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

In a manual data processing system,the custody of cash and the recording of cash receipts in the cash journal should be combined for maximum control.

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

Will the confirmation of accounts,loans,and notes receivable always provide sufficient appropriate audit evidence to cover the ownership assertion made by the client?

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

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?

In-Line Company records accounts receivable from customers arising from both the sale of in-line skates and the provision of repair service.The CA 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 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 ________.

When the credit manager decides a customer's account is considered to be uncollectible,the decision should be reviewed by the controller to ________.

What is dual-direction testing?

Which of the following audit procedures is the most effective when testing sales for understatement?

In a manual system for the recording of cash receipts,the same person should make the journal entries to the control account and the subsidiary records.

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

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

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

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 ________.

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

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

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

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