could send to In-Line's customers. C) What alternative procedures can Lyon perform if In-Line's customers fail to respond to the confirmation requests?

The bank confirmation provides the most evidence for which of the following assertions about cash?

The use of positive confirmations provides better evidence than the use of negative confirmations.

The most effective audit procedure for determining if an account receivable will be collected is ________.

Cash receipts procedures should include steps for authorizing and recording discounts when the customer takes them.