Auditing - Chapter 11 Smartbook

For effective control regarding notes receivable, the ______.

acceptance and renewal of notes should be authorized in writing by a responsible official who does not have custody of the notes write-off of defaulted notes should be approved by responsible officials

The employee responsible for controlling and depositing checks should be the ______.

cashier

As the auditors confirm their understanding of the revenue cycle, they are likely to ______.

perform a walk-through of the cycle inquire as to who performed various functions review revenue budgets and variance

For related party transactions, the primary audit objective is ______.

presentation and disclosure

Relying upon the confirmation process to form an opinion about the fairness of accounts receivable as a whole ______.

provides valuable evidence is an important part of the auditor's work

To identify related party transactions, auditors should review all of the following except ______.

accounting records for transactions with usual customers

When a customer's credit is not approved, the customer should be notified and ______.

an effort to negotiate other terms should be made

Audit documentation (working papers) for receivables and revenues include ______.

analysis of other accounts receivable documentation of internal controls analysis of notes receivable and related interest

For effective control, the custodian of notes receivable should not have access to_______.

both cash and general accounting records

Accounting estimate(s) related to receivables and revenue include all of the following except ______.

gross profit percentage

Auditors perform an independent computation of the interest earned during the year on notes receivable to audit the valuation of ______.

interest income discount amortization interest receivable

This department contributes to the monitoring of internal control over the revenue cycle by periodically taking over the monthly statement process, sending confirmations to customers, and reviewing revenue cycle documentation.

internal audit

Risks in the confirmation of accounts receivable process ______.

may be due to customers failing to compare the balance with their records include omitting accounts with erroneous balances include inappropriate intervention by client personnel

Any adjustments to sales for allowances and returns must be supported by serially numbered credit memoranda that is signed by an employee ______.

not responsible for cash handling or ledger maintenance

For auditors, the audit of revenue and receivables represents an area of ______ risk.

significant

The credit department evaluates prospective customers by reviewing ______.

the customer's financial statements a report from a credit agency

Proper internal controls over credits for merchandise that has been returned typically will include a stipulation that ______ before credit can be given.

the goods be received and fully examined

When the amount of revenue from a complex transaction must be estimated, ______ should be considered.

the relevance and reliability of data risks comparisons of past estimates to actual revenues

Actions taken around the balance sheet date to improve the financial picture presented in the financial statements is referred to as

window dressing