Question 1

Dual direction testing involves samples of transactions selected to obtain evidence about control over _________________________________ in one direction and control over _________________________________ in the other direction.
Question also found in study guide

Accepted Answer

The answer of Dual direction testing involves samples of transactions...

Question 2

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records.
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Accepted Answer

The answer of Another way to obtain information about the...

Question 3

The pending sales orders can be reviewed for evidence of the _________________________________ of recorded _________________________________ and ________________________________.
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Accepted Answer

The answer of The pending sales orders can be reviewed...

Question 4

The actions in tests of controls involve ________________________________,________________________________,________________________________,_________________________________ and ________________________________.
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Accepted Answer

The answer of The actions in tests of controls involve...

Question 5

Which of the following controls is designed to meet the completeness assertion?

Accepted Answer

Prenumbering invoices, shipping documents, and sales orders ensures that all sales transactions are recorded and there are no missing sales. This control helps to meet the completeness assertion, which requires that all sales transactions are recorded in the financial statements. Option B helps to meet the accuracy assertion, C helps to meet the existence assertion, and D helps to meet the cutoff assertion.

Question 6

Assertions related to account balances are ________________________________,________________________________,_________________________________ ________________________________,_________________________________ and ________________________________.
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Accepted Answer

The answer of Assertions related to account balances are ________________________________,________________________________,_________________________________...

Question 7

Smith Manufacturing Company's accounts receivable clerk has a friend who is also Smith's customer.The accounts receivable clerk,on occasion,has issued fictitious credit memorandums to his friend for goods supposedly returned (these returns did not exist).The most effective control for preventing this activity is to

Accepted Answer

Requiring receiving reports to support all credit memorandums before they are approved ensures that there is physical or documented evidence of a return, making it difficult to issue fictitious credits without actual returns. This control directly addresses the issue of issuing credit for non-existent returns.

Question 8

A procedure to gather evidence on both account balances and controls is called a ______________________________________ procedure.
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Accepted Answer

The answer of A procedure to gather evidence on both...

Question 9

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

Accepted Answer

The revenue and collection cycle starts with processing customer orders, granting credit, delivering goods, and ends with billing customers. Cash receipts are recorded separately in the cash receipts journal. Therefore, option C correctly reflects the order of activities in the revenue and collection cycle.

Question 10

The composition of Oak and Company's accounts receivable are as follows: Over $250,000 - 5 accounts
Between $25,000 and $250,000 - 80 accounts
Less than $25,000 - 200 accounts
The best confirmation strategy for the auditor is:

Accepted Answer

The answer of The composition of Oak and Company's accounts...

Question 11

Information about the internal control system can be gathered by completing an __________________________________________.
Question also found in study guide

Accepted Answer

The answer of Information about the internal control system can...

Question 12

Which of the following questions included in an internal control questionnaire would evaluate the valuation objective of revenues?

Accepted Answer

The answer of Which of the following questions included in...

Question 13

_________________________________ of accounts receivable records implies the power to alter them directly or enter transactions to alter them.
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Accepted Answer

The answer of _________________________________ of accounts receivable records implies the...

Question 14

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Accepted Answer

Changing the risk assessment and finding numerous unexpected errors suggests that there may be a need for more experienced audit team members to perform year-end testing to mitigate the risk of material misstatement. This would help ensure that any material errors or misstatements are identified and appropriately addressed. The other options, such as increasing the dollar threshold and changing the type of accounts receivable confirmations, may not be sufficient in addressing the identified risks. Moving detailed analytical procedures from year-end to interim may be helpful, but is not specific enough to address the identified errors.

Question 15

Internal control assessment is important because it governs the ________________________________,_________________________________ and _________________________________ of substantive procedures.
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Accepted Answer

The answer of Internal control assessment is important because it...

Question 16

Favorite Soda Company distributes beverages in the Portland,Oregon area.Which of the following would be the test to determine that shipments made were actual sales?

Accepted Answer

The answer of Favorite Soda Company distributes beverages in the...

Question 17

The financial records of the Movitz Company show that Mr.Dennis owes $4,100 on an account receivable.An independent audit is being carried out and the auditors send a positive confirmation to Mr.Dennis.What is the most likely reason as to why a positive confirmation rather than a negative confirmation was used here?

Accepted Answer

The most likely reason for using a positive confirmation instead of a negative confirmation is because inherent risk was particularly high for accounts receivable. Positive confirmations are typically used when there is a high level of inherent risk associated with the account, as a response is required for the confirmation to be considered valid. In contrast, negative confirmations are typically used when the risk is considered low, as a lack of response is assumed to indicate agreement. Therefore, the fact that a positive confirmation was used suggests that there were concerns about the accuracy or completeness of Mr. Dennis's account.

Question 18

In confirming a client's accounts receivable in prior years,an auditor discovered many differences between recorded account balances and confirmation replies.These differences were resolved and were not misstatements.In defining the sampling unit for the current year's audit,the auditor most likely would choose

Accepted Answer

Given the history of differences that were eventually resolved without indicating misstatements, the auditor is likely to focus on a detailed level of testing to better understand the nature of these differences. Choosing individual invoices as the sampling unit allows for a more granular examination of accounts receivable, facilitating the identification and resolution of any discrepancies.

Question 19

When an auditor decides to confirm accounts receivable balances rather than individual invoices,it most likely would be beneficial to include with the confirmations

Accepted Answer

Client-prepared statements of account would provide details of the account balances being confirmed and would assist the auditor in verifying and reconciling the confirmation responses. The other options do not provide relevant information for confirming account balances.

Question 20

Which of the following internal control activities most likely would deter lapping of collections from customers?

Accepted Answer

Lapping of collections involves the misappropriation of incoming payments from customers by applying subsequent payments to cover previous thefts. Separation of duties between receiving cash and posting the accounts receivable ledger would ensure that the employee who is responsible for receiving the cash does not also have access to the accounts receivable ledger to manipulate entries to cover up the scheme. Independent verification or supervision of date entries, write-offs, or daily cash summaries would not necessarily prevent lapping.

Quiz 7: Revenue and Collection Cycle

Dual direction testing involves samples of transactions selected to obtain evidence about control over _ in one direction and control over _ in the other direction. Question also found in study guide

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records. Question also found in study guide

The pending sales orders can be reviewed for evidence of the _________________ of recorded _ and ________________. Question also found in study guide

The actions in tests of controls involve ________________,,,_ and ________________. Question also found in study guide

Which of the following controls is designed to meet the completeness assertion?

Assertions related to account balances are ________________,,_ ,_ and ________________. Question also found in study guide

A procedure to gather evidence on both account balances and controls is called a ______________________________________ procedure. Question also found in study guide

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

The composition of Oak and Company's accounts receivable are as follows: Over $250,000 - 5 accounts Between $25,000 and $250,000 - 80 accounts Less than $25,000 - 200 accounts The best confirmation strategy for the auditor is:

Information about the internal control system can be gathered by completing an __________________________________________. Question also found in study guide

Which of the following questions included in an internal control questionnaire would evaluate the valuation objective of revenues?

_________________________________ of accounts receivable records implies the power to alter them directly or enter transactions to alter them. Question also found in study guide

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Internal control assessment is important because it governs the ________________,_ and _________________ of substantive procedures. Question also found in study guide

Favorite Soda Company distributes beverages in the Portland,Oregon area.Which of the following would be the test to determine that shipments made were actual sales?

When an auditor decides to confirm accounts receivable balances rather than individual invoices,it most likely would be beneficial to include with the confirmations

Which of the following internal control activities most likely would deter lapping of collections from customers?

Quiz 7: Revenue and Collection Cycle

Dual direction testing involves samples of transactions selected to obtain evidence about control over _________________________________ in one direction and control over _________________________________ in the other direction. Question also found in study guide

Another way to obtain information about the internal control system is to take a single example of a transaction and __________________________ the process from its initiation to its recording in the accounting records. Question also found in study guide

The pending sales orders can be reviewed for evidence of the _________________________________ of recorded _________________________________ and ________________________________. Question also found in study guide

The actions in tests of controls involve ________________________________,________________________________,________________________________,_________________________________ and ________________________________. Question also found in study guide

Which of the following controls is designed to meet the completeness assertion?

Assertions related to account balances are ________________________________,________________________________,_________________________________ ________________________________,_________________________________ and ________________________________. Question also found in study guide

A procedure to gather evidence on both account balances and controls is called a ______________________________________ procedure. Question also found in study guide

In the revenue and collection cycle,the order of the activities in the cycle is best illustrated by

The composition of Oak and Company's accounts receivable are as follows: Over $250,000 - 5 accounts Between $25,000 and $250,000 - 80 accounts Less than $25,000 - 200 accounts The best confirmation strategy for the auditor is:

Information about the internal control system can be gathered by completing an __________________________________________. Question also found in study guide

Which of the following questions included in an internal control questionnaire would evaluate the valuation objective of revenues?

_________________________________ of accounts receivable records implies the power to alter them directly or enter transactions to alter them. Question also found in study guide

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Internal control assessment is important because it governs the ________________________________,_________________________________ and _________________________________ of substantive procedures. Question also found in study guide

Favorite Soda Company distributes beverages in the Portland,Oregon area.Which of the following would be the test to determine that shipments made were actual sales?

When an auditor decides to confirm accounts receivable balances rather than individual invoices,it most likely would be beneficial to include with the confirmations

Which of the following internal control activities most likely would deter lapping of collections from customers?

Dual direction testing involves samples of transactions selected to obtain evidence about control over _ in one direction and control over _ in the other direction. Question also found in study guide

The pending sales orders can be reviewed for evidence of the _________________ of recorded _ and ________________. Question also found in study guide

The actions in tests of controls involve ________________,,,_ and ________________. Question also found in study guide

Assertions related to account balances are ________________,,_ ,_ and ________________. Question also found in study guide

Internal control assessment is important because it governs the ________________,_ and _________________ of substantive procedures. Question also found in study guide