Audit

When the auditor does not receive a response to the positive confirmations, possible procedures include ______.

-sending second and third requests-examining specific subsequent cash receipts-examining shipping documentation

Which of the following statements are correct? Multiple select question. Confirmation requests should be made soon after the end of the accounting period to maximize the response rate. Sending confirmations at the end of the accounting period reduces the chance of timing differences. Accounts receivable should only be confirmed at year end except in rare circumstances.

Confirmation requests should be made soon after the end of the accounting period to maximize the response rate. Sending confirmations at the end of the accounting period reduces the chance of timing differences.

Which of the following statements are correct? Multiple select question. In most systems the revenue process does not interact with the inventory management process. Many accounting systems integrate purchasing and human resources with revenue. The revenue process is similar for all types of organizations.

Many accounting systems integrate purchasing and human resources with revenue. The revenue process is similar for all types of organizations.

Which of the following statements are correct? Multiple select question. The revenue process is similar for all types of organizations. Many accounting systems integrate purchasing and human resources with revenue. In most systems the revenue process does not interact with the inventory management process.

The revenue process is similar for all types of organizations. Many accounting systems integrate purchasing and human resources with revenue.

Which of the following statements are correct? Goods should not be shipped without proper authorization. The shipping function is responsible for ensuring customers are billed for orders. The shipping function is responsible for ensuring orders are filled correctly. Goods should not be shipped until they are paid for in full.

The shipping function is responsible for ensuring orders are filled correctly. Goods should not be shipped without proper authorization.

True or false: An industry's rate of technological changes can affect the potential for misstatements in this revenue process.

True

True or false: Related-party transactions is a common disclosure for revenue-related accounts.

True

A major drawback to the use of negative confirmations is ______.

a non response could mean balance is correct or customer ignored it

To test the auditor's concern with accounts receivables completeness, the aged trial balance should be reconciled to the ______.

accounts receivable general ledger account

The auditor assesses the adequacy of the allowance account by first examining the ______ for amounts that have been outstanding for a long time.

aged trial balance

To monitor the collection of receivables and ensure that the details of the accounts receivable subsidiary ledger agree with the general ledger control account, managers use the ______.

aged trial balance of accounts receivable

When payments are sent directly to an entity ______.

all checks should be restrictively endorsed a control listing should be prepared

It is the responsibility of ______ to ensure that all necessary financial statements disclosures are made.

auditors

The auditor's concern with the ___assertion over accounts receivable is whether all accounts receivable have been included in the subsidiary ledger and the general ledger account.

completeness

Control activities that ensure the ______ assertion include accounting for the numerical sequence of shipping documents and sales invoices and matching shipping documents with sales invoices.

completion

If goods are shipped or services are performed and no revenue is recognized, the ______ assertion has not been met.

completion

To provide evidence on the valuation of the allowance, the auditor looks at the aged trial balance for old items and ______.

considers historical collection to provide evidence of uncolletability for current items

If the entity does not have adequate controls to ensure that revenue transactions are recorded on a timely basis, sales may be recorded in the wrong accounting period. This relates to the ______ assertion.

cutoff

To test for proper authorization of early payment discounts, the auditor can ______.

examine a sample of cash receipts transactions to determine if the entity's cash discount policies are being followed

The major audit procedures for testing the________ assertion for accounts receivables are confirmation of customers' accounts balances and examination of subsequent cash receipts.

existence

True or false: In most entities, the treasurer's department is usually part of the credit function.

false

True or false: Substantive analytical procedures are inadequate audit tests for examining the fairness of revenue related accounts because such tests fail to provide sufficient evidence, even though they are low cost.

false

Ways to test the aged trial balance include ______.

footing and crossfooting the use of CAAT's

A shipping document should be prepared anytime ______.

goods are sent to a customer

The billing function is responsible for handling ______.

goods returned for credit

When the results of testing controls do not support the planned level of control risk, detection risk will ______.

have to be set lower

If there is a dispute between the auditor and management over when revenue should be recognized, the auditor should assess the risk of material misstatement as ______.

high

The accounting standard regarding revenue requires an entity to follow a five-step approach. The first step it to ______.

identify contractual agreement(s) with a customer

The assessment of the potential effects of________risk factors is one of the inputs for the assessment of the risk of material misstatement.

inherent

If the aggregate misstatement is ______ the tolerable misstatement, the auditor may accept the account as fairly presented.

less than

Many companies use a(n)________system in which customer payments are sent directly to the entity's bank.

lockbox

The credit authorization function has responsibility for ______.

monitoring customer payments, reviewing and preparing aged accounts recievable trial balance, preparing report of customer accounts that may need write off, requesting payments from customers who are delinquent

For a negative confirmation, a response is required ______.

only if the amount is incorrect

The auditor should ______ that there is a risk of material misstatement due to fraud relating to revenue recognition.

presume

The major control for preventing fictitious sales is ______.

proper segregation of duties

Sending confirmation requests at the end of the accounting period ______.

reduces the chance of timing differences-maximizes response rate

One of the most important controls in any accounting system is proper

segregation of duties

The main control that authorizes ______ is payment or proper credit authorization.

shipping goods

Management's estimate for the allowance for uncollectible accounts and sales returns can be difficult to audit because of the ______ that may be involved in determining proper value.

subjectivity

An account and the details of transactions with each customer are found in the accounts receivable

subsidiary ledger

To examine the fairness of revenue related accounts,____ ____procedures are useful audit tests because they provide sufficient evidence at low cost.

substantive analytical

When using a reliance strategy, the auditor conducts ______ to ensure that the controls in the revenue process operate effectively.

test of controls

Inherent risk factors that may affect the revenue process are ______.

the difficulty of auditing transactions and account balances, the complexity and contentiousness of revenue recognition issues, industry-related factors, misstatements detected in prior audits

Analyzing misstatements may lead the auditor to conclude that the original assessment of control risk was ______.

too low

If the auditor concludes that audit risk is unacceptably high, options include ______.

too low

The major issue related to accounts receivable is concerned with the net realizable value of accounts receivable

valuation

Because positive accounts receivable confirmations require customer responses, any accounts with no responses must be ______.

verified by the auditor using alternative procedures