Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Audit procedures designed to uncover credit sales made after the client's fiscal year-end that relate to the current year being audited provide evidence for which of the following audit objectives?

Accepted Answer

A) realizable value 
B) accuracy 
C) cutoff 
D) existence

Question 3

A type of positive confirmation known as a blank confirmation

Accepted Answer

A) requests the recipient to fill in the amount of the balance. 
B) is considered less reliable than the regular positive confirmation. 
C) generates as high a response rate as the regular positive confirmation form. 
D) is used when the auditor is confirming several small balances.

Question 4

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

Accepted Answer

A) Send positive confirmations. 
B) Inquire of the client's credit manager. 
C) Send negative confirmations. 
D) Examine sales invoices.

Question 5

A type of positive confirmation in which an individual invoice is confirmed,rather than the customer's entire accounts receivable balance is the ________ confirmation.

Accepted Answer

A) invoice 
B) specific 
C) balance 
D) voucher

Question 6

The understatement of sales and accounts receivable is best uncovered by

Accepted Answer

A) testing internal controls. 
B) testing the aged accounts receivable trial balance. 
C) substantive tests of transactions for shipments made but not recorded. 
D) substantive tests of transactions for bad debts.

Question 7

The auditor is reviewing the receivables listed on the aged trial balance for notes and related party receivables.Which balance-related audit objective is he trying to satisfy?

Accepted Answer

A) detail tie-in 
B) existence 
C) classification 
D) all of the above

Question 8

Tests of the realizable value balance-related audit objective are for the purpose of evaluating the allowance for doubtful accounts.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a correct statement regarding analytical procedures?

Accepted Answer

A) If an auditor identifies a possible misstatement in sales using analytical procedures,accounts payable will be the likely offsetting misstatement. 
B) Auditors should also compare the results of their analytical procedures to budgets and industry trends. 
C) If sales are overstated,the income statement will be incorrect,but the balance sheet will be correct. 
D) If an analytical procedure uncovers an unusual fluctuation,the auditor must assume fraud is involved.

Question 10

Confirmation of accounts receivable selected from the trial balance is the most common test of details of balances for the ________ of accounts receivable.

Accepted Answer

A) presentation 
B) valuation 
C) accuracy. 
D) detail tie-in

Question 11

For most audits,a proper cash receipts cutoff is less important than either the sales or the sales returns and allowances cutoff since cash only affects the balance sheet,and not earnings.

Accepted Answer

A) True 
 B)False

Question 12

If material,all of the following are required to be separately disclosed in the financial statements except for

Accepted Answer

A) accounts receivable from officers. 
B) accounts receivable from affiliates. 
C) sales and assets for different business segments. 
D) sales for the last ten days of the fiscal year.

Question 13

Which audit procedure would be used to test for the existence balance-related audit objective?

Accepted Answer

A) Trace ten accounts from the aged trial balance to the accounts receivable master file. 
B) Confirm accounts receivable. 
C) Review large sales returns and allowances before and after the balance sheet date. 
D) Trace ten accounts from the trial balance to the accounts on the master file.

Question 14

An auditor is performing a credit analysis of customers with balances over 60 days due.She is most likely obtaining evidence for which audit related objective?

Accepted Answer

A) realizable value 
B) existence 
C) completeness 
D) occurrence

Question 15

Most tests of accounts receivable are based on what schedule,file,or listing?

Accepted Answer

A) sales master file 
B) aged accounts receivable trial balance 
C) accounts receivable master file 
D) accounts receivable general ledger account

Question 16

If the client's internal control for recording sales returns and allowances is evaluated as ineffective,

Accepted Answer

A) a larger sample may be needed to verify cutoff. 
B) sampling is not appropriate. 
C) all sales returns must be traced to supporting documentation. 
D) all sales returns must be confirmed with the customer.

Question 17

Describe each of the following types of confirmations:
• positive confirmation
• blank confirmation
• invoice confirmation
• negative confirmation

Accepted Answer

The answer of Describe each of the following types of...

Question 18

To determine if the client has rights to the accounts receivable on the trial balance,the auditor should inquire of management if any receivables are pledged or factored.

Accepted Answer

A) True 
 B)False

Question 19

Favorable results from analytical procedures may reduce the extent to which the auditor needs to test details of balances.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) efficiency basis. 
B) effectiveness basis. 
C) objective-by-objective basis. 
D) none of the above

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

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

Audit procedures designed to uncover credit sales made after the client's fiscal year-end that relate to the current year being audited provide evidence for which of the following audit objectives?

A type of positive confirmation known as a blank confirmation

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

A type of positive confirmation in which an individual invoice is confirmed,rather than the customer's entire accounts receivable balance is the ________ confirmation.

The understatement of sales and accounts receivable is best uncovered by

The auditor is reviewing the receivables listed on the aged trial balance for notes and related party receivables.Which balance-related audit objective is he trying to satisfy?

Tests of the realizable value balance-related audit objective are for the purpose of evaluating the allowance for doubtful accounts.

Which of the following is a correct statement regarding analytical procedures?

Confirmation of accounts receivable selected from the trial balance is the most common test of details of balances for the ________ of accounts receivable.

For most audits,a proper cash receipts cutoff is less important than either the sales or the sales returns and allowances cutoff since cash only affects the balance sheet,and not earnings.

If material,all of the following are required to be separately disclosed in the financial statements except for

Which audit procedure would be used to test for the existence balance-related audit objective?

An auditor is performing a credit analysis of customers with balances over 60 days due.She is most likely obtaining evidence for which audit related objective?

Most tests of accounts receivable are based on what schedule,file,or listing?

If the client's internal control for recording sales returns and allowances is evaluated as ineffective,

Describe each of the following types of confirmations: • positive confirmation • blank confirmation • invoice confirmation • negative confirmation

To determine if the client has rights to the accounts receivable on the trial balance,the auditor should inquire of management if any receivables are pledged or factored.

Favorable results from analytical procedures may reduce the extent to which the auditor needs to test details of balances.

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