Question 1

The positive (as opposed to the negative) form of receivables confirmation may be preferred when:

Accepted Answer

A)  internal control surrounding accounts receivable is considered to be effective.
B)  there is reason to believe that a substantial number of accounts may be in dispute.
C)  a large number of small balances are involved.
D)  the auditor believes that the recipients of the confirmations will give the requests adequate consideration.E) C) and D)
F) A) and D)

Question 2

Cutoff misstatements can occur for sales, sales returns, and cash receipts.List below the threefold approach an auditor performs for each account above to determine the reasonableness of the cutoff.

Accepted Answer

1.Decide on the appropriate cr...

Question 3

The most important test of details of balances to determine the existence of recorded accounts receivable is:

Accepted Answer

A)  tracing details of sales invoices to shipping documents.
B)  tracing the credits in accounts receivable to bank deposits.
C)  tracing sales returns entries to credit memos issued and receiving room reports.
D)  the confirmation of customers' balances.E) A) and C)
F) B) and C)

Question 4

Tests of the realizable value balance-related audit objective are for the purpose of evaluating the allowance for doubtful accounts.

Accepted Answer

A) True 
 B)False

Question 5

The accounts receivable balance-related audit objective net realizable value is not affected by assessed control risk for sales or cash receipts.

Accepted Answer

A) True 
 B)False

Question 6

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared.This test is to satisfy the audit objective of:

Accepted Answer

A)  accuracy.
B)  existence.
C)  control.
D)  completeness.E) A) and B)
F) A) and C)

Question 7

The most effective audit evidence gathered for accounts receivable is the:

Accepted Answer

A)  detail tie-in of the records.
B)  analysis of the allowance for doubtful accounts.
C)  confirmation of accounts receivable.
D)  examination of sales invoices.E) A) and D)
F) A) and C)

Question 8

Cutoff misstatements occur when:

Accepted Answer

A)   
B)   
C)   
D)   E) B) and C)
F) None of the above

Question 9

The two primary classes of transactions in the sales and collection cycle are:

Accepted Answer

A)  sales and sales discounts.
B)  sales and cash receipts.
C)  sales and sales returns.
D)  sales and accounts receivable.E) A) and B)
F) C) and D)

Question 10

A type of positive confirmation known as a blank confirmation:

Accepted Answer

A)  requests the recipient to fill in the amount of the balance.
B)  is considered less reliable than the regular positive confirmation.
C)  generates as high a response rate as the regular positive confirmation form.
D)  is used when the auditor is confirming several small balances.E) A) and B)
F) A) and C)

Question 11

Negative confirmations normally require a larger sample size than positive confirmations.

Accepted Answer

A) True 
 B)False

Question 12

Tests of details of balances focus on testing the year-end balances of balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 13

A confirmation is a type of audit evidence.

Accepted Answer

A) True 
 B)False

Question 14

Confirmation is the most common test of details of balances for the accuracy of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 15

For cash receipts, the occurrence transaction-related audit objective affects which of the following balance-related audit objective?

Accepted Answer

A)  Existence
B)  Completeness
C)  Rights
D)  Detail tie-inE) None of the above
F) A) and C)

Question 16

When sending confirmations during most audits of accounts receivable, the emphasis is often on confirming larger and older accounts.

Accepted Answer

A) True 
 B)False

Question 17

For sales, the completeness transaction-related audit objective affects the existence balance-related audit objective.

Accepted Answer

A) True 
 B)False

Question 18

Describe each of the following types of confirmations:
•Positive confirmation
•Blank confirmation
•Invoice confirmation
•Negative confirmation

Accepted Answer

•Positive confirmations are communicatio...

Question 19

Both U.S.and international auditing standards require the use of confirmations for accounts receivable.

Accepted Answer

A) True 
 B)False

Question 20

Because of its central role in auditing of accounts receivable, which of the following would normally be one of the first items tested?

Accepted Answer

A)  Accounts receivable master file
B)  Customer file
C)  Aged trial balance
D)  Sales registerE) All of the above
F) None of the above

Exam 16: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

For sales, the completeness transaction-related audit objective affects the existence balance-related audit objective.

Correct AnswerverifiedShow Answer

A type of positive confirmation known as a blank confirmation:

Correct AnswerverifiedShow Answer

Cutoff misstatements can occur for sales, sales returns, and cash receipts.List below the threefold approach an auditor performs for each account above to determine the reasonableness of the cutoff.

Correct Answerverified1.Decide on the appropriate cr...View AnswerShow Answer

When sending confirmations during most audits of accounts receivable, the emphasis is often on confirming larger and older accounts.

Correct AnswerverifiedShow Answer

The positive (as opposed to the negative) form of receivables confirmation may be preferred when:

Correct AnswerverifiedShow Answer

Tests of the realizable value balance-related audit objective are for the purpose of evaluating the allowance for doubtful accounts.

Correct AnswerverifiedShow Answer

The most effective audit evidence gathered for accounts receivable is the:

Correct AnswerverifiedShow Answer

Negative confirmations normally require a larger sample size than positive confirmations.

Correct AnswerverifiedShow Answer

Describe each of the following types of confirmations: •Positive confirmation •Blank confirmation •Invoice confirmation •Negative confirmation

Correct Answerverified•Positive confirmations are communicatio...View AnswerShow Answer

Cutoff misstatements occur when:

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The most important test of details of balances to determine the existence of recorded accounts receivable is:

Correct AnswerverifiedShow Answer

The two primary classes of transactions in the sales and collection cycle are:

Correct AnswerverifiedShow Answer

Confirmation is the most common test of details of balances for the accuracy of accounts receivable.

Correct AnswerverifiedShow Answer

Because of its central role in auditing of accounts receivable, which of the following would normally be one of the first items tested?

Correct AnswerverifiedShow Answer

For cash receipts, the occurrence transaction-related audit objective affects which of the following balance-related audit objective?

Correct AnswerverifiedShow Answer

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared.This test is to satisfy the audit objective of:

Correct AnswerverifiedShow Answer

The accounts receivable balance-related audit objective net realizable value is not affected by assessed control risk for sales or cash receipts.

Correct AnswerverifiedShow Answer

Both U.S.and international auditing standards require the use of confirmations for accounts receivable.

Correct AnswerverifiedShow Answer

Tests of details of balances focus on testing the year-end balances of balance sheet accounts.

Correct AnswerverifiedShow Answer

A confirmation is a type of audit evidence.

Correct AnswerverifiedShow Answer

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1.Decide on the appropriate cr...
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•Positive confirmations are communicatio...
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