Kayla Harbaugh
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Auditing Chapter 9 Homework

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Kayla Harbaugh
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Auditing Chapter 9 Homework

Frage 1 von 30

1

Which of the following processes are not included in the revenue cycle?

Wähle eine der folgenden:

  • Preparing and sending monthly statements to customers

  • Shipping products to customers

  • Obtaining credit approval

  • Sending payments to suppliers

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Frage 2 von 30

1

Credit approval policies are implemented by organizations primarily to accomplish which of the following objectives?

Wähle eine der folgenden:

  • To minimize credit losses

  • To prevent lapping by the accounts receivable department

  • To ensure customer satisfaction

  • To determine revenue recognition policies

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Frage 3 von 30

1

The purpose of the bill of lading is to provide which of the following?

Wähle eine der folgenden:

  • The warehouse personnel with the product that must be shipped to customers

  • Evidence of title transfer of goods to customers

  • A credit application for customer approval

  • Invoices to customers for proper collection

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Frage 4 von 30

1

A method used by companies to fraudulently inflate revenues includes which of the following?

Wähle eine der folgenden:

  • Use of hidden "side letters" giving the customer an irrevocable right to return the product

  • Recording of fictitious sales

  • Shipment of produce not ordered by customers

  • All of the above

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Frage 5 von 30

1

Calculating the turnover of receivables is often used in testing the sales cycle by auditors when performing which of the following?

Wähle eine der folgenden:

  • Reasonableness testing

  • Ratio analysis

  • Nonstatistical sampling

  • Trend analysis

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Frage 6 von 30

1

An analysis of monthly sales compared with past years and budgets is a form of what type of testing?

Wähle eine der folgenden:

  • Common size analysis

  • Ratio analysis

  • Trend analysis

  • Regression analysis

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Frage 7 von 30

1

Lithgow and Harris, CPAs, are performing the audit of Wild Flower Grocery Stores. Lithgow and Harris relates annual revenue to sales per square feet and sales per customer. What type of analysis is Lithgow and Harris most likely performing?

Wähle eine der folgenden:

  • Reasonableness tests

  • Nonstatistical analysis

  • Ratio analysis

  • Critical analysis

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Frage 8 von 30

1

In an audit of financial statements, risks related to a high rate of return of products sold include which of the following?

Wähle eine der folgenden:

  • An estimate of accrued returns that reduces net income

  • A reduction of net sales for an increase to the sales returns and allowance account

  • Sales that are recorded improperly

  • Consignment goods that are returned and forwarded to third parties

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Frage 9 von 30

1

The major risk associated with receivables is related to which of the following?

Wähle eine der folgenden:

  • They may be recorded as long-term when in fact they will be realized in the current period

  • They are pledged as collateral as disclosed in the footnotes to financial statements

  • They will not be realized for the entire amount due

  • They may be sold to a bank with recourse

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Frage 10 von 30

1

The internal audit department at Monument Company receives electronic exceptions reports for all sales transactions entered over $10,000 in total. This process is performed for which purpose?

Wähle eine der folgenden:

  • Monitoring revenue transactions

  • Providing suggestions for operational improvement

  • Drafting financial statements

  • Providing management reports to the controller

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Frage 11 von 30

1

Auditors will examine significant sales returns immediately subsequent to the period under audit in order to do which of the following?

Wähle eine der folgenden:

  • Substantiate cutoff and the occurrence of net sales transactions

  • Assess the nature of procedures that will be performed for the next period's audit

  • Test the sufficiency of cash balances to cover refunds

  • Monitor customer satisfaction for disclosure

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Frage 12 von 30

1

The auditor of the revenue cycle of ABC Company computes an estimate of ABC's allowance for doubtful accounts and compares it to the estimate provided by ABC's management. The purpose for this procedure is to substantiate which assertion?

Wähle eine der folgenden:

  • Existence of receivables

  • Valuation of receivables

  • Rights to receivables

  • Cutoff of receivables

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Frage 13 von 30

1

In the audit of the revenue of Hiram Manufacturing Company, the auditors obtain a number of shipping documents shortly before year-end and immediately following the year under audit. The auditors compare the documents to the sales journal in order to test which of the following assertions?

Wähle eine der folgenden:

  • Existence of sales

  • Completeness of receivables

  • Cutoff of sales transactions

  • Presentation and disclosure of receivables

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Frage 14 von 30

1

Completeness of revenues may be tested by the auditor through the selection of a sample of which of the following?

Wähle eine der folgenden:

  • Inventory records and tracing them to the shipping documents

  • Shipping documents and tracing them to the sales journal

  • Accounts receivable and tracing them to cash receipts

  • Recorded sales transactions and tracing them to the general ledger

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Frage 15 von 30

1

The aged accounts receivable report is utilized by the auditor to accomplish which of the following?

Wähle eine der folgenden:

  • Select the type of confirmations that will be sent to banks

  • Identify debits in the receivables balance that should be reclassified to payables

  • Assess the adequacy of the allowance for doubtful accounts

  • Encourage the client to collect on receivables that are long past due

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Frage 16 von 30

1

According to auditing standards, accounts receivable confirmations are required to be used in which of the following situations?

Wähle eine der folgenden:

  • On every audit engagement

  • If environmental risk is low

  • If the client agrees in writing to the procedure

  • If the accounts receivable balance is material

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Frage 17 von 30

1

Accounts receivable confirmations usually provide strong evidence about which of the following?

Wähle eine der folgenden:

  • The obligations of receivables

  • The existence of receivables

  • The presentation and disclosure of receivables

  • The completeness of receivables

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Frage 18 von 30

1

Confirmations that are sent to select customers asking them to review the current balance due the client as shown on the client's statement and return the letters directly to the auditor indicating whether they agree with the indicated balance, are known by which of the following terms?

Wähle eine der folgenden:

  • Negative confirmations

  • Direct confirmations

  • Positive confirmations

  • Indirect confirmations

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Frage 19 von 30

1

An auditor's examination of the sales account using a cutoff test would most likely detect which of the following?

Wähle eine der folgenden:

  • Sales made with improper credit terms

  • Sales recorded in the wrong period

  • Kiting

  • Lapping of accounts receivable

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Frage 20 von 30

1

Alternative procedures that would provide evidence of the existence of receivables would include which of the following?

Wähle eine der folgenden:

  • Review of subsequent collections

  • Analysis of the aged trial balance

  • Physical observation of customer facilities

  • A confirmation to the client management for customer accounts

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Frage 21 von 30

1

Auditors are concerned with the addresses provided for customers in the confirmation of accounts receivable because of which of the following reasons?

Wähle eine der folgenden:

  • Confirmations should be sent only to business addresses and not residential

  • Confirmations are selected based upon zip codes

  • The address may be routed to the client for retrieval and fraudulent signing

  • A P.O. Box is more reliable than a street address

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Frage 22 von 30

1

Unreturned positive confirmations for accounts receivable warrant which of the following actions?

Wähle eine der folgenden:

  • Requesting that the client send additional audit correspondence to customers

  • Replacing the sample selection with a new customer

  • Sending second requests and possibly performing subsequent procedures

  • The projection of larger misstatements to the population

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Frage 23 von 30

1

In the audit of accounting estimates, such as the allowance for doubtful accounts, the auditor strives to provide reasonable assurance about which of the following?

Wähle eine der folgenden:

  • All material accounting estimates have been developed properly

  • The estimates are reasonable

  • The estimates are presented in accordance with GAAP

  • All of the above are true

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Frage 24 von 30

1

To determine whether any accounts receivable are pledged or assigned to others, the auditor would most likely perform which of the following procedures?

Wähle eine der folgenden:

  • Examine subsequent collections

  • Test a sample of transactions to the general ledger

  • Derive an independent estimate of the allowance and compare it to pledged assets

  • Review loan agreements and board of directors' meeting minutes

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Frage 25 von 30

1

Which of the following criteria must be met in order to recognize revenue in the current accounting period?

Wähle eine der folgenden:

  • Goods or services have been transferred to the customer

  • The transaction price has been determined

  • Collectability is reasonably assured

  • All of the above

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Frage 26 von 30

1

Management has been found involved in many fraudulent schemes; a common one is “channel stuffing.” What does “channel stuffing” involve?

Wähle eine der folgenden:

  • Shipping of goods not ordered

  • Overly complex transactions

  • Growth through stock acquisitions

  • Management compensation schemes

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Frage 27 von 30

1

Sources of audit planning information may come from which of the following?

Wähle eine der folgenden:

  • Knowledge of client's business and industry

  • Assessment of risk of material misstatement

  • Results of analytical procedures

  • All of the above

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Frage 28 von 30

1

Which of the following audit procedures does not address existence/occurrence for accounts receivables and sales?

Wähle eine der folgenden:

  • Examine subsequent collections

  • Trace bill of lading to sales invoice and sales journal

  • Confirm balances of unpaid invoices with customers

  • Scan sales journal for duplicate entries

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Frage 29 von 30

1

Substantive tests of the revenue cycle typically do not provide evidence of which of the following?

Wähle eine der folgenden:

  • The balance in the allowance account is correct

  • Accounts receivable exist

  • Fraudulent transactions are not included in the financial statements

  • Sales transactions exist and are properly valued

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Frage 30 von 30

1

A sample of positive confirmations is mailed for material accounts receivable balances. Frequently there is a lack of response. Which of the following is not an acceptable alternative procedure?

Wähle eine der folgenden:

  • Inquiry of management

  • Mailing second and third confirmations

  • Reviewing collections on the account subsequent to the confirmation date

  • Examination of supporting documents

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