question

Which of the following is an account that is not affected by the sales and collection cycle? A) Cash B) Accounts receivable C) Allowance for doubtful accounts D) Accounts payable

answer

d

question

The auditor's objectives for the sales and cash collections activities when the client is primarily an e-commerce business as compared to a "bricks and mortar" business are: A) unchanged. B) expanded. C) mitigated. D) decreased.

answer

a

question

Which of the following is not one of the five classes of transactions included in the sales and collection cycle? A) Sales returns and allowances B) Write-off of uncollectible accounts C) Bad debt expense D) Interest Income

answer

d

question

What event initiates a transaction in the sales and collection cycle? A) Receipt of cash B) Delivery of product to a customer C) Identification of a new customer D) Customer request for goods

answer

d

question

A ________ is a document that indicates a request for merchandise by a customer. A) sales invoice B) vendor invoice C) customer order D) sales order

answer

c

question

What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected? A) Determination of correct delivery address B) Credit approval C) Matching of shipping document with sales invoice D) Receipt of sales order from the customer

answer

b

question

Before goods are shipped on account, a properly authorized person must: A) prepare the sales invoice. B) approve the journal entry. C) approve the customer's credit. D) verify that the unit price is accurate.

answer

c

question

A document prepared to initiate shipment of the goods sold by an independent shipper is the: A) sales order. B) bill of lading. C) sales invoice. D) customer order.

answer

b

question

The document used to indicate to the customer the amount of a sale and payment due date is the: A) sales invoice. B) bill of lading. C) purchase order. D) sales order.

answer

a

question

Generally, when is the earliest point in the sales and collection cycle in which revenue can be recognized? A) When the sale is approved B) When the credit approval process is finalized C) When the cash is collected D) When the goods have been shipped

answer

d

question

Most companies recognize sales revenue when: A) sales are invoiced. B) payment is received from the customer. C) goods are shipped. D) the customer's order is received.

answer

c

question

Which of the following is not a business function within the "Sales" class of transactions? A) Processing customer orders B) Granting credit C) Processing and recording sales returns and allowances D) Shipping goods

answer

c

question

The total of the individual account balances in the accounts receivable subsidiary ledger should equal the: A) total sales for the period. B) balance of the sales account in the general ledger. C) total sales less the total cash received for the period. D) balance of the accounts receivable account in the general ledger.

answer

d

question

In the accounts receivable subsidiary ledger the length of time the account has been due can be useful to the client and the auditor in preparing the: A) trial balance. B) working trial balance. C) accounts receivable trial balance. D) aged accounts receivable trial balance.

answer

d

question

A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the: A) accounts receivable subsidiary ledger. B) monthly statement. C) remittance advice. D) sales invoice.

answer

b

question

The document that accompanies the customer's payment is the: A) credit memo. B) remittance advice. C) vendor invoice. D) monthly statement.

answer

b

question

The document that requires adjustments to the customers subsidiary ledger account is the: A) bill of lading. B) sales invoice. C) credit memo. D) monthly statement.

answer

c

question

A document that initiates shipment of goods and indicates the description of the merchandise, the quantity shipped, and customer name and address is the: A) bill of lading. B) sales invoice. C) picking ticket. D) vendor invoice.

answer

a

question

The ________ is a contract between a carrier (e.g., a trucking company) and the seller of goods that dictates the details surrounding the shipment of goods. A) bill of lading B) sales invoice C) picking ticket D) remittance advice

answer

a

question

Some companies have customers send payments directly to an address maintained by a bank. This is called a(n) ________ system. A) direct deposit B) funds transfer C) lockbox D) interbank transfer

answer

c

question

Which of the following is a business function related to sales returns and allowances? A) Processing customer orders B) Writing off uncollectible accounts C) Processing and recording credit memos D) Granting credit

answer

c

question

For a firm that practices good internal controls in the sales and collections cycle, the function of indicating credit approval should be recorded on which of the following documents? A) Sales order B) Sales invoice C) Customer order D) Remittance advice

answer

a

question

When posting items from the sales journal, details of the journal and journal totals are posted to which items? A) Details of the journal are posted to Journal totals are posted to The sales account The general ledger B) Details of the journal are posted to Journal totals are posted to The sales account The accounts receivable subsidiary ledger C) Details of the journal are posted to Journal totals are posted to The accounts receivable master file The general ledger D) Details of the journal are posted to Journal totals are posted to The accounts receivable account in the general ledger The sales account in the general ledger

answer

c

question

Credit memos are normally issued to: A) adjust the customers balance to the amount owed to the company because of returned goods or an allowance. B) assist in the aging of accounts receivable. C) reduce customer frustration and sales losses. D) inform the customer of the balance due.

answer

a

question

Who is generally responsible for opening receipts when a company uses a lockbox to speed the handling of cash receipts? A) Company personnel B) Temporary employees in the town where the lockbox is located C) Bank employees D) Company controller

answer

c

question

When processing and recording cash receipts, an important fact to consider is: A) the most important concern is depositing cash at least twice daily. B) the most important concern is the possibility of theft. C) theft can occur only after the receipts are entered in the records. D) it the customer fails to include a remittance advice, the check should be returned to the customer.

answer

b

question

Sales should be recorded, at the earliest, when: A) the order is received. B) the order is received and credit is approved. C) credit is approved and it is verified that there is enough inventory to fill the order. D) the shipment takes place.

answer

d

question

When designing audit procedures, tracing of source documents to the customers subsidiary ledger and subsequently to the general ledger is done to satisfy what assertion? A) Valuation B) Cutoff C) Completeness D) Classification

answer

c

question

When assessing risk control, the auditor must do all of the following except: A) assess control risk for each objective by evaluating the controls and deficiencies for each objective. B) perform the detailed test of balances. C) identify the key internal controls and deficiencies. D) associate the key controls and deficiencies with the objectives.

answer

b

question

When sales invoices are automatically calculated and posted by a computer, the auditor may be able to reduce substantive tests of transactions for which, if any, assertion? A) Accuracy B) Existence C) Completeness D) None of the above

answer

a

question

In many audits, no substantive tests of transactions are made for the ________ assertion on the grounds that understatement of sales is not a concern. A) accuracy B) existence C) completeness D) none of the above

answer

c

question

Which one the following procedures performed for the billing function provides evidence for the completeness assertion? A) Making sure that all shipments have been billed B) Making sure that no shipment has been billed more than twice C) Making sure that each shipment is billed at the correct amount D) Making sure that each shipment is billed to the proper customer

answer

a

question

When assessing planned control risk for sales: A) the key internal controls and deficiencies for sales will be the same for every company. B) the audit objectives for sales will differ from company to company. C) a flowchart is required to help assess control risk for sales. D) assessing control risk for sales is a highly subjective decision.

answer

d

question

The document that the accounting staff will use as the primary basis for recording sales transactions and updating the customers accounts receivable subsidiary ledger is the: A) sales order. B) bill of lading. C) sales journal. D) sales invoice.

answer

d

question

In determining the level of audit efficiency, once the auditor has identified the key internal controls and identified any deficiencies in order to determine the level of control risk appropriate for a private company client, it is appropriate to decide whether: A) substantive tests can be reduced sufficiently to justify costs of performing tests of controls. B) substantive tests can be increased sufficiently to justify costs of performing tests of controls. C) tests of controls can be increased sufficiently to justify costs of performing substantive tests. D) tests of controls can be reduced sufficiently to justify costs of performing substantive tests.

answer

a

question

Which one of the following statements is true? In deciding on substantive tests of transactions: A) some procedures are commonly employed on every audit regardless of the circumstances. B) all procedures are dependent on the adequacy of the controls and the results of the tests of controls. C) results obtained in the prior year's audit will not affect the procedures used this year. D) the materiality of the item will not influence the choice of procedures used.

answer

a

question

To test for recorded sales for which there were no actual shipments, the auditor vouches from the: A) bill of lading to the sales journal. B) sales journal to the shipping documents. C) sales journal to the accounts receivable subsidiary ledger. D) bill of lading to the supporting customer order and sales order.

answer

b

question

An effective procedure to test for unbilled shipments is to trace from the: A) sales journal to the shipping documents. B) shipping documents to the sales journal. C) sales journal to the accounts receivable ledger. D) sales journal to the general ledger sales account.

answer

b

question

The auditor traces items from the source documents to the journals in order to accumulate audit evidence that will satisfy the: A) existence objective. B) completeness objective. C) ownership objective. D) valuation objective.

answer

b

question

In many audits of sales transactions substantive tests of transactions can be reduced in determining the completeness objective because: A) understatements of assets and income are a greater concern than overstatements. B) overstatements of assets and income are a greater concern than understatements. C) it doesn't matter if income is understated because the savings on income tax offsets the reduced revenue and net income is correct. D) the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.

answer

b

question

To determine that sales are accurately recorded, the unit prices on the duplicate sales invoices are normally compared with: A) the original invoices. B) an approved master price list. C) the amounts recorded in the sales journal for that transaction. D) the amounts posted to the customer's account in the accounts receivable master file.

answer

b

question

Prenumbered documents are intended to help: A) Prevent the failure to bill or record sales Prevent duplicate billings or recordings of sales Yes Yes B) Prevent the failure to bill or record sales Prevent duplicate billings or recordings of sales No No C) Prevent the failure to bill or record sales Prevent duplicate billings or recordings of sales Yes No D) Prevent the failure to bill or record sales Prevent duplicate billings or recordings of sales No Yes

answer

a

question

Prenumbered documents will only be useful for control purposes if: A) a different numerical sequence is used for each company. B) the sequence is accounted for periodically. C) employees are allowed to use documents out of numerical sequence. D) the same numerical sequence is used each accounting period.

answer

b

question

________ tests are for omitted transactions, while ________ tests are for nonexistent transactions. A) Tracing, vouching B) Vouching, tracing C) Verifying, tracking D) Tracking, verifying

answer

a

question

Which one of the following best describes the auditors responsibilities regarding appropriate authorizations in the sales/collections cycle? A) B, C, and D should all be of concern to the auditor. B) Credit must be authorized before the sale. C) Goods must be shipped after the authorization. D) Prices must be authorized.

answer

a

question

Which one of the following is of the least concern to the auditor when designing substantive tests of transactions for the sales/collection cycle? A) Sales being included in the journal for which no shipment was made B) Sales to related parties, such as officers and subsidiaries C) Sales recorded more than once D) Shipments being made to nonexistent customers and recorded as sales

answer

b

question

An auditor needs to determine whether all customers of an electric utility company are being billed. The auditor should test from the: A) sales register to the accounts receivable ledger. B) sales register to the meter department records. C) accounts receivable ledger to the sales register. D) meter department records to the sales register.

answer

d

question

Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom? A) The cashier prepares the daily deposit. B) The cashier makes the daily deposit at a local bank. C) The cashier posts the receipts to the accounts receivable subsidiary ledger cards. D) The cashier endorses the checks.

answer

c

question

Which of the following is the appropriate point at which the auditor deems authorization to be critical? A) Credit granting Price authorization Shipment of goods Yes Yes Yes B) Credit granting Price authorization Shipment of goods Yes No Yes C) Credit granting Price authorization Shipment of goods No Yes No D) Credit granting Price authorization Shipment of goods Yes No No

answer

a

question

Which of the following would least concern an auditor regarding the lack of a specific authorization to conduct the sales transaction? A) Granting of credit B) Shipment of goods C) Determination of discounts D) Selling of goods for cash

answer

d

question

Transaction-related audit objectives are essentially the same for processing credit memos as for sales with certain differences. Which of the following are two key differences? A) Risk and emphasis on the completeness objective. B) Materiality and emphasis on the accuracy objective C) Risk and emphasis on the classification objective D) Materiality and emphasis on the occurrence objective

answer

d

question

Smith Manufacturing Company's accounts receivable clerk has a friend who is also a Smith's customer. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to: A) prenumber and account for all credit memorandums. B) require receiving reports that provide evidence of returned inventory items to support all credit memorandums before they are approved. C) have independent sales and accounts receivable departments. D) mail monthly statements to customers.

answer

b

question

When an employee who is authorized to make customer entries in the accounts receivable subsidiary ledger, purposefully enters cash received into the wrong customer's account that employee may be suspected of: A) kiting. B) lapping. C) floating. D) shorting.

answer

b

question

An audit procedure that compares the name, amount, and dates shown on remittance advices, either paper of electronic via direct deposit, with cash receipts journal entries and with related duplicate deposit slips would be effective in detecting: A) kiting. B) lapping. C) illicit write-offs of customers as uncollectible accounts. D) sales without proper credit authorization.

answer

b

question

To prevent fraud, management should deny cash access to anyone responsible for: A) Opening mail from customers Entering sales transactions Entering cash receipts transactions Yes Yes Yes B) Opening mail from customers Entering sales transactions Entering cash receipts transactions No No Yes C) Opening mail from customers Entering sales transactions Entering cash receipts transactions No Yes Yes D) Opening mail from customers Entering sales transactions Entering cash receipts transactions Yes No No

answer

C

question

The audit procedure referred to as proof of cash receipts is particularly useful to test: A) time lags in making deposits. B) whether all recorded cash receipts have been deposited in the bank. C) whether there are cash receipts that have not been recorded in the journals. D) the client's reconciliation between cash receipts and bank deposits.

answer

B

question

Which of the following test of controls is useful to test the completeness objective for cash receipts? A) Compare shipping documents with sales records. B) Observe endorsement of incoming checks. C) Examine evidence that the receivable master file is reconciled to the general ledger. D) Observe if the client reconciles the bank account.

answer

b

question

When designing tests of controls and substantive tests of transactions for cash receipts, it is important to remember that: A) the test of controls are designed to test for monetary misstatements. B) auditors use the same methodology for designing tests of controls and substantive tests of transactions for cash receipts as they use for sales. C) the tests of controls are not dependent on the controls the auditor identifies. D) the tests of controls is not dependent on whether the company being audited is publicly

answer

b

question

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this fraud and be least likely to be detected by an auditor? A) Understating the sales journal by not recording cash sales B) Overstating the accounts receivable control account by intentionally misstating prices charged for goods sold C) Overstating the accounts receivable subsidiary ledger by not recording payments made by customers D) Understating the cash receipts journal by purposely recording incorrect amounts

answer

a

question

Which of the following would offer the best protection for a company that wishes to prevent a reoccurrence of a previously detected "lapping" problem with trade accounts receivable? A) Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail. B) Segregate duties so that no employee has access to both checks from customers and currency from daily cash receipts. C) Have customers send payments directly to the company's depository bank. D) Request that customer's payment checks be made payable to the company and addressed to the treasurer.

answer

c

question

Preparation of a proof of cash would not be useful in discovering differences between the actual and reported cash balances if the differences were due to: A) deposits in transit. B) collections on the company's behalf by the bank which are deposited directly to the company's account. C) cash receipts that were not recorded in the relevant accounting records. D) service charges.

answer

c

question

The auditor's primary concern in performing audit procedures of the write-off of uncollectible accounts relates to the risk that the client writes offs customer accounts that have already been collected. The primary control for preventing this fraud is: A) examining authorized credit memos. B) examining the uncollectible account authorization form. C) examining debit memos. D) examining the vouchers payable register.

answer

b

Actg 135 ch 14 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards