Question 1

A control test procedure that simultaneously tests bot validity and completeness control procedures,is called a

Accepted Answer

A) dual-purpose test. 
B) cut-off test 
C) two-direction test 
D) walk-through test

Question 2

To determine whether sales transactions have been recorded in the proper accounting period,the auditor performs cutoff tests.Which of the following best describes the overall approach used when performing cutoff tests?

Accepted Answer

A) Ascertain that management's letter of representation includes the statement that transactions have been accounted for in the proper accounting period. 
B) Analyze transactions occurring within a few days before and after year-end. 
C) Confirm year-end transactions with regular customers. 
D) Examine cash receipts in the subsequent period.

Question 3

Substantive procedures for the audit of cash would include which of the following?

Accepted Answer

A) Ask that a cutoff bank statement be mailed directly to the client. 
B) Enquire if the client has prepared bank reconciliations for all bank accounts on a monthly basis. 
C) Prepare a schedule of inter-bank transfers for a period of ten business days before and after year-end date. 
D) Obtain written descriptions from the client about its cash receipts procedures.

Question 4

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) Fictitious or improperly recorded sales entered at year-end. 
D) Lapping of year-end accounts receivable.

Question 5

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 6

The control objective associated with selecting a sample of cash receipts remittance lists (or daily cash reports)and tracing them through to the cash receipts journal is ________.

Accepted Answer

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

Question 7

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 8

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 9

Tracing a sample of recorded cash receipts from the cash receipts journal to the bank statement is an audit procedure designed to satisfy the control objective of ________.

Accepted Answer

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

Question 10

Your analysis of ABC Company's financial statements revealed a substantial increase in the number of days' sales in accounts receivable.Based on those results,additional substantive audit evidence would most likely be directed towards which of these assertions?

Accepted Answer

A) Completeness 
B) Valuation 
C) Presentation 
D) ownership

Question 11

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 12

Obtaining a schedule of bank transfers between the auditee's accounts a few days before and after the year-end date and testing the propriety of items included,is a procedure done primarily to detect what type of misstatement?

Accepted Answer

A) Overstatement of Accounts receivable due to lapping 
B) Theft of cash receipts from customers 
C) Cheques written before year-end but not mailed until after year-end. 
D) Overstatement of cash balances due to cheque kiting.

Question 13

A fictitious entry in the cash receipts journal provides evidence of which assertion misstatement for accounts receivable?

Accepted Answer

A) Ownership 
B) Completeness 
C) Valuation 
D) Existence

Question 14

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 15

Which of the following audit procedures is most likely to detect lapping by the accounts receivable clerk?

Accepted Answer

A) Use the cutoff bank statement to trace all cheques dated before the balance sheet date to the outstanding cheque list on the bank reconciliation. 
B) Use the cutoff bank statement to determine if the bank recorded all deposits in transit per the bank reconciliation on the first business day after the balance sheet date. 
C) Compare the detail of cheques listed on a sample of deposit slips to the detail of customer credits listed on the day's posting to the customer accounts in the subsidiary ledger. 
D) Prepare a schedule of inter-bank transfers for a few days before and after the balance sheet date.

Question 16

If tests of controls revealed a significant weakness regarding the completeness of recording of cash receipts,additional substantive testing towards which assertions should result?

Accepted Answer

A) Existence of cash and completeness of accounts receivable 
B) Completeness of cash and accounts receivable. 
C) Completeness of cash and existence of accounts receivable. 
D) Existence of cash and accounts receivable.

Question 17

In determining the adequacy of the allowance for uncollectible accounts,the least valuable evidence would be obtained from ________.

Accepted Answer

A) an aging schedule of past due accounts that the auditor has tested 
B) correspondence with the client's collection agency 
C) financial statements of individual customers 
D) lack of a reply to negative confirmations

Question 18

In the analysis of financial statements,a continuity schedule is a working paper that shows the movements in the account balances and the other financial statements amounts that should tie with them.

Accepted Answer

A) True 
 B)False

Question 19

A nonresponse to a negative confirmation is considered evidence the balance confirmed is correct.

Accepted Answer

A) True 
 B)False

Question 20

Confirmations of accounts receivable provides strong evidence of both the existence and ownership assertions.

Accepted Answer

A) True 
 B)False

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

A control test procedure that simultaneously tests bot validity and completeness control procedures,is called a

To determine whether sales transactions have been recorded in the proper accounting period,the auditor performs cutoff tests.Which of the following best describes the overall approach used when performing cutoff tests?

Substantive procedures for the audit of cash would include which of the following?

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

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 control objective associated with selecting a sample of cash receipts remittance lists (or daily cash reports) and tracing them through to the cash receipts journal is ________.

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 ________.

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

Tracing a sample of recorded cash receipts from the cash receipts journal to the bank statement is an audit procedure designed to satisfy the control objective of ________.

Your analysis of ABC Company's financial statements revealed a substantial increase in the number of days' sales in accounts receivable.Based on those results,additional substantive audit evidence would most likely be directed towards which of these assertions?

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

Obtaining a schedule of bank transfers between the auditee's accounts a few days before and after the year-end date and testing the propriety of items included,is a procedure done primarily to detect what type of misstatement?

A fictitious entry in the cash receipts journal provides evidence of which assertion misstatement for accounts receivable?

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

Which of the following audit procedures is most likely to detect lapping by the accounts receivable clerk?

If tests of controls revealed a significant weakness regarding the completeness of recording of cash receipts,additional substantive testing towards which assertions should result?

In determining the adequacy of the allowance for uncollectible accounts,the least valuable evidence would be obtained from ________.

In the analysis of financial statements,a continuity schedule is a working paper that shows the movements in the account balances and the other financial statements amounts that should tie with them.

A nonresponse to a negative confirmation is considered evidence the balance confirmed is correct.

Confirmations of accounts receivable provides strong evidence of both the existence and ownership assertions.