ACC 450 - Chapter 11 Connect
What audit procedure is likely to detect the error/fraud: Recording of sales made in the subsequent period.
Comparing recorded sales several days before and after the balance sheet date with shipping documents.
What audit procedure is likely to detect the error/fraud: Failing to inform the auditors of pledged accounts receivable.
Reviewing standard confirmations from financial institutions.
The confirmation of the client's trade accounts receivable as a means of obtaining audit evidence is ordinarily considered to be a:
Substantive procedure.
To test the existence assertion for recorded receivables, the auditors would select a sample from the:
Accounts receivable subsidiary ledger.
To determine that sales transactions have been recorded in the proper accounting period, the auditors perform a cutoff review. Which of the following best describes the approach used when performing a cutoff review?
Analyze transactions occurring within a few days before and after the year end.
The auditors should confirm accounts receivable unless the auditors' assessment of the risk of material misstatement is low ....
And accounts receivable are immaterial, or the use of confirmations would be ineffective.
Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents related to sales invoices?
Completeness.
What audit procedure is likely to detect the error/fraud: Recording fictitious accounts receivable.
Confirming a sample of accounts receivable.
Which of the following is not among the criteria that ordinarily exist for revenue to be recognized?
Delivery has occurred or is scheduled to occur in the near future.
Which of the following would be the best protection for a company that wishes to prevent the "lapping" of trade accounts receivable?
Have customers sent payments directly to the company's depository bank.
Which of the following would most likely be detected by an auditor's review of the client's sales cutoff?
Inflated sales for the year.
Which of the following is most likely to be an example of fraudulent financial reporting relating to sales?
Recording sales when the customer is likely to return the goods.
What procedure most directly relates to the audit objective: The presentation and disclosure of receivables are adequate.
Review drafts of financial statements. Disclosure.
To determine that all sales have been recorded, the auditors would select a sample of transactions from the:
Shipping documents file.
What procedure most directly relates to the audit objective: All receivables that should be recorded are recorded as of year-end.
Trace a sample of sales invoices from the purchases journal to postings to accounts receivable and sales accounts.
Which of the following audit procedures is most effective in testing credit sales for understatement?
Trace sample of initial sales slips through summaries to recorded general ledger sales.
What audit procedure is likely to detect the error/fraud: Failing to record all sales transactions.
Tracing a sample of shipping documents to recorded sales transactions.
What procedure most directly relates to the audit objective: Recorded receivables exist.
Vouch year-end accounts receivable balances to supporting documents. Existence, rights.
What procedure most directly relates to the audit objective: The client has rights to recorded year-end receivables.
Vouch year-end accounts receivable balances to supporting documents. Existence, rights.
What procedure most directly relates to the audit objective: Recorded receivables are at appropriate net realizable values.
Review the aged trail balance for significant past due accounts.
