AUDITING CHAPTER 16 EXAM BANK SOLUTION MANUAL ALREADY PASSED
As a result of analytical procedures, the auditor determines that the gross profit percentage has
declined from 30% in the preceding year to 20% in the current year. The auditor should - Answers
Consider the possibility of a misstatement in the financial statements.
An auditor's preliminary analysis of accounts receivable turnover revealed the following rates over these
accounting periods: 2016 (4.3) 2015 (66.2) 2014 (7.3): Which of the following is the most likely cause of
the decrease in accounts receivable turnover? - Answers Liberalization of credit policy
After a CPA has determined that accounts receivable have increased as a result of slow collections in a
"tight money" environment, the CPA will be likely to - Answers expand tests of collectibility
Which of the following procedures will an auditor most likely perform for year-end accounts receivable
confirmations when the auditor did not receive replies to second requests? - Answers Inspect the
shipping records documenting the merchandise sold to the debtors.
The negative form of accounts receivable confirmation request is useful except when - Answers
Individual account balances are relatively large
The return of a positive confirmation of accounts receivable without an exception attests to the -
Answers accuracy of the receivable balance.
Which of the following will likely provide the most assurance concerning the accuracy balance-related
objective for accounts receivable? - Answers Vouch amounts in the subsidiary ledger to details on
shipping documents.
Which of the following audit procedures will best uncover an understatement of sales and accounts
receivable? - Answers Test a sample of sales transactions, selecting the sample from prenumbered
shipping documents.
The confirmation of customers' accounts receivable rarely provides reliable evidence about the
completeness assertion because - Answers customers may not be inclined to report understatement
errors in their accounts.
Which of the following is least likely to be a reasonable explanation for an increase in accounts
receivable turnover? - Answers Allowance of a new grace period for customer payments
An auditor who is auditing accounts receivable would least likely perform which of the following tests? -
Answers Select cash disbursements made shortly after year-end and examine the supporting
documentation such as receiving reports and vendor invoices.
The auditor sends out positive accounts receivable confirmations for a client. Assuming a second
confirmation is sent out to a major customer who still fails to respond, the auditor should: - Answers
Send out a third confirmation request and if no response, perform alternative procedures.
As a result of analytical procedures, the auditor determines that the gross profit percentage has
declined from 30% in the preceding year to 20% in the current year. The auditor should - Answers
Consider the possibility of a misstatement in the financial statements.
An auditor's preliminary analysis of accounts receivable turnover revealed the following rates over these
accounting periods: 2016 (4.3) 2015 (66.2) 2014 (7.3): Which of the following is the most likely cause of
the decrease in accounts receivable turnover? - Answers Liberalization of credit policy
After a CPA has determined that accounts receivable have increased as a result of slow collections in a
"tight money" environment, the CPA will be likely to - Answers expand tests of collectibility
Which of the following procedures will an auditor most likely perform for year-end accounts receivable
confirmations when the auditor did not receive replies to second requests? - Answers Inspect the
shipping records documenting the merchandise sold to the debtors.
The negative form of accounts receivable confirmation request is useful except when - Answers
Individual account balances are relatively large
The return of a positive confirmation of accounts receivable without an exception attests to the -
Answers accuracy of the receivable balance.
Which of the following will likely provide the most assurance concerning the accuracy balance-related
objective for accounts receivable? - Answers Vouch amounts in the subsidiary ledger to details on
shipping documents.
Which of the following audit procedures will best uncover an understatement of sales and accounts
receivable? - Answers Test a sample of sales transactions, selecting the sample from prenumbered
shipping documents.
The confirmation of customers' accounts receivable rarely provides reliable evidence about the
completeness assertion because - Answers customers may not be inclined to report understatement
errors in their accounts.
Which of the following is least likely to be a reasonable explanation for an increase in accounts
receivable turnover? - Answers Allowance of a new grace period for customer payments
An auditor who is auditing accounts receivable would least likely perform which of the following tests? -
Answers Select cash disbursements made shortly after year-end and examine the supporting
documentation such as receiving reports and vendor invoices.
The auditor sends out positive accounts receivable confirmations for a client. Assuming a second
confirmation is sent out to a major customer who still fails to respond, the auditor should: - Answers
Send out a third confirmation request and if no response, perform alternative procedures.
