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Exam 16: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

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Question 31

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Cutoff misstatements can occur for

A)
B)
C)
D)

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Question 32

Multiple Choice

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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.

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Question 33

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The most effective audit evidence gathered for accounts receivable is the

When analytical procedures in the sales and collection cycle uncover unusual fluctuations,the auditor should make additional inquiries of management.

Confirmation is the most common test of details of balances for the accuracy of accounts receivable.

A listing of the balances in the accounts receivable master file at the balance sheet date,including individual customer balances outstanding and a breakdown of each balance by the time passed between the date of the sale and the balance sheet date,is the

You are reviewing sales to discover cutoff problems.If the client's policy is to record sales when title to the merchandise passes to the buyer,then the books and records would contain errors if the December 31 entries were for sales recorded

Tests of detail tie-in are normally conducted last in the audit of the sales and collections cycle.

For effective internal control,employees maintaining the accounts receivable subsidiary ledger should not also approve

When making the sampling decisions for accounts receivable confirmations,

One of the shortcomings in evaluating the allowance for uncollectible accounts by reviewing individual noncurrent balances on the aged trial balance is I. it is difficult to compare the results of the current year with those of the previous year. II) current accounts are ignored in establishing the adequacy of the allowance.

A high inherent risk increases planned detection risk and decreases planned substantive tests.

The auditor should perform procedures to verify the addresses used for the accounts receivable confirmations.

For most audits,a proper cash receipts cutoff is less important than the sales cutoff because the improper cutoff of cash

Negative confirmations normally require a larger sample size than positive confirmations.

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared.This test is to satisfy the audit objective of

After the auditor is satisfied with the allowance for uncollectible accounts,it is easy to verify bad debt expense.

A positive confirmation is more reliable evidence than a negative confirmation because

Testing the information on the aged trial balance for detail tie-in is a necessary audit procedure,which would normally include

Discuss the audit procedures performed when testing the detail tie-in objective for accounts receivable,and explain why this objective is ordinarily tested before any other objectives for accounts receivable.