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The document contains 10 multiple choice questions related to auditing accounts receivable. Specifically, it addresses procedures to test for understated receivables, cutoff testing, existence testing, realizable value testing, and controls over sales returns and allowances. The most important tests include confirmation of receivables, testing sales invoices and shipping documents, and tracing credits to bank deposits.

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15 views

U

The document contains 10 multiple choice questions related to auditing accounts receivable. Specifically, it addresses procedures to test for understated receivables, cutoff testing, existence testing, realizable value testing, and controls over sales returns and allowances. The most important tests include confirmation of receivables, testing sales invoices and shipping documents, and tracing credits to bank deposits.

Uploaded by

batistillenie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

The understatement of sales and accounts receivable is best uncovered by:


a. testing internal controls.
b. testing the aged accounts receivable trial balance.
c. substantive tests of transactions for shipments made but not recorded.
d. substantive tests of transactions for bad debts.

2. Audit procedures designed to uncover credit sales made after the client's fiscal year end that
relate to the current year being audited provide evidence for which of the following audit
objective?
a. Realizable value
b. Accuracy
c. Cutoff
d. Existence

3. Cutoff misstatements occur:


a. either by error or fraud.
b. by error only.
c. by fraud only.
d. randomly without causes related to errors or fraud.

4. Which of the following is likely to be determined first when performing tests of details for
accounts receivable?
a. Recorded accounts receivable exist.
b. Accounts receivable in the aged trial balance agree with related master file amounts, and
the total is correctly added and agrees with the general ledger.
c. Accounts receivable are owned.
d. Existing accounts receivable are included.

5. An auditor is performing a credit analysis of customers with balances over 60 days due. She is
most likely obtaining evidence for which audit related objective?
a. Realizable value
b. Existence
c. Completeness
d. Occurrence

6. The most important test of details of balances to determine the existence of recorded accounts
receivable is:
a. tracing details of sales invoices to shipping documents.
b. tracing the credits in accounts receivable to bank deposits.
c. tracing sales returns entries to credit memos issued and receiving room reports.
d. the confirmation of customers' balances.

7. Confirmation of accounts receivable selected from the trial balance is the most common test of
details of balances for the of accounts receivable.
a. presentation
b. valuation
c. accuracy.
d. detail tie-in

8. If the client's internal control for recording sales returns and allowances is evaluated as
ineffective:
a. a larger sample may be needed to verify cutoff.
b. sampling is not appropriate.
c. all sales returns must be traced to supporting documentation.
d. all sales returns must be confirmed with the customer.

9. Which of the following audit procedures would not likely detect a client's decision to pledge or
factor accounts receivable?
a. A review of the minutes of the board of directors' meetings
b. Discussions with the client
c. Confirmation of receivables
d. Examination of correspondence files

10. When do most companies record sales returns and allowances?


a. During the month in which the sale occurs
b. During the accounting period in which the return occurs
c. Whenever the customer contacts the company regarding the credit
d. During the month after the sale occurs
e.

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