Chapter 9
A control that may be implemented to ensure all sales that occur are recorded in the general ledger includes which of the following? a. Use of prenumbered shipping, invoice and sales documents. b. Reconciliation of invoices with customer statements. c. Use of pre-authorized price lists. d. Use of prenumbered statements, inventory lists and credit memos.
A
A method of testing for the completeness of sales is to test the sequence of sales invoices used during the period under audit. a. True b. False
A
A substantive audit procedure that would reveal ownership and related disclosure issues includes scanning the cash receipts journal for relatively large inflows of cash that from unusual sources. a. True b. False
A
A tendency for fraud may exist when the granting of stock options is dependent on reaching an earnings goal. a. True b. False
A
A timing difference type of exception in the confirmation process may arise when goods are in transit at the confirmation date. a. True b. False
A
Accounts receivable confirmations usually provide strong evidence about which of the following? a. The existence of receivables. b. The completeness of receivables. c. The obligations of receivables. d. The presentation and disclosure of receivables.
A
After identifying the risks of material misstatement, the auditor develops an audit plan in response to those risks. Which of the following plans for testing revenue would be most likely when the auditor believes that control risk is high? a. The only evidence the auditor plans to obtain is from tests of details. b. The auditor plans to obtain 40% of the necessary audit evidence from tests of controls and the remaining 60% from substantive analytical procedures. c. The auditor plans to obtain the majority of the necessary audit evidence from tests of controls. d. Any of these would be an appropriate audit plan if the auditor believes that control risk is high.
A
An auditor's examination of the sales account using a cutoff test would most likely detect which of the following? a. Sales recorded in the wrong period. b. Sales made with improper credit terms. c. Kiting. d. Lapping of accounts receivable.
A
An auditor's primary concern with identifying related party sales and receivables rests with the presentation and disclosure assertion. a. True b. False
A
An example of alternative procedures for the confirmation of accounts receivable includes which of the following actions? a. Review of subsequent collections on account by the client. b. Inquiry of management. c. Tracing source documents to recorded amounts. d. Providing an estimate of the allowance for doubtful accounts to be recorded by the client.
A
As required by auditing standards, auditors should ordinarily presume there is a risk of material misstatement caused by fraud relating to revenue recognition. a. True b. False
A
Assume that an auditor expected that the client's activities related to sales and accounts receivable would be similar to industry averages. Which of the following relationships detected as part of planning analytical procedures would not suggest a heightened risk of material misstatement in the revenue cycle? a. The number of days' sales in accounts receivable decreased from sixty-five days in the prior year to forty-seven days in the current year. The industry average increased from forty-five to forty-seven days. b. The gross margin increased from 16.7% to 18.3%, while the industry average changed from 16.7% to 16.3%. c. Accounts receivable increased 35% over the prior year, while sales stayed relatively stable. d. All of these relationships are suggestive of a heightened risk of fraud.
A
Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following? a. Substantiate cutoff and the occurrence of net sales transactions. b. Assess the nature of procedures that will be performed for the next period's audit. c. Monitor customer satisfaction for disclosure. d. Test the sufficiency of cash balances to cover refunds.
A
Calculating the turnover of receivables is often used in testing the sales cycle by auditors when performing which of the following? a. Ratio analysis. b. Reasonableness testing. c. Trend analysis. d. Nonstatistical sampling.
A
Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following? a. Shipping documents and tracing them to the sales journal. b. Recorded sales transactions and tracing them to the general ledger. c. Inventory records and tracing them to the shipping documents. d. Accounts receivable and tracing them to cash receipts.
A
Current auditing standards do not require the confirmation of receivables if accounts receivable are not material. a. True b. False
A
Customer complaints noted in returned accounts receivable confirmations may be an indicator of fraud. a. True b. False
A
For which of the following accounts receivable customer populations would the use of negative confirmations be most appropriate? a. A cable company with control risk over the revenue cycle assessed low. b. A retail truck and trailer sales company with high inherent risk and moderate control risk over the revenue cycle. c. A mortgage banking company with excellent control over the purchasing cycle. d. A utility company with control risk over the revenue cycle assessed high.
A
If the contract stipulates more than one deliverable, the client must allocate a separate price to each deliverable. a. True b. False
A
In testing controls over whether sales are properly valued, the auditor could take a sample of recorded sales invoices and agree the price on the invoice to an authorized price list. a. True b. False
A
In the revenue cycle, the most significant accounts typically include revenue and accounts receivable. a. True b. False
A
Ratio analysis performed by the audit team may include the comparison of gross profit percentage to industry averages. a. True b. False
A
Research indicates that a majority of financial statement frauds involve inappropriate recording of revenue. a. True b. False
A
Responding to identified risks involves developing an audit approach that addresses those risks. Which of the following statements about the planned audit approach is true for the revenue cycle? a. The audit approach will typically require more evidence for higher risk assertions than lower risk areas. b. The sufficiency and appropriateness of selected procedures will not vary across assertions. c. The audit approach needs to include tests of controls, substantive analytical procedures, and tests of details. d. The audit approach should follow the audit firm's standardized audit program.
A
Sales transactions should be documented at initiation in order to accomplish which of the following objectives? a. To provide evidence of authorization and recording. b. To offer credit to customers. c. To provide the customer a copy of the transaction. d. To generate back orders.
A
The allowance for doubtful accounts balance will not be a precise amount because of which of the following reasons? a. It is an accounting estimate based upon judgment. b. It is merely a reserve that is reversed by the client as income is needed for profitable results. c. GAAP is not clear on the calculation of the allowance. d. The precision is determined by the results of confirmation responses.
A
The auditor might conclude that a heightened risk of fraud exists if the planning analytical procedures indicate increases in revenue and net income, but negative cash flow from operations. a. True b. False
A
The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues. a. True b. False
A
The major risk associated with receivables is related to which of the following? a. They will not be realized for the entire amount due. b. They may be sold to a bank with recourse. c. They may be recorded as long-term when in fact they will be realized in the current period. d. They are pledged as collateral as disclosed in the footnotes to financial statements.
A
The primary difference between positive and negative confirmations used in the audit of accounts receivable is which of the following? a. The mode of response. b. The method in which accounts are selected for confirmation. c. The control of the confirmation process by the auditor. d. The amount of information included.
A
The purpose of the bill of lading is to provide which of the following? a. Evidence of title transfer of goods to customers. b. Invoices to customers for proper collection. c. The warehouse personnel with the product that must be shipped to customers. d. A credit application for customer approval.
A
The revenue cycle involves receiving a customer's order, approving credit for a sale, determining whether the goods are available for shipment, shipping the goods, billing the customer, collecting cash, and recognizing the effect of this process on revenue and other related accounts such as accounts receivable, inventory, and sales commission expense. a. True b. False
A
The revenue cycle involves receiving a customer's order, approving credit for a sale, determining whether the goods are available for shipment, shipping the goods, billing the customer, collecting cash, and recognizing the effect of this process on revenue and other related accounts such as accounts receivable, inventory, and sales commission expense. a. True b. False
A
The revenue cycle involves the procedures in generating a sales order, shipping the products, recording the transaction, and collecting the receivable. a. True b. False
A
The risk of material misstatement due to fraud relating to revenue recognition should be a. ordinarily presumed by the auditor. b. assumed to have been considered by the FASB. c. approached in a manner that is identical to control risk assessment. d. given lower priority to the risk of embezzlement.
A
To determine whether any accounts receivable are pledged or assigned to others, the auditor would most likely perform which of the following procedures? a. Review loan agreements and board of directors' meeting minutes. b. Derive an independent estimate of the allowance and compare it to pledged assets. c. Test a sample of transactions to the general ledger. d. Examine subsequent collections.
A
Valid evidence obtained in an audit for testing the cutoff of sales includes receiving reports for returned merchandise. a. True b. False
A
What evidence is utilized by the auditor for analytical purposes in substantiating the completeness of the allowance for bad debt estimate? a. Accounts receivable aging schedule. b. Confirmations returned without exception. c. Copies of checks received from customers. d. Stock prices of customer companies.
A
When assessing fraud risks, the auditor should consider the client's motivation to increase revenue due to both internal and external pressures. a. True b. False
A
Which of the following is the fifth step in the five-step revenue recognition process prescribed by ASC 606? a. Satisfaction of a performance obligation. b. Execution of an enforceable contract for the transfer of goods or services. c. Collection of substantially all of the transaction price from the customer. d. None of the above.
A
Which of the following procedures can organizations use to address credit risk most effectively? a. A periodic review of the credit policy by key executives to determine whether changes are dictated either by current economic events or by deterioration of the receivables. b. Periodic monitoring of receivables for evidence of increased risk, such as increases in the number of days past due or an unusually high concentration in a few key customers whose financial prospects are declining c. An informal credit policy, which may be automated for most transactions, but requires special approval for large and/or unusual transactions. d. Adequate segregation of duties over fixed assets, with specific authorization to write off fixed assets that have been fully depreciated.
A
Which of the following statements is true regarding the processing and recording of revenue transactions? a. Sales transactions typically begin with the receipt of a purchase order from a customer. b. Invoices should be prepared once the client determines that the goods ordered by a customer are available. c. A bill of lading provides documentation that the customer has received the goods. d. The accurate recording of revenue transactions is important for preparing financial statements, but not important for the client's management decisions.
A
While audit firms may have a standardized audit program for the revenue cycle, the auditor should customize the audit program based on the assessment of risk of material misstatement. a. True b. False
A
A company that ships a large quantity of its products from its manufacturing plant to a warehouse that it leases until the customer is ready for the product should record the delivery to the warehouse as revenue. a. True b. False
B
A consistent pattern of earnings growth would eliminate the auditor's concern for fraud in revenue recognition. a. True b. False
B
A key indicator of fraud in the revenue cycle is the auditor's detection of which of the following? a. Recurring entries in the sales journal. b. Altered shipping documents and invoices. c. Customer collections that are over 90 days past due. d. Credit entries in customer accounts receivable for authorized write-offs.
B
According to auditing standards, accounts receivable confirmations are required to be used in which of the following situations? a. If environmental risk is low. b. If the accounts receivable balance is material. c. On every audit engagement. d. If the client agrees in writing to the procedure.
B
Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead. a. True b. False
B
Auditors in practice commonly use negative confirmations. a. True b. False
B
Auditors in practice commonly use negative confirmations. a. True b. False
B
Channel stuffing is a fraud in the revenue cycle that involves recording revenue after a customer has requested to purchase the inventory. a. True b. False
B
Channel stuffing is a fraud in the revenue cycle that involves recording revenue after a customer has requested to purchase the inventory. a. True b. False
B
Diageo made improper cash payments to government officials in Mexico, Brazil, and Argentina during the period 2003-2009, which violated provisions of the Foreign Corrupt Practices Act. a. True b. False
B
Diageo made improper cash payments to government officials in Mexico, Brazil, and Argentina during the period 2003 to 2009, which violated provisions of the Foreign Corrupt Practices Act. a. True b. False
B
Exceptions found in the confirmation of accounts receivable balances need not be projected as errors to the population as they are typically isolated errors. a. True b. False
B
It is not possible for internal controls to mitigate risks associated with the valuation of accounts receivable. a. True b. False
B
Lapping of accounts receivable is least likely to occur when there is an inadequate segregation of duties. a. True b. False
B
Management has been found involved in many fraudulent schemes; a common one is "channel stuffing." What does "channel stuffing" involve? a. Management compensation schemes. b. Shipment of goods not ordered. c. Overly complex transactions. d. Growth through stock acquisitions.
B
Positive accounts receivable confirmations should be used on all accounts which represent small immaterial balances. a. True b. False
B
Responding to identified risks in the revenue cycle rarely involves developing an audit approach that contains substantive procedures (e.g., tests of details and, when appropriate, substantive analytical procedures. a. True b. False
B
Substantive tests of details for revenue transactions focus primarily on the completeness assertion. a. True b. False
B
Surprisingly, AmTrust's restatement was followed by a stock price increase, likely because investors inferred that by revealing the restatement the company could move forward with confidence. a. True b. False
B
The auditor traces recorded sales to invoices, sales orders, and shipping documents in order to substantiate which assertion? a. Completeness. b. Occurrence. c. Legality. d. Cutoff.
B
The auditor would examine a sample of sales transactions throughout the entire period to determine if sales were recorded in the proper period when performing a sales cutoff test. a. True b. False
B
The revenue cycle considered by auditors includes the sales process but not collections. a. True b. False
B
The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department. a. True b. False
B
The use of data analytics tools makes the audit of the revenue cycle more effective, but not more efficient. a. True b. False
B
Use of reasonableness tests by Bono Mullins, PC, will include relationships between financial but not non-financial data. a. True b. False
B
When performing planning analytical procedures, the auditor could perform trend analysis with ratios, but not with account balances. a. True b. False
B
When the client has a large number of relatively small accounts receivable and the assessed level of control risk for receivables and related revenue transactions is high, the auditor is more likely to use negative confirmations. a. True b. False
B
Which of the following factors is not a motivation for clients to fraudulently misstate revenue? a. Management bonuses are contingent on a certain revenue goal. b. Controls over revenue process are ineffective. c. Bankruptcy may be imminent. d. Management wants to meet publicly announced earnings expectations.
B
Which of the following is a proper control for the detection of unusual sales transactions recorded in the general ledger? a. Use of sequentially numbered sales documents. b. Review of transactions by upper management or the board. c. Electronic authorization prior to posting. d. Random statements to customers.
B
Which of the following is not a form of ratio analysis? a. Gross margin analysis. b. Monthly sales analysis compared with past years. c. Turnover of receivables. d. Sales in last month to total sales.
B
Which of the following must exist prior to the recognition of revenue by a company from the sale of a product? a. The customer is given the option to return the product at any time. b. The product is transferred to the customer. c. A price is discussed based upon the customer's resale of the product. d. Cash is realized on the sale of the product.
B
Which of the following statements about the Medicis fraud is false? a. In 2012, the PCAOB settled a disciplinary order censuring Ernst & Young (EY), imposing a $2 million penalty against the firm and sanctioning four of its current and former partners. b. The PCAOB found that EY and its partners failed to properly evaluate a material component of the company's financial statements—its allowance for doubtful accounts. c. EY did not properly evaluate Medicis' practice of reserving for most of its estimated product returns at replacement cost, instead of at gross sales price. It appears that EY accepted the company's basis for reserving at replacement cost when the auditors should have known that this approach would not be supported by the audit evidence. d. The PCAOB investigation revealed that by using replacement cost for the reserve, rather than gross sales price, Medicis' reported sales returns reserve were materially understated and its reported revenue was materially overstated. e. All of these are true.
B
Which of the following statements is true regarding assertions in the revenue cycle? a. Audit evidence about the existence of revenues is also the most appropriate evidence about the valuation of receivables. b. If a client has an incentive to overstate revenues, the existence assertion would be more relevant than the completeness assertion. c. It is typical that all five assertions for revenue are equally important. d. The allowance for doubtful accounts has important implications for the ownership assertion of accounts receivable.
B
Which one of the following procedures would be considered improper by the auditor in the process of confirming receivables? a. The auditor allows the client's staff to prepare the confirmation letters after the auditor has chosen the items to be confirmed. b. The auditor allows the client's staff to mail the confirmation letters after he or she has proofed the typing of the letters. c. The auditor allows the client to sign the confirmations after they are prepared. d. The auditor asks the addressee to return the confirmation to the audit firm's office.
B
While electronic confirmations of receivables are more efficient, they are seldom used because they are not considered as reliable as paper confirmations. a. True b. False
B
A sample of positive confirmations is mailed for material accounts receivable balances. Frequently there is a lack of response. Which of the following is not an acceptable alternative procedure? a. Examination of supporting documents. b. Reviewing collections on the account subsequent to the confirmation date. c. Inquiry of management. d. Mailing second and third confirmations.
C
Alternative procedures that would provide evidence of the existence of receivables would include which of the following? a. Analysis of the aged trial balance. b. Physical observation of customer facilities. c. Review of subsequent collections. d. A confirmation to the client management for customer accounts.
C
An analysis of monthly sales compared with past years and budgets is a form of what type of testing? a. Common size analysis. b. Ratio analysis. c. Trend analysis. d. Regression analysis.
C
Confirmations that are sent to select customers asking them to review the current balance due the client as shown on the client's statement and return the letters directly to the auditor indicating whether they agree with the indicated balance, are known by which of the following terms? a. Indirect confirmations. b. Negative confirmations. c. Positive confirmations. d. Direct confirmations.
C
Credit approval policies are implemented by organizations primarily to accomplish which of the following objectives? a. To determine revenue recognition policies. b. To prevent lapping by the accounts receivable department. c. To minimize credit losses. d. To ensure customer satisfaction.
C
Lithgow and Harris, CPAs, are performing the audit of Wild Flower Grocery Stores. Lithgow and Harris relates annual revenue to sales per square feet and sales per customer. What type of analysis is Lithgow and Harris most likely performing? a. Critical analysis. b. Ratio analysis. c. Reasonableness tests. d. Nonstatistical analysis.
C
To test the completeness of sales, the auditor would select a sample of transactions from which of the following populations? a. Open invoice file. b. Sales invoice file. c. Bill of lading file. d. Customer order file.
C
Unreturned positive confirmations for accounts receivable warrant which of the following actions? a. The projection of larger misstatements to the population. b. Requesting that the client send additional audit correspondence to customers. c. Sending second requests and possibly performing subsequent procedures. d. Replacing the sample selection with a new customer.
C
Which of the following evidences delivery of product to customers sufficient for company recording as revenues? a. An agreement to purchase product signed by the customer. b. A pick ticket in the warehouse. c. A bill of lading and tracking number with the shipper. d. A check received from the customer.
C
Which of the following is a formal document that conveys responsibility for shipped merchandise to the shipper? a. Receiving report. b. Purchase order. c. Bill of lading. d. Sales invoice.
C
Which of the following statements is false regarding the fraud at ArthroCare? a. ArthroCare is a manufacturer of medical devices, based in Austin, Texas, whose shares are traded on NASDAQ. b. PricewaterhouseCoopers' audit was deficient for ArthroCare, thereby enabling the fraud to go undetected for a period of time. c. Two of ArthroCare's sales executives overstated ending inventory that improperly inflated company revenue and earnings. d. ArthroCare agreed to pay a $30 million fine to resolve the investigation.
C
A method used by companies to fraudulently inflate revenues includes which of the following? a. Use of hidden "side letters" giving the customer an irrevocable right to return the product. b. Recording of fictitious sales. c. Shipment of product not ordered by customers. d. All of the above.
D
An auditor performs tests of controls in the revenue cycle. First, the auditor makes inquiries of company personnel about credit-granting policies. The auditor then selects a sample of sales transactions recorded in the general ledger and examines documentary evidence of credit approval. Which of the financial statement assertion(s) does this test of controls most likely support? Completeness/Valuation or Allocation - Yes/Yes - No/Yes - Yes/No - No/No a. C b. D c. A d. B
D
Auditors are concerned with the addresses provided for customers in the confirmation of accounts receivable because of which of the following reasons? a. Confirmations should be sent only to business addresses and not residential. b. Confirmations are selected based upon zip codes. c. A P.O. box is more reliable than a street address. d. The address may be routed to the client for retrieval and fraudulent signing.
D
Fraud related to revenue recognition will most likely be identified by the auditor through which of the following independent situations? a. Gross margin is equivalent in the current period to previous periods and is below that of the industry. b. Sales have increased 5% in the current period over the previous period and is consistent with the results of competitors. c. Sales of a revolutionary new product are increasing beyond that of the competition in the periods immediately following its introduction. d. Sales are higher in the month preceding each quarter end.
D
Homer and Moe, PC are auditing the financial statements of Lyoncraft, Inc. and decide to confirm a sample of accounts receivable. This test is performed by Homer and Moe primarily to substantiate which of the following assertions? a. Existence of related party transactions. b. Cutoff of the allowance for bad debt. c. Obligation of debt. d. Existence of accounts receivable.
D
In an audit of financial statements, risks related to a high rate of return of products sold include which of the following? a. An estimate of accrued returns that reduces net income. b. A reduction of net sales for an increase to the sales returns and allowance account. c. Consignment goods that are returned and forwarded to third parties. d. Sales that are recorded improperly.
D
In the audit of accounting estimates, such as the allowance for doubtful accounts, the auditor strives to provide reasonable assurance about which of the following? a. All material accounting estimates have been developed properly. b. The estimates are reasonable. c. The estimates are presented in accordance with GAAP. d. All of the above are true.
D
In the audit of the revenue of Hiram Manufacturing Company, the auditors obtain a number of shipping documents shortly before year-end and immediately following the year under audit. The auditors compare the documents to the sales journal in order to test which of the following assertions? a. Existence of sales. b. Completeness of receivables. c. Presentation and disclosure of receivables. d. Cutoff of sales transactions.
D
Much of the understanding of revenue transactions for compliance with GAAP can be performed by accomplishing which of the following tasks? a. Confirming sales with customers. b. Comparing shipping documents with invoices. c. Discussing the transactions with qualified members of the Financial Accounting Standards Board. d. Examining sales contracts and inquiry of management.
D
Sources of audit planning information may come from which of the following? a. Knowledge of client's business and industry. b. Assessment of risk of material misstatement. c. Results of analytical procedures. d. All of the above.
D
Substantive tests of the revenue cycle typically do not provide evidence of which of the following? a. Sales transactions exist and are properly valued. b. Accounts receivable exist. c. Fraudulent transactions are not included in the financial statements. d. The balance in the allowance account is correct.
D
The aged accounts receivable report is utilized by the auditor to accomplish which of the following? a. Encourage the client to collect on receivables that are long past due. b. Select the type of confirmations that will be sent to banks. c. Identify debits in the receivables balance that should be reclassified to payables. d. Assess the adequacy of the allowance for doubtful accounts.
D
The auditor is concerned that the client has recorded fictitious sales. Which of the following procedures would be the best audit procedure to identify fictitious sales? a. Select a sample of shipping documents (bills of lading) and trace to the sales invoice to determine whether the invoice was properly recorded. b. Select a sample of customer purchase orders and trace through to the generation of a sales invoice. c. Select a sample of customer purchase orders to determine whether a valid customer actually exists. d. Select a sample of recorded sales invoices and trace to shipping documents (bills of lading and packing slips) to verify shipment of goods.
D
The auditor of the revenue cycle of ABC Company computes an estimate of ABC's allowance for doubtful accounts and compares it to the estimate provided by ABC's management. The purpose for this procedure is to substantiate which assertion? a. Cutoff of receivables. b. Existence of receivables. c. Rights to receivables. d. Valuation of receivables.
D
The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total. This process is performed for which purpose? a. Drafting financial statements. b. Providing management reports to the controller. c. Providing suggestions for operational improvement. d. Monitoring revenue transactions.
D
When auditing a nonpublic company, the auditor would generally make a decision not to test the operating effectiveness of controls in which of the following situations? a. The preliminary assessment of control risk is high. b. It is more cost efficient to directly test ending account balances than to test controls. c. The auditor believes that controls are designed effectively but are not operating as described. d. All of these are situations when the auditor would likely not test the operating effectiveness of controls.
D
Which of the following audit procedures does not address existence/occurrence for accounts receivables and sales? a. Confirm balances of unpaid invoices with customers. b. Scan sales journal for duplicate entries. c. Examine subsequent collections. d. Trace bill of lading to sales invoice and sales journal.
D
Which of the following criteria must be met in order to recognize revenue in the current accounting period? a. Goods or services have been transferred to the customer. b. The transaction price has been determined. c. Collectability is reasonably assured. d. All of the above.
D
Which of the following explanations best describes the purpose of lapping? a. Lapping is an approach used by client personnel to eliminate differences between a customer's records and the client's records reported on confirmations. b. Lapping is an agreement containing contract terms that are not part of a formal sales contract. c. Lapping is a procedure used by the auditor to obtain evidence the client's customer does return a positive confirmation. d. Lapping is a technique used by client personnel to cover up the embezzlement of cash.
D
Which of the following processes are not included in the revenue cycle? a. Preparing and sending monthly statements to customers. b. Shipping products to customers. c. Obtaining credit approval. d. Sending payments to suppliers.
D
Which of the following statements is false regarding planning analytical procedures in the revenue cycle? a. As revenue is typically regarded as a high-risk account, planning analytical procedures related to revenue are not required. b. The first step in planning analytical procedures includes developing an expectation of recorded amounts or ratios, and evaluating whether that expectation is precise enough to accomplish the relevant objective. c. Trend analysis would not be appropriate as a planning analytical procedure in the revenue cycle. d. All of these statements are false.
D
Under the FASB's guidance on revenue recognition, which of the following is not criteria that must be met in order for a contract to exist? a. The payment terms are spelled out. b. The parties have approved it. c. The goods and/or services involved are clearly identified. d. There is commercial value to the contract. e. The auditor has ensured that the contract's valuation is reasonable in all material respects.
E
