question

To be recognized, revenues must also be realized or realizable and

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earned

question

Bill and hold refers to an arrangement where

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sales are recorded but are not shipped

question

The document that generates recording of a sale is the

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invoice

question

A small business owner can best offset the lack of separation of duties by

answer

being actively involved in the accounting process

question

Accountants should be under orders to record sales and accounts receivable when

answer

all supporting documentation of shipping is in order

question

Confirmations of accounts receivable provide the most evidence for which of the following assertions

answer

existence

question

If the auditor obtains sufficient competent evidence on the client's accounts receivable balance by alternative procedures because it is impractical to confirm accounts receivable, the auditor's opinion should be unqualified and could be expected to

answer

avoid mentioning the alternative procedures

question

Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations

answer

the client requests alternative procedures be performed instead

question

When an accounts receivable is considered uncollectible, the person who generally authorizes the write-off is the client's

answer

treasurer

question

In determining the adequacy of the allowance for uncollectible accounts, the least valuable evidence would be obtained from

answer

no reply to negative confirmations

question

An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when

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no reply to a positive confirmation request is received

question

A customer reply on a positive confirmation says "we dispute the $250 charge. we believe it is excessive." this confirmation

answer

provides evidence of existence

question

When auditing the revenue and collection cycle, auditors normally select balances to confirm from the

answer

accounts receivable listing

question

The primary consideration when planning whether to send confirmations of accounts receivable before the balance sheet date is the

answer

client's internal control over transactions affecting receivables

question

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

answer

inspect the shipping records documenting the merchandise sold to the debtors

question

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because

answer

customers may not be inclines to report understatement errors in their accounts

question

An audit team is auditing sales transactions. One step is to vouch a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. The purpose of this audit procedure is to establish that

answer

entries in the accounts receivable subsidiary ledger were properly invoiced

question

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide the strongest evidence concerning the

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existence of the balances confirmed

question

In the audit of accounts receivable the most important emphasis should be on the

answer

existence assertion

question

A client has a separate sales group for its largest "preferred" customers. This is a select group of customers that normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?

answer

send out positive confirmations on a large sample of these customers

question

Which of the following management policies would increase the probability of fraud in a company?

answer

Measuring performance and awarding bonuses based on short-term operating results

question

Which of the following is not considered one of the three factors increasing the probability of fraud?

answer

Lack of training

question

If the amount of a check is altered by an employee after it has cleared the bank, the chance can be detected by

answer

comparing the magnetic imprint of the amount paid to the amount written on the check face

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In the audit of cash the auditor obtains a bank cutoff statement primarily to

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test the propriety of items appearing on the client's year-end bank reconciliation

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Auditors ordinarily send a standard confirmation request to all banks with which the client has done business during the year under audit, regardless of the year-end balances. A purpose of this procedure is to

answer

seek information about contingent liabilities and security agreements

question

To gather evidence regarding the bank's balance in a bank reconciliation, an auditor would examine all of the following except the

answer

general ledger

question

Which of the following sets of information does an auditor usually confirm on one form?

answer

Cash in bank and collateral for loans

question

An unrecorded check issued during the last week of the year would most likely be discovered by the auditor when the

answer

cutoff bank statement is reconciled

Datsko Auditing- Exam 3- Ch. 6;7 – Flashcards

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