Exam 3 Set 4
Terms in this set (18)
Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment, the CPA would be likely to
Expand tests regarding the collectability of receivables.
Which of the following is not an issue related to the valuation of accounts receivable?
In the confirmation of accounts receivable, the auditor would most likely
Randomly select a representative sample of accounts for confirmation.
Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the receivables'
In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified?
A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances.
To reduce the risks associated with accepting e-mail responses to requests for confirmation of accounts receivable, an auditor most likely would
Request the senders to mail the original forms to the auditor or the auditor may follow up with a telephone call to verify the response.
The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because
Customers may not be inclined to report understatement errors in their accounts.
Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipient?
"If you do not report any differences within 15 days, it will be assumed that this statement is correct."
Some firms that dispose of only a small part of their total output by consignment shipments fail to make any distinction between consignment shipments and regular sales. Which of the following would suggest that goods have been shipped on consignment?
Large debits to accounts receivable followed by small periodic credits.
Which of the following most likely would be the result of ineffective internal control policies and procedures in the revenue process?
Final authorization of credit memos by personnel in the Sales Department could permit an employee defalcation scheme.
Upon receipt of customers' checks in the mailroom, a responsible employee should prepare a listing of remittances that is forwarded to the cashier. A copy of the listing should be sent to the
Accounts receivable bookkeeper to update the subsidiary accounts receivable records.
Mill Company uses a batch processing method to process its sales transactions. Data on Mill's sales transaction tapes are electronically sorted by customer number and are subjected to programmed edit checks in preparing its invoices, sales journals, and updated customer account balances. One of the direct outputs of the creation of these tapes most likely would be a
Report showing exceptions and control totals.
Which of the following sets of duties would ordinarily be considered basically incompatible in terms of effective internal control?
Collection of receipts on account and maintaining accounts receivable records.
During a review of a small business entity's internal control system, the auditor discovered that the accounts receivable clerk approves credit memos and has access to cash. Which of the following controls would be most effective in offsetting this weakness?
The owner reviews credit memos before they are recorded.
Which of the following procedures most likely would not be an internal control activity designed to reduce the risk of errors in the billing process?
Reconciling the control totals for sales invoices with the accounts receivable subsidiary ledger.
Smith is engaged in the audit of a cable TV firm that services a rural community. All receivable balances are small, customers are billed monthly, and internal control is effective. To determine the existence of the accounts receivable balances at the balance sheet date, Smith would most likely
Send negative confirmation requests.
Which of the following most likely would give the most assurance concerning the valuation assertion for accounts receivable?
Assessing the allowance for uncollectible accounts for reasonableness.
An auditor is reviewing sales cutoff as of March 31, 2013. All sales are shipped FOB destination and the company records sales three days after shipment. The auditor notes the following transactions:
If the entity records the required adjustments, the net effect on income (in thousands of dollars) for the period ended March 31, 2013 is
An increase of 8.
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