Chapter 7 & 8 Bus Assurance and Auditing TEST
BANK Practice Questions with correct answers
Chamberlain College of Nursing
What is the standard sequence of the revenue and collection cycle?
Ans Order, Ship, Bill, Collect
QUIZ What are the four key documents in the revenue and collection cycle?
Ans Customer Order, Shipping Document, Sales Invoice, and Cash Receipts
QUIZ What are the three primary assertions for Revenue?
Ans Occurrence, Completeness, and Cutoff
QUIZ What are the three primary assertions for Accounts Receivable?
Ans Existence, Completeness, and Valuation
QUIZ What are the five steps of the revenue recognition model?
,Ans Identify contract, identify obligations, determine price, allocate price, and recognize revenue
QUIZ What is the purpose of a 3-way match in auditing?
Ans To confirm the occurrence and accuracy of a transaction by matching the customer order, shipping
document, and invoice
QUIZ What is the difference between tracing and vouching in dual-direction testing?
Ans Tracing (completeness) goes from source documents to the journal; vouching (occurrence) goes
from the journal to source documents
QUIZ When should a positive confirmation be used for Accounts Receivable?
Ans For high-risk or large account balances where a response is mandatory
QUIZ When should a negative confirmation be used for Accounts Receivable?
Ans For low-risk or small account balances where the customer only responds if the information is
incorrect
QUIZ What is the primary goal of cutoff testing?
Ans To ensure sales are recorded in the correct time period by comparing shipping dates to invoice
dates
QUIZ What is the risk of underestimating returns and allowances?
Ans Revenue becomes overstated
, QUIZ What condition must be met for revenue recognition regarding performance?
Ans The company must have substantially accomplished what it must to be entitled to the benefits
QUIZ On what date are sales normally recorded?
Ans The date of the sales invoice
QUIZ From which document do auditors normally select balances to confirm?
Ans The accounts receivable listing
QUIZ Which account is NOT part of the revenue and collection cycle?
Ans Purchase Returns and Allowances (this belongs to the expenditure cycle)
QUIZ To which assertion is the 'credit sales approved by credit department' control directed?
Ans Occurrence
QUIZ What is the best protection against the 'lapping' of trade accounts receivable?
Ans Having customers send payments directly to the company's depository bank
QUIZ What internal control best prevents concealing a cash shortage by writing off a receivable?
Ans Requiring write-offs to be approved by a responsible officer after reviewing credit department
recommendations and evidence
BANK Practice Questions with correct answers
Chamberlain College of Nursing
What is the standard sequence of the revenue and collection cycle?
Ans Order, Ship, Bill, Collect
QUIZ What are the four key documents in the revenue and collection cycle?
Ans Customer Order, Shipping Document, Sales Invoice, and Cash Receipts
QUIZ What are the three primary assertions for Revenue?
Ans Occurrence, Completeness, and Cutoff
QUIZ What are the three primary assertions for Accounts Receivable?
Ans Existence, Completeness, and Valuation
QUIZ What are the five steps of the revenue recognition model?
,Ans Identify contract, identify obligations, determine price, allocate price, and recognize revenue
QUIZ What is the purpose of a 3-way match in auditing?
Ans To confirm the occurrence and accuracy of a transaction by matching the customer order, shipping
document, and invoice
QUIZ What is the difference between tracing and vouching in dual-direction testing?
Ans Tracing (completeness) goes from source documents to the journal; vouching (occurrence) goes
from the journal to source documents
QUIZ When should a positive confirmation be used for Accounts Receivable?
Ans For high-risk or large account balances where a response is mandatory
QUIZ When should a negative confirmation be used for Accounts Receivable?
Ans For low-risk or small account balances where the customer only responds if the information is
incorrect
QUIZ What is the primary goal of cutoff testing?
Ans To ensure sales are recorded in the correct time period by comparing shipping dates to invoice
dates
QUIZ What is the risk of underestimating returns and allowances?
Ans Revenue becomes overstated
, QUIZ What condition must be met for revenue recognition regarding performance?
Ans The company must have substantially accomplished what it must to be entitled to the benefits
QUIZ On what date are sales normally recorded?
Ans The date of the sales invoice
QUIZ From which document do auditors normally select balances to confirm?
Ans The accounts receivable listing
QUIZ Which account is NOT part of the revenue and collection cycle?
Ans Purchase Returns and Allowances (this belongs to the expenditure cycle)
QUIZ To which assertion is the 'credit sales approved by credit department' control directed?
Ans Occurrence
QUIZ What is the best protection against the 'lapping' of trade accounts receivable?
Ans Having customers send payments directly to the company's depository bank
QUIZ What internal control best prevents concealing a cash shortage by writing off a receivable?
Ans Requiring write-offs to be approved by a responsible officer after reviewing credit department
recommendations and evidence
