Question 1

In which of the following circumstances is the use of the negative form of accounts receivable confirmation most likely to be justified?

Accepted Answer

A) A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers. 
B) A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances. 
C) A small number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers. 
D) A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances.

Question 2

Money laundering refers to the proper processing of cash receipts.

Accepted Answer

A) True 
 B)False

Question 3

The open (or pending)sales order file can be reviewed for evidence of the completeness of recorded sales.

Accepted Answer

A) True 
 B)False

Question 4

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 or allocation 
C) completeness 
D) rights and obligations

Question 5

A charity sells raffle tickets at community events.One ticket will be chosen to win a prize.The charity could reduce the risk of employee misappropriation of cash best by ________.

Accepted Answer

A) insuring all employees with fidelity bonds 
B) counting all cash in the presence of two people as soon as it comes back to the charity's offices 
C) having auditors conduct surprise cash counts at the community events 
D) using pre-numbered tickets and accounting for all ticket numbers

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The primary consideration when planning to confirm accounts receivable before the balance sheet date is the ________.

Accepted Answer

A) type of confirmation to be used 
B) client's internal control over transactions affecting receivables 
C) availability of staff auditors 
D) number of customer accounts

Question 8

Which of the following is most likely to be detected by an auditor's review of a client's sales cut off?

Accepted Answer

A) Shipments lacking sales invoices and shipping documents. 
B) Excessive write-off of accounts receivable. 
C) Unrecorded sales at year-end. 
D) Lapping of year-end accounts receivable.

Question 9

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

Accepted Answer

A) Verify that extensions and footings on the entity's sales invoices and monthly customer statements have been recomputed. 
B) Inspect the entity's reports of pre-numbered shipping documents that have not been recorded in the sales journal. 
C) Compare the invoiced prices on pre-numbered sales invoices to the entity's authorized price list. 
D) Inquire about the entity HYPERLINK "" .

Question 10

Which of the following controls is most likely to help ensure that all credit sales transactions are recorded?

Accepted Answer

A) The billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account balances. 
B) The accounting department supervisor independently reconciles the accounts receivable subsidiary ledger to the accounts receivable control account monthly. 
C) The accounting department supervisor controls the mailing of monthly statements to customers and investigates any differences reported by customers. 
D) The billing department supervisor matches pre-numbered shipping documents with entries in the sales journal.

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

In which of the following circumstances is the use of the negative form of accounts receivable confirmation most likely to be justified?

Money laundering refers to the proper processing of cash receipts.

The open (or pending)sales order file can be reviewed for evidence of the completeness of recorded sales.

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 ________.

A charity sells raffle tickets at community events.One ticket will be chosen to win a prize.The charity could reduce the risk of employee misappropriation of cash best by ________.

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

The primary consideration when planning to confirm accounts receivable before the balance sheet date is the ________.

Which of the following is most likely to be detected by an auditor's review of a client's sales cut off?

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

Which of the following controls is most likely to help ensure that all credit sales transactions are recorded?