Audit quiz

To test the existence assertion for recorded receivables, the auditors would select a sample from the:

Accounts receivable subsidiary ledger.

Which of the following accounts is not normally part of the revenue and collection cycle?

Purchases Returns and Allowances

When a sample of customer accounts receivable is selected for vouching debits, auditors will vouch them to

Sales invoices with shipping documents and customer sales invoices.

To conceal a theft involving receivables, a dishonest bookkeeper might charge which of the following accounts?

Sales returns.

When auditing the revenue and collection cycle, auditors normally select balances to confirm from the

Accounts receivable listing.

Sales are normally recorded on the date of the

Sales Invoice

Which of the following responses to an accounts receivable confirmation at December 31 would cause an audit team the most concern?

"These goods were returned for credit on November 15."

Which of the following would provide the most assurance concerning the valuation of accounts receivable?

Assess the allowance for uncollectible accounts for reasonableness.

Audit documentation often includes a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. The audit team uses this aging primarily to

Estimate credit losses.

In the audit of accounts receivable, the most important emphasis should be on the

Existence assertion.

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide the strongest evidence concerning the

Existence of the balances confirmed.

Which of the following would be the best protection for a company that wishes to prevent the "lapping" of trade accounts receivable?

Have customers send payments directly to the company's depository bank.

Which of the following would most likely be detected by an auditor's review of the client's sales cutoff?

Inflated sales for the year.

Which of the following might be detected by auditors' cutoff review and examination of sales journal entries for several days prior to the balance sheet date?

Inflating sales for the year.

Which of the following is least likely to be considered an inherent risk relating to receivables and revenues?

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

A client has a separate sales group for its largest "preferred" customers, a select group of customers who normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?

Send out positive

Which of the following internal control activities most likely would deter lapping of collections from customers?

Separation of duties between receiving cash and posting the accounts receivable ledger.

When an audit team traces a sample of shipping documents to the related sales invoice copies, they are trying to find relevant evidence that

Shipments to customers were invoiced.

To determine that all sales have been recorded, the auditors would select a sample of transactions from the:

Shipping documents file.

An audit client sells 15 to 20 units of product annually. A large portion of the annual sales occur in the last month of the fiscal year. Annual sales have not materially changed over the past five years. Which of the following approaches would be most effective concerning the timing of audit procedures for revenue?

The auditor should inspect transactions occurring in the last month of the fiscal year and review the related sale contracts to determine that revenue was posted in the proper period.

Revenues are normally considered to have been earned when

The company has substantially accomplished what it must to be entitled to the benefits