ACCT 3222 Module 10 Questions with Correct
Answers
Which of the following actions would best conceal the theft of cash collections from sales
on account?
Understating the sales journal amounts.
To determine whether the entity's internal control operated effectively to minimize the
likelihood of failing to bill a customer for a shipment of goods, the auditor should begin
by selecting a sample of transactions from the population represented by the
Bill of lading (shipping report) file.
Which of the following is not a factor that an auditor would consider when assessing the
inherent risk associated with sales transactions?
The nature of the credit authorization process.
Tracing bills of lading (shipping reports) to sales invoices as a test of controls related to
the sales and collection process provides evidence that
Customers were billed for goods shipped to them.
Customers are more likely to complain to the entity if which of the following assertions
for cash receipts is violated?
Completeness.
Which of the following would not be considered a test in the area of accounts receivable
that relates to the existence assertion?
Trace the record of shipping to inclusion in the accounts receivable subsidiary ledger.
,Which of the following comparisons would be most useful to an auditor in evaluating
the overall results of an entity's sales efforts?
Current year sales to current year budgeted sales.
An auditor's purpose in reviewing credit ratings of customers with delinquent accounts
receivable is most likely to obtain evidence concerning management's assertions relating
to
Valuation or allocation.
Which of the following procedures would an auditor most likely perform related to
year-end accounts receivable confirmations when the auditor does not receive replies
even after second requests?
Inspect related shipping records and sales invoices documenting the merchandise sold to
customers.
According to SAB 101, which of the following is not a criterion for revenue recognition?
Cash is received.
Which of the following is not a key segregation of duties in the revenue process?
The accounts receivable function should be segregated from the invoice preparation function.
Which of the following is the population the auditor is most likely to draw from in order
to test the cutoff assertion for revenue?
Shipping documents.
Which of the following is not a typical procedure performed related to other non-trade
receivables?
, Write-off of receivables from officers against their bonus pay as those arrangements are
inappropriate.
If tolerable misstatement for the accounts receivable balance is $75,000 and the
aggregate factual misstatement found by the auditor is $82,000, the auditor is most
likely to
Request that the entity adjust its accounts receivable balance by $82,000.
For the control activities to be effective, employees maintaining the accounts receivable
subsidiary ledger should not also approve:
write-offs of customer accounts.
Which of the following controls is most likely to help ensure that all credit revenue
transactions of an entity are recorded?
The billing department supervisor matches prenumbered shipping documents with entries in
the sales journal.
Which of the following internal controls would be most likely to deter the lapping of
collections from customers?
segregation of duties between receiving cash and posting the accounts receivable ledger
Smith Corporation has numerous customers. A customer file is maintained and includes
a customer record with a name, an address, a credit limit, and an account balance. The
auditor wishes to test this file to determine whether credit limits are being exceeded.
The best procedure for the auditor to follow would be to:
develop a routine in IDEA or an audit data analytic to compare credit limits with account
balances and identify any account with a balance exceeding its credit limit.
Answers
Which of the following actions would best conceal the theft of cash collections from sales
on account?
Understating the sales journal amounts.
To determine whether the entity's internal control operated effectively to minimize the
likelihood of failing to bill a customer for a shipment of goods, the auditor should begin
by selecting a sample of transactions from the population represented by the
Bill of lading (shipping report) file.
Which of the following is not a factor that an auditor would consider when assessing the
inherent risk associated with sales transactions?
The nature of the credit authorization process.
Tracing bills of lading (shipping reports) to sales invoices as a test of controls related to
the sales and collection process provides evidence that
Customers were billed for goods shipped to them.
Customers are more likely to complain to the entity if which of the following assertions
for cash receipts is violated?
Completeness.
Which of the following would not be considered a test in the area of accounts receivable
that relates to the existence assertion?
Trace the record of shipping to inclusion in the accounts receivable subsidiary ledger.
,Which of the following comparisons would be most useful to an auditor in evaluating
the overall results of an entity's sales efforts?
Current year sales to current year budgeted sales.
An auditor's purpose in reviewing credit ratings of customers with delinquent accounts
receivable is most likely to obtain evidence concerning management's assertions relating
to
Valuation or allocation.
Which of the following procedures would an auditor most likely perform related to
year-end accounts receivable confirmations when the auditor does not receive replies
even after second requests?
Inspect related shipping records and sales invoices documenting the merchandise sold to
customers.
According to SAB 101, which of the following is not a criterion for revenue recognition?
Cash is received.
Which of the following is not a key segregation of duties in the revenue process?
The accounts receivable function should be segregated from the invoice preparation function.
Which of the following is the population the auditor is most likely to draw from in order
to test the cutoff assertion for revenue?
Shipping documents.
Which of the following is not a typical procedure performed related to other non-trade
receivables?
, Write-off of receivables from officers against their bonus pay as those arrangements are
inappropriate.
If tolerable misstatement for the accounts receivable balance is $75,000 and the
aggregate factual misstatement found by the auditor is $82,000, the auditor is most
likely to
Request that the entity adjust its accounts receivable balance by $82,000.
For the control activities to be effective, employees maintaining the accounts receivable
subsidiary ledger should not also approve:
write-offs of customer accounts.
Which of the following controls is most likely to help ensure that all credit revenue
transactions of an entity are recorded?
The billing department supervisor matches prenumbered shipping documents with entries in
the sales journal.
Which of the following internal controls would be most likely to deter the lapping of
collections from customers?
segregation of duties between receiving cash and posting the accounts receivable ledger
Smith Corporation has numerous customers. A customer file is maintained and includes
a customer record with a name, an address, a credit limit, and an account balance. The
auditor wishes to test this file to determine whether credit limits are being exceeded.
The best procedure for the auditor to follow would be to:
develop a routine in IDEA or an audit data analytic to compare credit limits with account
balances and identify any account with a balance exceeding its credit limit.
