Exam (elaborations) Test Bank For Compilance and Substantive Audit Procedures

The overall objective in the audit of the sales and collection cycle is to evaluate whether a. The sales account and the accounts receivable account are free of errors. b. The sales account and the accounts receivable account are free of material errors. c. The sales account and the accounts receivable account are presented fairly in accordance with generally accepted accounting principles. d. The account balances affected by the cycle are fairly presented in accordance with generally accepted accounting principles. 2. For the most part, the audit of the sales and collection cycle a. Cannot be performed until the audit of cash is completed. b. Can be performed independently of the audit of other cycles. c. Must be performed simultaneously with the audit of the purchases and disbursements cycle. d. Must be performed first so that the audit of the other cycles can rely on the data. 3. For the most part, the evidence gathered during the audit of the sales and collection cycle can be subjectively combined with the other parts of the audit a. As the evidence accumulation process proceeds. b. Only when all fieldwork processes of the engagement are completed. c. Only after the audit of the sales and collection cycle is concluded. d. After the conclusive of both the cash cycle and the sales and collection cycle. 4. Which one of the following is not typically included in the sales and collection cycle? a. Sales returns and allowances. b. Bad debt expenses. c. Allowance for uncollectible accounts. d. Cash credits from the cash disbursements journal. 5. The customer’s request for merchandise, the customer order, would be in the form of a. An oral request. b. A written request on customer’s letterhead. c. A written request on a pre-printed form. d. Any of the above three formats. 6. A document for recording the description, quantity, and related information for goods ordered by a customer is the a. Customer order. b. Sales order. c. Shipping document. d. Remittance advice. 7. The document used to indicate to the customer the amount of a sale and due date of the payment is the a. Sales order. b. Shipping document. c. Bill of lading. d. Sales invoice. 8. The document used as the basis for recording sales transactions and updating the accounts receivable master file is the a. Sales order. b. Bill of lading. c. Sales journal. d. Sales invoice. 9. A document prepared to initiate shipment of the goods sold is the a. Sales order. b. Bill of lading. c. Sales invoice. d. Customer order. 10. When posting the Sales Journal, details of a journal are posted to “X” and journal are posted to “Y” a. X = the sales account, Y = the general ledger. b. X = the accounts receivable master file, Y = the general ledger. c. X = the sales account, Y = the accounts receivable subsidiary ledger. d. X = the accounts receivable account in the general ledger, Y = the sales account in the general ledger. 11. The report which typically includes information analyzed by key components as sales person, product, and territory is the a. Remittance advice. b. Summary sales report. c. Accounts receivable master life. d. Monthly statement. 12. The document which supports reductions in accounts receivable is the a. Remittance advice. b. Credit memo. c. Sales invoice. d. Monthly statement. 13. The document which accompanies the customer’s payment is the a. Credit memo. b. Remittance advice. c. Sales invoice. d. Monthly statement. 14. The document which is used to permit the immediate deposit of cash and to improve the control over the custody of assets is the a. Sales invoice. b. Credit memo. c. Remittance advice. d. Cash receipts journal. 15. The daily entries in the cash receipts journal are supported by the a. Sales invoices. b. Shipping documents. c. Remittance advices. d. Credit memos. 16. A file for recording individual sales, cash receipts, and sales returns and allowances for each customer is the a. Sales journal. b. Cash receipts journal. c. General ledger. d. Accounts receivable subsidiary ledger. 17. The total of the individual account balances in the accounts receivable master file equals the a. Total sales for the period. b. Total sales less the total cash received for the period. c. Balance of the accounts receivable account in the general ledger. d. Balance of the sales account in the general ledger. 18. A listing of the amount owed by cash customer which shows how long each component part has been due is the a. Trial balance. b. Working trial balance. c. Accounts receivable trial balance. d. Aged accounts receivable trial balance.