Ch. 11 Review Questions

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

Inflated sales for that 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

Which of the following is most likely to be an example of fraudulent financial reporting relating to sales?

Recording sales when a customer is likely to return the goods

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

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

Shipping documents file

Which of the following is an example of misappropriation of assets relating to sales?

Theft of cash register sales

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

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

Accounts receivables subsidiary ledger

The auditors should 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

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

Assess the allowance for uncollectible accounts for reasonableness

Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents related to sales invoices?

Completeness

Under SEC rules,which of the following is not among the criteria that ordinarily exists for revenue to be recognized?

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