Question 1

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

Accepted Answer

A) recipients are likely to return positive confirmation requests without verifying the accuracy of the information 
B) the combined assessed level of inherent and control risk relative to accounts receivable is low 
C) a small number of accounts receivable is involved but a relatively large number of errors are expected 
D) the auditor performs a dual-purpose test that assesses control risk and obtains substantive evidence

Question 2

Selecting a sample of recorded sales invoices from the sales journal and comparing the quantity billed to the quantity shipped is an example of a test to satisfy the control objective of accuracy.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Tracing bills of lading to sales invoices provides evidence that ________.

Accepted Answer

A) shipments to customers were invoiced 
B) shipments to customers were recorded as sales 
C) recorded sales were shipped 
D) invoiced sales were shipped

Question 5

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.

Question 6

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and recalculating the cross totals of quantities and prices is ________.

Accepted Answer

A) authorization 
B) completeness 
C) validity 
D) accuracy

Question 7

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

Question 8

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

Accepted Answer

A) Completeness. 
B) Accuracy. 
C) Validity. 
D) Classification.

Question 9

Define the response rate as it pertains to positive accounts receivable confirmations.Describe methods that can be utilized to increase the response rate.

Accepted Answer

The answer of Define the response rate as it pertains...

Question 10

A customer replies to a positive confirmation as follows: "We dispute the $250 charge from your client as the goods were never received." This confirmation ________.

Accepted Answer

A) provides evidence of existence but not valuation 
B) does not provide evidence of existence so valuation is irrelevant 
C) provides evidence that the goods were never shipped 
D) provides evidence that the account should be written off

Question 11

Tracing a sample of recorded cash receipts to the customers' accounts in the accounts receivable subsidiary ledger is an audit procedure designed to satisfy the control objective of ________.

Accepted Answer

A) completeness 
B) validity 
C) accuracy 
D) accounting

Question 12

If it is impracticable to confirm accounts receivable but the auditor obtains sufficient,appropriate evidence to verify the receivable balance by performing alternative procedures,the auditor's opinion should be unqualified.The audit report should ________.

Accepted Answer

A) disclose the fact that alternative procedures were used because of a client-imposed scope limitation 
B) disclose in the opinion paragraph that confirmation of accounts receivable was impracticable 
C) not mention the alternative procedures 
D) include an explanatory paragraph that discloses the performance of alternative procedures

Question 13

Which of the following lists outlines the best order for a typical sequence of activities in the revenue and collection cycle?

Accepted Answer

A) Delivering goods,billing customers,credit granting,collection activity. 
B) Customer ordering,delivering goods,billing customer,cash receipts. 
C) Customer ordering,delivering goods,credit granting,collection activity. 
D) Credit granting,billing customers,delivering goods,cash receipts.

Question 14

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.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

To gather evidence about transactions with related parties,an auditor would most likely ________.

Accepted Answer

A) send account confirmations 
B) perform analysis of receivables turnover 
C) scan the receivables sub-ledger for credit balances 
D) scan the aged trial balance for names of officers and directors

Question 18

An auditor should trace cancelled cheques and cleared deposits for the last part of the current audit period and the first part of the subsequent period to detect whether ________.

Accepted Answer

A) the cash receipts journal was held open for a few days after the year-end 
B) the last cheques recorded before the year-end were actually mailed by the year-end 
C) cash balances were overstated because of kiting 
D) any unusual payments to or receipts from related parties occurred

Question 19

An unrecorded cheque issued during the last week of the year would most likely be discovered by the auditor when the ________.

Accepted Answer

A) cheque register for the last month is reviewed 
B) cutoff bank statement is reconciled 
C) bank confirmation is reviewed 
D) search for unrecorded liabilities is performed

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

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

Selecting a sample of recorded sales invoices from the sales journal and comparing the quantity billed to the quantity shipped is an example of a test to satisfy the control objective of accuracy.

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

Tracing bills of lading to sales invoices provides evidence that ________.

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

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and recalculating the cross totals of quantities and prices is ________.

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

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

Define the response rate as it pertains to positive accounts receivable confirmations.Describe methods that can be utilized to increase the response rate.

A customer replies to a positive confirmation as follows: "We dispute the $250 charge from your client as the goods were never received." This confirmation ________.

Tracing a sample of recorded cash receipts to the customers' accounts in the accounts receivable subsidiary ledger is an audit procedure designed to satisfy the control objective of ________.

If it is impracticable to confirm accounts receivable but the auditor obtains sufficient,appropriate evidence to verify the receivable balance by performing alternative procedures,the auditor's opinion should be unqualified.The audit report should ________.

Which of the following lists outlines the best order for a typical sequence of activities in the revenue and collection cycle?

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?

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

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

To gather evidence about transactions with related parties,an auditor would most likely ________.

An auditor should trace cancelled cheques and cleared deposits for the last part of the current audit period and the first part of the subsequent period to detect whether ________.

An unrecorded cheque issued during the last week of the year would most likely be discovered by the auditor when the ________.

Fidelity bonds can help prevent and detect embezzlement.