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Which of the following is not true about the confirmation of accounts receivable? A. Confirmation requests should be signed by the auditors B.Confirmation requests should be mailed directly by the auditors C. Confirmation requests should bear the auditors return address D. Confirmation requests should include a return envelope addressed to the office of auditors

A. Confirmation requests should be signed by the auditors

For effective internal control, the billing function should not be performed by the: A. Sales department. B. Accounting department. C. Finance department. D. Information Processing department.

A. Sales department

Which of the following would be least likely to diminish the validity of evidence obtained through information of accounts receivable? A. The confirmation request are sent on the clients letterhead B.The confirmation requests are mailed to customers by the internal auditors C.The client's mailroom personnel closely monitor and inspect confirmation requests during mailing. D.The return address on the envelope used to send the confirmation request is that of the client.

A. The confirmation request are sent on the clients letterhead

An auditor who uses a transaction cycle approach to assesing control risk most likely would test control activities related to transactions involving the sales of goods to customers with the A. collection receivables B.purchase of merchandise inventory C. payments of accounts payable C. sales of long-term debt

A. collection receivables

What type of error is the CPA most likely to discover when he/she examines all shipping reports dated in January of 20X1, shipped FOB shipping point, which were recorded in December of 20X0 as credit sales ? A.Accounts receivable are overstated at december 31 20X0 B.Accounts receivable are understated at December 31 20X0 C.Operating expenses are overstated for the 12 months ended December 31 20X0 D.Sales returns and allowance are overstated at December 31 20X0

A.Accounts receivable are overstated at december 31 20X0

Which of tre following is a likely procedure to test the adequacy of the allowance for doubtful accounts? A.Examine cash receipts received after year-end B.Confirm receivables C.Examine dates of purchase orders, D.Foot the receivables lead schedule

A.Examine cash receipts received after year-end

When control risk for the existence assertion is assessed at a high level, which of the following is a likely effect with respect to the auditors' confirmation of receivables? A.The account balances as of year-end will generally be confirmed B.The auditors will in general use blank rather than positive confirmation requests. C.The auditors will be required to confirm accounts as of an interim date (during the year under audit) and as of year-end. D.Confirmation will not in general be used as the auditor will rely primarily upon support such as vendors , invoices, purchase orders and receiving reports.

A.The account balances as of year-end will generally be confirmed

To test the existence assertion for recorded receivables, an auditor would select a sample from the. A. Sales orders file. B. Customer purchase orders. C. Accounts receivable subsidiary ledger. D. Shipping documents (bills of lading) file.

Accounts Receivable subsidiary ledger

After the CPAs have selected particular accounts receivable for confirmation: A.As a control measure, the CPAs should carefully list the audited values of all of those accounts before turning the letters over to the client to type and mail. B.It is important that every account selected that has a material balance ultimately be verified by confirmation or the application of alternative procedures; immaterial balances never require any follow-up through alternative procedures. C.All requests for confirmation should be mailed in envelopes bearing the CPA's return address and should include a return envelope adressed to the cpa firm D.All differences between confirmation replies and book values should be reconciled by the CPA'S rather than the client

All requests for confirmation should be mailed in envelopes bearing the CPA's return address and should include a return envelope adressed to the cpa firm

When scheduling the audit work to be performed on an engagement the auditors should consider confirming accounts receivable balances at an interim date if: A. Subsequent collections are to be reviewed B. Internal control over receivables is good. C. Negative confirmation requests are to be used D. There is simultaneous examination of cash and accounts receivable

B. Internal control over receivables is good.

Which procedure would be of most assistance to an auditor discovering a large credit sale that has errorneously been recorded twice? A. Footing the sales journal B. Confirming accounts receivable C.Tracing the total saes in the sales journal to the general ledger D. Observation of the physical count inventory count year-end.

B. Confirming accounts receivable

In the confirmation of accounts receivable, the auditor is most closely associated with A. Business risk B.Detection risk C.Inherent risk D.Relative risk

B. Detection risk

Which of the following is not true about the auditors verification of notes receivable? A. The intereset revenye on notes receivable is usually audited by independent computation B. Inspecting the notes is sufficient evidence of existence of the notes. C. The auditors may evaluate the collectability of notes by inspecting credit files. D. Confirmation of notes payable to banks may be accomplished in conjunction with the confirmation of cash balances.

B. Inspecting the notes is sufficient evidence of existence of the notes.

Audtors may use positive and/or negative forms of confirmation requests for accounts receivable. Of the following, which combinations is it most likely that the auditors will use? A. The postive form used a large balances and the negative form for the small balances. B. The positive form used for large balances and the negative form for the small balances C. The positive form used for trade receivables and the negative form for other receivables. D. The positive form when controls related to receivables are satisfactory and the negative form when controls related to receivables are unsatisfactory.

B. The positive form used for large balances and the negative form for the small balances

Which of the following manipulations would understate receivables on the financial statements? A. Understatement of cash sales B. Closing the sales journal prior to year-end C.Closing the cash receipts journal prior to year-end D.The sales journal was held open after year-end

B. closing the sales journal prior to year-end

Which of the following is not typically considered to be an alternate procedure for handling non replies to accounts receivable confirmation requests? A.Examine sales invoices B.Inclusion of the information in the engagement letter C.Examine corrrespondance D. Examine any subsequent cash receipts

B.Inclusion of the information in the engagement letter

The auditors obtain audit evidence for accounts receivables by using positive or negative confirmation requests. Under which of the following circumstances might have the negative form of the accounts receivable confirmation be useful? A. A substantial number number of accounts receivable are in dispute B. The combination of inherent risk and control risk is high C. Client records include a large number of relatvely small balances. D. The auditors believe that recipients of the requests are unlikely to give them consideration.

C. Client records include a large number of relatvely small balances.

The audit working papers often include a client-prepared, aged trial balance of accounts receivables as of the balance sheet date. This aging is best used by the auditors to: A. Consider internal control over credit sales. B. Test the accuracy of recorded charge sales. C. Estimate credit losses D. Verify the validity of the recorded receivables.

C. Estimate credit losses

An audit basically consists of having the auditor form an opinion regarding management's financial statement assertions. The auditor therefore develops general and specific program steps to apply to the accounts and transactions. In a particular case, s/he might do this by: A. Tracing sales invoices to shipping documents to tests the completeness of reported sales B.Tracing shipping documents to sales invoices to test the occurrence of reported sales C. Tracing sales invoices to shipping documents to test the occurrence of reported sales D. Tracing sales invoices to shipping documents to test the completeness of recorded accounts receivables

C. Tracing sales invoices to shipping documents to test the occurrence of reported sales

Tracing recorded sales transactions to the bills of lading provides evidence about the: A. Completeness of sales transactions. B. Collectibility of sales transactions. C. Occurrence of sales transactions. D. Billing of all sales transactions.

C. occurrence of sales transactions

Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal control over the revenue cycle? A.Fictitious transactions may be recorded that cause an understatement of revenues and an overstatment of receivables. B.Claims received from customers for goods returned (and unpaid for) may be intentionally recorded in other customers' accounts permitting a misappropriation of cash. C.Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash. D.The failure to prepare shipping documents may lead to an understatement of inventory balances

C.Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash.

Which of the following is consistent with effective internal control over sales transactions? A.The accounting department prepares a shipping report authorizing the shipment of goods B.The accounting department accounts for all receiving reports C.The billing department accounts for all shipping documents D.The accounts payable department annually approves the extension of credit to customers

C.The billing department accounts for all shipping documents

Which of the following fraudelent activities most likely could be perpetraded due to lack of effective internal controls in the revenue cycles? A.Merchandise received is not promptly reconciled to the outstanding purchsae order file B.Obsolete items included in inventory balances are rarely reduced to the lower of cost or market value C.The write-off of receivables by personnel who receive cash permits the misapporpations of cash D. fictitious transactions are recorded that cause an understatement of revenue and overstatement of receivables

C.The write-off of receivables by personnel who receive cash permits the misapporpations of cash

The department approving a sales transaction should be the shipping department.

FALSE

Once a CPA has determined that accounts receivable have increased due to slow collections in a "tight money" enviroment, the CPA would be likely to : A. Increase the balance in the allowance for bad debts accounts B. Review the aging concern ramifications C. Review the credit and collection policy D. Expand tests of collectibility.

D. Expand tests of collectibility.

To verify that all sales that have been shipped to customers have been recorded, a test of transactions should be completed on a representative sample drawn from: A. The sales journal B.The billing clerks file of sales C.Duplicate copies of sales invoices D. The shipping clerks file of duplicate copies of bills of landing.

D. The shipping clerks file of duplicate copies of bills of landing.

Which of the following would indicate the need to use positive accounts receivable confirmation requests ? A. large populations consisting of small balances B. good internal control over accounts receivables C. most accounts are with large reputable companies D. a large number of accounts receivable are in dispute

D. a large number of accounts receivable are in dispute

Your client performed the physical count of inventory as of November 30, one month prior to year-end. Subsequently, your client closed the sales journal on 12/29/XX, two days before year-end, and reported those two days' credit sales in January of the next year. Assuming the client uses a perpetual inventory system, which of the following is most likely to be overstated relating to the year XX financial statements? A) Sales. B) Cash. C) Inventory. D) Accounts receivable.

Inventory

Which of the following is least likely to be typically considered to be an alternate procedure for handling nonreplies to accounts receivable confirmation requests A.Examine bills of lading. B.Physically examine items sold. C.Examine correspondence. D.Examine subsequent cash receipts.

Physically examine items sold

A client might overstate December 31 accounts receivable balances by dating and recording January transactions in December. Such entries recorded in which journal are most likely to achieve this end? A. Cash receipts. B. Payroll. C. Purchases. D. Sales.

Sales

Analytical procedures performed during an audit indicate that accounts receivable doubled since the end of the prior year. However the allowance for doubtful accounts as a % of accounts receivable remained about the same. Which of the following client explanations would satisfy the auditor? A greater percentage of accounts receivable are listed in the "more than 120 days overdue" category than in the prior year. B.Internal control activities over the recording of cash receipts have been improved since the end of the prior year. C.The client opened a second retail outlet during the current year and its credit sales approximately equaled the older outlet. D.The client tightened its credit policy during the current year and sold considerably less merchandise to customers with poor credit ratings.

The client opened a second retail outlet during the current year and its credit sales approximately equaled the older outlet.

Accounts receivable that are written off should not be turned over to a collection agency

false

CPAs use negative accounts receivable confirmation requests more frequently than positive accounts receivable confirmation requests.

false

confirmation requests should contain a "business reply" envelope addressed to the auditors at the clients address

false

To obtain the best evidence regarding the completeness of recorded accounts receivable, the auditors: A. Trace a sample of the bills of lading to sales invoices. B. Confirm a sample of accounts payable. C. Review the aging of accounts receivable. D. Trace a sample of recorded sales to shipping documents.

trace a sample of the bills of landing to sales invoices

An aged trial balance of accounts receivable may provide evidence on the adequacy of the allowance for uncollectible accounts.

true

analytical procedures are used by auditors to gain evidence about the adequacy of the allowance for uncollectible accounts

true

confirmation of accounts receivables by direct communication with the debtor tests the existence of accounts receivables

true

confirmation of accounts receivables provides some assurance that no lapping or other manipulation affecting accounts receivables is being carried on

true

when its impossible to confirm accounts receivables, the auditors may be able to satisfy themselves as to the existence of accounts receivables by alternative procedures

true