AUDITING EXAM: Chapter 10 Questions, LearnSmart Questions from all chapters
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Course
AUDITING
Institution
AUDITING
Which Objective? Confirm a sample of receivables by direct communication with the debtors ↝↝- Existence
Which Objective? Review confirmations of liabilities to determine if receivables have been sold ↝↝- Right to Assets (Rights and Obligations)
Which Objective? Select a samp...
AUDITING EXAM: Chapter 10 Questions, LearnSmart
Questions from all chapters
Which Objective? Confirm a sample of receivables by direct communication with the debtors ↝↝-
Existence
Which Objective? Review confirmations of liabilities to determine if receivables have been sold ↝↝-
Right to Assets (Rights and Obligations)
Which Objective? Select a sample of sales invoices in the subsequent period, and examine the related
shipping documents for date of shipment to ascertain whether some of those shipments at the end of
the period were inadvertently not recorded ↝↝- Completeness
Which Objective? Vouch sales and cash receipt transactions occurring near period end ↝↝- Cutoff of
Sales Transactions
Which Objective? Compare the amount of credits given to customers in the subsequent period to the
amount estimated by management ↝↝- Valuation of Assets
Which Objective? Provide a list of related parties to all members of the audit team to assist in
identification of the transacations ↝↝- Presentation and Disclosure
Overstatement may occur when sales for the ____ period are recorded in the _______ period. ↝↝-
Next, Current
Which of the following is an effective control over accounts receivable?
A. Balances in the subsidiary accounts receivable ledger should be reconciled to the general ledger
control account once a year, preferably at year end.
B. Responsibility for approval of the write-off of uncollectible accounts receivable should be assigned to
the cashier.
C. The billing function should be assigned to persons other than those responsible for maintaining
accounts receivable subsidiary records.
,D. Only persons who handle cash receipts should be responsible for the preparation of documents that
reduce accounts receivable balances. ↝↝- C. The billing function should be assigned to persons other
than those responsible for maintaining accounts receivable subsidiary records.
The use of the positive (as opposed to the negative) form of receivables confirmation is indicated when:
A. a large number of small balances are involved.
B. control risk for accounts receivable is assessed as low.
C. there is reason to believe that a substantial number of accounts may be in dispute.
D. there is reason to believe a significant portion of the requests will be answered. ↝↝- C. there is
reason to believe that a substantial number of accounts may be in dispute.
The auditor is examining copies of sales invoices only for the initials of the person responsible for
checking the extensions. This is an example of a:
A. test of controls.
B. test of balances.
C. dual purpose test.
D. substantive procedure ↝↝- A. test of controls.
An auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control
account as of October 31, 20X0. By this procedure, the auditor would be most likely to learn which of the
following?
A. An account balance is past due and should be written off.
B. An October invoice was improperly computed.
C. An October check from a customer was posted in error to the account of another customer with a
similar name.
D. An opening balance in a subsidiary ledger account was improperly carried forward from the previous
accounting period. ↝↝- D. An opening balance in a subsidiary ledger account was improperly carried
forward from the previous accounting period.
Which of the following audit procedures is most effective in testing credit sales for understatement?
A. Trace sample of initial sales slips through summaries to recorded general ledger sales.
, B. Confirm accounts receivable.
C. Trace sample of recorded sales from ledger to initial sales slip.
D. Age accounts receivable. ↝↝- A. Trace sample of initial sales slips through summaries to recorded
general ledger sales.
To determine that sales transactions have been recorded in the proper accounting period, the auditors
perform a cutoff review. Which of the following best describes the overall approach used when
performing a cutoff review?
A. Ascertain that management has included in the representation letter a statement that transactions
have been accounted for in the proper accounting period.
B. Analyze transactions occurring within a few days before and after year end.
C. Examine cash receipts in the subsequent period.
D. Confirm year-end transactions with regular customers. ↝↝- B. Analyze transactions occurring
within a few days before and after year end.
The confirmation of the client's trade accounts receivable as a means of obtaining audit evidence is
ordinarily considered to be a:
A. test of a control.
B. basic principle of attestation.
C. substantive procedure.
D. required observation technique. ↝↝- C. substantive procedure.
Which of the following would be the best protection for a company that wishes to prevent the "lapping"
of trade accounts receivable?
A. Have customers send payments directly to the company's depository bank.
B. Segregate duties so that no employee has access to both checks from customers and currency from
daily cash receipts.
C. Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming
mail.
D. Request that customers' payment checks be made payable to the company and addressed to the
treasurer. ↝↝- A. Have customers send payments directly to the company's depository bank
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