Question 1

Auditors should consider the possibility of kiting if there are frequent deposits of round amounts.

Accepted Answer

A) True 
 B)False  True

Question 2

A cutoff bank statement is a special statement printed by the bank which does not include all paid cheques and deposit slips.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following controls helps to achieve the accuracy objective over sales invoices?

Accepted Answer

A) Recorded sales in the sales journal are supported by invoices. 
B) Invoices,shipping documents,and sales orders are pre-numbered and the numerical sequence is checked. 
C) Sales are recognized in accordance with generally accepted accounting principles. 
D) Quantities invoiced are agreed to quantities shipped and quantities ordered by the customer as evidenced in source documentation. 
A) Recorded sales in the sales journal are supported by invoices. 
B) Invoices,shipping documents,and sales orders are pre-numbered and the numerical sequence is checked. 
C) Sales are recognized in accordance with generally accepted accounting principles. 
D) Quantities invoiced are agreed to quantities shipped and quantities ordered by the customer as evidenced in source documentation. D

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following procedures is an auditor most likely to perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Accepted Answer

A) Review the cash receipts journal for the month prior to the year-end. 
B) Intensify the study of the internal control system over the revenue cycle. 
C) Increase the assessed level of detection risk for the existence assertion. 
D) Inspect the shipping records documenting the merchandise sold to the debtors. 
A) Review the cash receipts journal for the month prior to the year-end. 
B) Intensify the study of the internal control system over the revenue cycle. 
C) Increase the assessed level of detection risk for the existence assertion. 
D) Inspect the shipping records documenting the merchandise sold to the debtors.

Question 7

Tests of controls results ultimately determine the amount of substantive audit procedures to be performed.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following source documents are typically NOT involved in the revenue and collection cycle?

Accepted Answer

A) purchase requisitions 
B) shipping documents 
C) customer orders 
D) sales invoices 
A) purchase requisitions 
B) shipping documents 
C) customer orders 
D) sales invoices

Question 11

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?

Accepted Answer

A) understating the sales journal 
B) overstating the accounts receivable subsidiary ledger 
C) understating the accounts receivable subsidiary ledger 
D) understating the cash receipts journal 
A) understating the sales journal 
B) overstating the accounts receivable subsidiary ledger 
C) understating the accounts receivable subsidiary ledger 
D) understating the cash receipts journal

Question 12

In evaluating the adequacy of the allowance for doubtful accounts,an auditor is most likely to review the aging of receivables as evidence and support for management's financial statement assertion of ________.

Accepted Answer

A) existence or occurrence 
B) valuation 
C) completeness 
D) rights and obligations 
A) existence or occurrence 
B) valuation 
C) completeness 
D) rights and obligations

Question 13

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

Accepted Answer

A) recipients are unlikely to respond to negative confirmation requests 
B) the combined assessed level of inherent and control risk relative to accounts receivable is high 
C) a large number of accounts receivable is involved but a relatively small number of errors are expected 
D) the auditor performs a dual-purpose test that assesses control risk and obtains substantive evidence 
A) recipients are unlikely to respond to negative confirmation requests 
B) the combined assessed level of inherent and control risk relative to accounts receivable is high 
C) a large number of accounts receivable is involved but a relatively small number of errors are expected 
D) the auditor performs a dual-purpose test that assesses control risk and obtains substantive evidence

Question 14

If an auditor selects a sample of customer accounts receivable and traces payment credits to remittance worksheets and bank deposits,the auditor is testing the control objective of completeness.

Accepted Answer

A) True 
 B)False

Question 15

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 ________.

Accepted Answer

A) existence or occurrence 
B) rights and obligations 
C) valuation or allocation 
D) completeness 
A) existence or occurrence 
B) rights and obligations 
C) valuation or allocation 
D) completeness

Question 16

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

Accepted Answer

No.The respondents to the confirmations

Question 17

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

Accepted Answer

A) Existence. 
B) Presentation. 
C) Valuation. 
D) Completeness. 
A) Existence. 
B) Presentation. 
C) Valuation. 
D) Completeness.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

What is two-direction testing?

Accepted Answer

Two-direction testing involves samples s

Question 20

Fidelity bonds can help prevent and detect embezzlement.

Accepted Answer

A) True 
 B)False

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

Auditors should consider the possibility of kiting if there are frequent deposits of round amounts.

A cutoff bank statement is a special statement printed by the bank which does not include all paid cheques and deposit slips.

Which of the following controls helps to achieve the accuracy objective over sales invoices?

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

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

Which of the following procedures is an auditor most likely to perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Tests of controls results ultimately determine the amount of substantive audit procedures to be performed.

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 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 source documents are typically NOT involved in the revenue and collection cycle?

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?

In evaluating the adequacy of the allowance for doubtful accounts,an auditor is most likely to review the aging of receivables as evidence and support for management's financial statement assertion of ________.

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

If an auditor selects a sample of customer accounts receivable and traces payment credits to remittance worksheets and bank deposits,the auditor is testing the control objective of completeness.

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 ________.

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

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

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

What is two-direction testing?

Fidelity bonds can help prevent and detect embezzlement.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Purchases, payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

Filters