Exam 16: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

The appropriate and sufficient evidence to be obtained from tests of details must be decided on an:

For effective internal control, employees maintaining the accounts receivable subsidiary ledger should not also approve:

The most important aspect of evaluating the client's method of obtaining a reliable cutoff is to:

For sales, the completeness transaction-related audit objective affects the existence balance-related audit objective.

Cutoff misstatements occur:

The most reliable evidence from confirmations is obtained when they are sent:

How might the auditor determine whether a client has limited rights to accounts receivable?

The two primary classes of transactions in the sales and collection cycle are:

Confirmation of accounts receivable balances normally provides evidence concerning the:

For most audits, a proper cash receipts cutoff is less important than either the sales or the sales returns and allowances cutoff.

Describe the differences between positive and negative confirmations. Which type is generally viewed as more reliable?

An auditor learns that collections of accounts receivable during the first ten days of January were debited to cash and credited to accounts receivable as of December 31. The effect generally will be to:

Assuming the client's internal controls are adequate, describe how the auditor can verify proper cutoff of sales transactions.

Cutoff misstatements occur when:

Which of the following audit procedure would normally be included in the audit plan when auditing the allowance for doubtful accounts?

The type of receivables confirmation is a major factor affecting sample size, with negative confirmations normally requiring a larger sample than positive confirmations.

When a customer disagrees with the amount shown on an account receivable confirmation, the auditor should not ask the client to reconcile the difference.

A positive confirmation is more reliable evidence than a negative confirmation because:

For most audits, inherent risk for accounts receivable is moderate or low except for which balance-related audit objectives?

Discuss the audit procedures performed when testing the detail tie-in objective for accounts receivable, and explain why this objective is ordinarily tested before any other objectives for accounts receivable.