AUDIT Test 5

an auditor is required to confirm accounts receivable if the accounts receivable balances are

material to the financial statements

The negative request form of accounts receivable confirmation may be used when the

Risk of material misstatement is LOW Number of small balances is MANY Consideration by the recipient is LIKELY

Analytical procedures performed during an audit indicate that accounts receivable doubles since the end of the prior year. However, the allowance for doubtful accounts as a percentage of accounts receivable remained about the same. Which client explanation would satisfy the auditor

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

Which of the following controls will most likely 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 officer after review of credit department recommendations and supporting evidence

Which of the following are not directly involved in the revenue cycle

receiving department clerk

In the confirmation of accounts receivable, the auditor would most likely

request confirmation of a sample of the inactive accounts

for the purpose of effective internal control, postdated checks received from customers should be

restrictively endorsed

The most effective audit procedure for determining the collectibility of an account receivable

review of the subsequent cash collections

Tracing copies of computer prepared sales invoices to copies of the corresponding computer-prepared shipping documents provides evidence that

sales billed to customers were actually shipped

Tracing shipping documents to pre numbered sales invoices provides evidence that

shipments to customers were properly invoiced

Which of the following circumstances is the use of the blank form of positive confirmation of accounts receivable most likely preferable

the recipients are likely to sign the confirmations without devoting proper attention to them

An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This may indicate that

there was improper cut off sales at the end of the year