Question 1

A bank confirmation is an excellent form of evidence to test the completeness of cash.

Accepted Answer

A) True 
 B)False

Question 2

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 3

The most frequent reconciliation is the comparison of the sum of customers' unpaid balances with the accounts receivable control account total.Usually,this reconciliation is done with a(n)________.

Accepted Answer

A) aged trial balance 
B) capital asset sub-ledger 
C) bank statement 
D) customer statement

Question 4

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 5

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates exceptions and comments noted by respondents.By this procedure,the auditor is most likely to learn of which of the following?

Accepted Answer

A) One of the cashiers has been covering a personal embezzlement by lapping. 
B) One of the sales clerks has not been preparing charge slips for credit sales to family and friends. 
C) One of the EDP control clerks has been removing all sales invoices applicable to his account from the data file. 
D) The credit manager has misappropriated remittances from customers whose accounts have been written off.

Question 6

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 7

Money laundering refers to the proper processing of cash receipts.

Accepted Answer

A) True 
 B)False

Question 8

Upon receipt of customer cheques in the mailroom,a responsible employee should prepare a remittance listing and forward it to the cashier.A copy of the listing should be sent to the ________.

Accepted Answer

A) internal auditor to investigate the listing for unusual transactions 
B) controller to compare the listing with the monthly bank statement 
C) accounts receivable bookkeeper to update the subsidiary accounts receivable records 
D) entity's bank to compare the listing with the cashier's deposit slip

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 occurrence 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) Vouch sales entries in sales journal to supporting shipping documents.

Question 10

The packing slip authorizes the transfer of inventory from the warehouse to the shipping department and then to the customer.

Accepted Answer

A) True 
 B)False

Question 11

Infotech is a small software company with few billings.It sends out invoices to clients using the preparation date as the invoice number.As a result,which of the following assertions about billings cannot be tested?

Accepted Answer

A) Validity. 
B) Completeness. 
C) Classification. 
D) Proper period accounting.

Question 12

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 13

A control weakness for revenues and receivables processing that could lead to theft of inventory is ______.

Accepted Answer

A) when accounting staff can update the accounts receivable files 
B) when the stockkeeper authorizes release of the inventory 
C) when no period confirmation of the balance owing from the customer is made. 
D) when shipping personnel have the power to alter the quantities shipped on the shipping documents

Question 14

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 15

One of the key assertions to consider in obtaining evidence about accounts receivable is completeness.

Accepted Answer

A) True 
 B)False

Question 16

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and matching the recording date to the shipping date per the shipping documents is ________.

Accepted Answer

A) proper period 
B) completeness 
C) validity 
D) accuracy

Question 17

The most effective audit procedure for determining if an account receivable will be collected is ________.

Accepted Answer

A) examination of cash collections subsequent to the year-end 
B) examination of sales invoice(s) 
C) confirmation of the account 
D) the review of the customer's file to determine previous collection experience and to check sales orders from the customer for evidence credit approval

Question 18

Which of the following audit procedures is the most effective when testing sales for understatement?

Accepted Answer

A) Scrutinize the accounts receivable aged trial balance. 
B) Confirm a sample of recorded accounts receivable. 
C) Trace a sample of shipping documents to sales invoices recorded in the sales journal. 
D) Vouch a sample of recorded sales from the sales journal to shipping documents.

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

A bank confirmation is an excellent form of evidence to test the completeness of cash.

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

The most frequent reconciliation is the comparison of the sum of customers' unpaid balances with the accounts receivable control account total.Usually,this reconciliation is done with a(n) ________.

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

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates exceptions and comments noted by respondents.By this procedure,the auditor is most likely to learn of which of the following?

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 ________.

Money laundering refers to the proper processing of cash receipts.

Upon receipt of customer cheques in the mailroom,a responsible employee should prepare a remittance listing and forward it to the cashier.A copy of the listing should be sent to the ________.

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

The packing slip authorizes the transfer of inventory from the warehouse to the shipping department and then to the customer.

Infotech is a small software company with few billings.It sends out invoices to clients using the preparation date as the invoice number.As a result,which of the following assertions about billings cannot be tested?

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 ________.

A control weakness for revenues and receivables processing that could lead to theft of inventory is ______.

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

One of the key assertions to consider in obtaining evidence about accounts receivable is completeness.

The control objective associated with selecting a sample of recorded sales invoices from the sales journal and matching the recording date to the shipping date per the shipping documents is ________.

The most effective audit procedure for determining if an account receivable will be collected is ________.

Which of the following audit procedures is the most effective when testing sales for understatement?