Chapter 11 MC

Control amounts posted to the accounts receivable ledger are compared with control totals of invoices

Invoices are sent for shipped goods and are recorded in the sales journal, but are not posted to any customer account

Monthly statements are mailed to all customers with outstanding balances.

Customers' checks are misappropriated before being forwarded to the cashier for deposit

Daily sales summaries are compared with control totals of invoices.

Invoices are sent for shipped goods, but are not recorded in the sales journal

Sales invoices are compared with shipping documents and approved customer orders before invoices are mailed.

Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious transactions

An employee, other than the bookkeeper, periodically prepares a bank reconciliation

Customers' checks are properly credited to customer accounts and are properly deposited, but errors are made in recording receipts in the cash receipts journal

Monthly statements are mailed to all customers with outstanding balances.

Customers' checks are credited to incorrect customer accounts

Approved sales orders are required for goods to be released from the warehouse.

Goods are removed from inventory for unauthorized orders

Shipping clerks compare goods received from the warehouse with approved sales orders

Goods shipped to customers do not agree with goods ordered by customers

And accounts receivable are immaterial, or the use of confirmations would be ineffective

There is a presumption that auditors will 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. And accounts receivable are composed of large accounts. And the effectiveness of confirmations is absolutely determined. Or accounts receivable are from extremely reputable customers.

Shipping documents file

To determine that all sales have been recorded, the auditors would select a sample of transactions from the: Shipping documents file. Sales journal. Accounts receivable subsidiary ledger. Remittance advices.

Accounts receivable subsidiary ledger

To test the existence assertion for recorded receivables, the auditors would select a sample from the: Sales orders file. Customer purchase orders. Accounts receivable subsidiary ledger. Shipping documents (bills of lading) file.

Over recorded sales due to a lack of control over the sales entry function

Which of the following is least likely to be considered an inherent risk relating to receivables and revenues? Restrictions placed on sales by laws and regulations. Decline in sales due to economic declines. Decline in sales due to product obsolescence. Over-recorded sales due to a lack of control over the sales entry function.

Recording sales when the customer is likely to return the goods.

Which of the following is most likely to be an example of fraudulent financial reporting relating to sales? Inaccurate billing due to a lack of controls. Lapping of accounts receivable. Misbilling a client due to a data input error. Recording sales when the customer is likely to return the goods.

Delivery has occurred or is scheduled to occur in the near future

Which of the following is not among the criteria that ordinarily exist for revenue to be recognized? Collectibility is reasonably assured. Delivery has occurred or is scheduled to occur in the near future. Persuasive evidence of an arrangement exists. The seller's price to the buyer is fixed or determinable.

Inflated sales for the year

Which of the following would most likely be detected by an auditor's review of the client's sales cutoff? Excessive goods returned for credit. Unrecorded sales discounts. Lapping of year-end accounts receivable. Inflated sales for the year.

Assess the allowance for uncollectible accounts for reasonableness

Which of the following would provide the most assurance concerning the valuation of accounts receivable? Trace amounts in the accounts receivable subsidiary ledger to details on shipping documents. Compare receivable turnover ratios to industry statistics for reasonableness. Inquire about receivables pledged under loan agreements. Assess the allowance for uncollectible accounts for reasonableness.

Monthly statements are mailed to all customers with outstanding balances

a. Invoices for goods sold are posted to incorrect customer accounts.

Shipping documents are compared with sales invoices when goods are shipped

b. Goods ordered by customers are shipped, but are not billed to anyone.

Theft of cash register sales

Which of the following is an example of misappropriation of assets relating to sales? Accidentally recording cash that represents a liability as revenue. Holding the sales journal open to record next year's sales as having occurred in the current year. Intentionally recording cash received from a new debt agreement as revenue. Theft of cash register sales.

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip

Different customer accounts are each credited for the same cash receipt

Write offs must be approved by a responsible official after review of a credit department recommendations and supportive evidence.

Identify the control that is most likely to prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable: Write-offs must be approved by a responsible official after review of credit department recommendations and supporting evidence. Write-offs must be approved by the accounts receivable department. Write-offs must be authorized by the shipping department. Write-offs must be supported by an aging schedule showing that only receivables overdue by several months have been written off.

Goods returned for credit are approved by the supervisor of the sales department

Invalid transactions granting credit for sales returns are recorded

Send positive confirmation requests.

Cooper, CPA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent real estate taxes. Internal control at the municipality is weak. To determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely: Send positive confirmation requests. Send negative confirmation requests. Examine evidence of subsequent cash receipts. Inspect the internal records, such as copies of the tax invoices that were mailed to the residents.

Customer orders are compared with an approved customer list

Credit sales are made to individuals with unsatisfactory credit ratings

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip

Customers' checks are misappropriated after being forwarded to the cashier for deposit

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.

Customers' checks are received for less than the customers' full account balances, but the customers' full account balances are credited

completeness

Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents to related sales invoices? Existence or occurrence. Completeness. Rights and obligations. Presentation and disclosure.