Chapter 11 Auditing Multiple Choice

Front 1

Which of the following is least likely to be considered an inherent risk relating to receivables and revenues?
1. Restrictions placed on sales by laws and regulations
2. Decline in sales due to economic declines
3. Decline in sales due to product obsolescence
4. Over-recorded sales due to a lack of control over the sales entry function

Back 1

4. Over-recorded sales due to a lack of control over the sales entry function

Front 2

Which of the following would provide the most assurance concerning the valuation accounts receivable?
1. trace amounts in the accounts receivable subsidiary ledger to details on shipping documents
2. compare receivable turnover ratios to industry statistics for reasonableness
3. Inquire about receivables pledged under loan agreements
4. ***** the allowance for uncollectible accounts for reasonableness

Back 2

4. ***** the allowance for uncollectible accounts for reasonableness

Front 3

Which of the following is most likely to be an example of fraudlent financial reporting relating to sales?
1. inaccurate billing due to a lack of control
2. lapping of accounts receivable
3. misbilling a client due to a data input error
4. recording sales when the customer is likely to return the goods

Back 3

4. recording sales when the customer is likely to return the goods

Front 4

Which of the following is an example of misappropriation of assests relating to sales?
1. accidentally recording cash that represents a liabillity as revenue
2. holding the sales journal open to record next year's sales as having occurred in the current year
3. Intentionally recording cash received from a new debt agreement as revenue
4. Theft of cash register sales

Back 4

4. Theft of cash register sales

Front 5

There is a presumption that auditors will confirm accounts receivable unless the auditors' assessment of the risk of material misstatement is low?
1. And accounts receivable are immaterial , or the use of confirmations would be ineffective
2. and accounts receivable are composed of large accounts
3. and the effectiveness of confirmations is absolutely determined
4. or accounts receivable are from extremely reputable customers

Back 5

1. And accounts receivable are immaterial , or the use of confirmations would be ineffective

Front 6

Which of the following is not among the criteria that ordinary exist for revenue to be recognized?
1. collectibility is reasonably assured
2. delivery has occured or is scheduled to occur in the near future
3. Persuasive evidence of an arrangment exists
4. the seller's price to the buyer is fixed or determinable

Back 6

2. delivery has occured or is scheduled to occur in the near future

Front 7

To determine that all sales have been recorded, the auditors would select a sample of transactions from the :
1. shipping documents file
2. sales journal
3. accounts receivable subsidiary ledger
4. remittance advices

Back 7

1. shipping documents file

Front 8

Which of the following would most likely be detected by an auditors review of the clients sales cutoff?
1. excessive goods returned for credit
2. unrecorded sales discount
3. lapping of year-end accounts receivable
4. inflated sales for the year

Back 8

4. inflated sales for the year

Front 9

To test the existence assertion for recorded receivables, the auditors would select a sample from the:
1. sales order file
2. customer purchase orders
3. accounts receivable subsidiary ledger
4. shipping documents (bills of lading) file

Back 9

3. accounts receivable subsidiary ledger

Front 10

Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents to related sales invoices?
1. exsistence or occurence
2. completeness
3. rights and obligations
4. presentation and disclosure

Back 10

2. completeness

Front 11

cooper, cpa, is auditing the financial statements of a small rural municipality. the recievable balances represent residences delinquent real esate taxes. Internal control at the municipality is weak. To determine the exsistence of the accounts receivable at the balance sheet date, Cooper would most likely:
1. send postive confirmation requests
2. send negative confirmtion request
3. examine evidence of subsequent cash receipts
4. inspect the internal records, such as copies of the tax invoices that were mailed to the residents

Back 11

1. send postive confirmation requests

Front 12

identifying the control that is most likely to prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable:
1. write offs must be approved by a responsible official after review of credit department recommendations and supporting eveidence
2. write offsd must be approved by the accounts receivable department
3. write offs must be authorized by the shipping department
4. write offs must be supported by an aging schedule showing that only receivable overdue by several months have been written off

Back 12

1.write offs must be approved by a responsible official after review of credit department recommendations and supporting eveidence