Chapter 07Revenue and Collection Cycle
True / False Questions1.A price list master file contains the
product unit prices that are used for billing
customers.TrueFalse
2.The accountants who record cash receipts and credits to
customer accounts should not handle the cash.TrueFalse
3.Credit checks should be performed by the sales department
before credit is approved.TrueFalse
4.The aging information for accounts receivable is typically
used in connection with assessing the allowance for doubtful
accounts.TrueFalse
5.A comparison of checks listed on a sample of deposit slips to
the detail of customer credits posted to customer accounts
receivable can be an audit test for lapping.TrueFalse
6.If control risk is assessed very low, the substantive audit
procedures on account balances must be expanded.TrueFalse
7.A confirmation procedure scheduled on the year-end date with a
large sample of customer account balances is necessary if tests of
controls reveal control weaknesses.TrueFalse
8.Auditors should not place total reliance on controls to the
exclusion of other substantive testing procedures.TrueFalse
9.An objective for an audit is to obtain evidence related to
management's financial statement assertions.TrueFalse
10.When obtaining evidence about accounts receivable, auditors
must put emphasis on the completeness and obligations
assertions.TrueFalse
11.Inquiries of management usually do not provide very
convincing evidence about the existence and rights
assertions.TrueFalse
12.A computer generally cannot be used for scanning large files
of accounts receivable for unusual credit balances.TrueFalse
13.The use of confirmations to test accounts receivable is
considered a generally accepted audit procedure.TrueFalse
14.Confirmations yield evidence about existence and the gross
valuation of a receivable balance.TrueFalse
Multiple Choice Questions15.To be recognized, revenues must also
be realized or realizable and
A.Foreseeable.
B.Collected.
C.Earned.
D.Shipped.
16.The SEC requires all of the following for revenue to be
recognized except
A.Cash is collected.
B.Persuasive evidence of an arrangement exists.
C.Delivery has occurred or services have been rendered.
D.The seller's price to the buyer is fixed or determinable.
17."Bill and hold" refers to an arrangement where
A.Sales are recorded but are not shipped.
B.Sales are shipped but are not recorded.
C.Sales are billed but not collected.
D.Inventory is held but not billed.
18.Custody of inventory is transferred to the shipping area upon
authorization of
A.The customer order.
B.The shipping order.
C.The invoice.
D.The purchase order.
19.The document that generates recording of a sale is the
A.The customer order.
B.The shipping order.
C.The invoice.
D.The purchase order.
20.The sum of customers' unpaid balances that is compared to the
general ledger balance comes from
A.A total of sales invoices.
B.A total of shipping orders.
C.The sales journal.
D.The accounts receivable trial balance.
21.The file that contains sales transactions that were initiated
in the system but are not yet completed is the
A.Credit check file.
B.Sales detail.
C.Inventory master.
D.Pending order master.
22.The assertion that auditors will probably emphasize in the
revenue and collection cycle is
A.Occurrence.
B.Completeness.
C.Accuracy.
D.Classification.
23.A small business owner can best offset the lack of separation
of duties by
A.Creating an internal audit department.
B.Installing the latest computer equipment and software.
C.Being actively involved in the accounting process.
D.Relying on the external auditor to detect errors.
24.Accountants should be under orders to record sales and
accounts receivable when
A.The customer's order is received.
B.All supporting documentation of shipping is in order.
C.The item has been paid for.
D.The terms are agreed upon.
25.Which of the following is an example of a control activity
that satisfies the accuracy control objective for sales
invoices?
A.Recorded sales in the sales journal are supported by
invoices.
B.Invoices, shipping documents, and sales orders are prenumbered
and the numerical sequence is checked.
C.Sales are recorded in the proper account.
D.Invoice quantities are compared to shipment and customer order
quantities.
26.Scanning sales invoices for missing numbers in the sequence
would be an activity intended to satisfy what assertion?
A.Completeness.
B.Accuracy.
C.Occurrence.
D.Classification.
27.Vouching debits from a sample selection of customers'
accounts receivable records to supporting sales invoices is an
audit procedure designed to obtain evidence about the assertion
of
A.Occurrence.
B.Completeness.
C.Classification.
D.Accuracy.
28.Alpha Brewery Corporation recorded sales through January 4,
2005, dating them December 31, 2004. This situation is an example
of a violation of which of the following assertions?
A.Existence or occurrence.
B.Completeness.
C.Classification.
D.Accuracy.
29.Confirmations of accounts receivable provide the most
evidence for which of the following assertions?
A.Existence.
B.Valuation or allocation.
C.Rights and obligations.
D.Completeness.
30.The auditor maintains control of the mailing and receipt of
confirmations by typically performing all of the following
except
A.Preparing the confirmation letters.
B.Mailing the confirmation letters.
C.Receiving the confirmation letters.
D.None of the above.
31.If the auditor obtains sufficient competent evidence on the
client's accounts receivable balance by alternative procedures
because it is impractical to confirm accounts receivable, the
auditor's opinion should be unqualified and could be expected
to
A.Disclose the fact that alternative procedures were used due to
client-imposed scope limitation.
B.Disclose in the opinion paragraph that confirmation of
accounts receivable was impracticable.
C.Avoid mentioning the alternative procedures.
D.Include an explanatory paragraph that discloses the
performance of alternative procedures.
32.Which of the following is not a valid reason for an auditor
deciding not to send accounts receivable confirmations?
A.The balance is immaterial.
B.Confirmations would be ineffective.
C.The client requests alternative procedures be performed
instead.
D.Other procedures provide sufficient competent evidence.
33.When an account receivable is considered uncollectible, the
person who generally authorizes the write-off is the client's
A.Credit manager.
B.Treasurer.
C.Accountant.
D.Internal auditor.
34.Which of the following audit procedures is the most effective
in testing sales for understatement?
A.Analyze the aged trial balance of recorded accounts
receivable.
B.Confirm recorded accounts receivable.
C.Trace a sample of shipping documents to sales invoices
recorded in the sales journal.
D.Vouch a sample of recorded sales from the sales journal to
shipping documents.
35.To determine whether sales transactions have been recorded in
the proper accounting period, the auditor performs cutoff tests.
Which of the following best describes the overall approach used
when performing cutoff tests?
A.Ascertain that management has included in the representation
letter a statement that transactions have been accounted for in the
proper accounting period.
B.Analyze transactions occurring within a few days before and
after year-end.
C.Confirm year-end transactions with regular customers.
D.Examine cash receipts in the subsequent period.
36.The most effective audit procedure for determining the
collectability of an account receivable is the
A.Review of the subsequent cash collections.
B.Examination of the related sales invoice(s).
C.Confirmation of the account.
D.Review of authorization of credit sales to the customer and
the previous history of collections.
37.In determining the adequacy of the allowance for
uncollectible accounts, the least valuable evidence would be
obtained from
A.An aging schedule of past due accounts that the auditor has
tested.
B.Correspondence with the client's collection agency.
C.Financial statements of individual customers.
D.No reply to negative confirmations.
38.An auditor confirms a representative number of open accounts
receivable as of December 31 and investigates respondents'
exceptions and comments. By this procedure, the auditor would be
most likely to learn of which of the following?
A.One of the cashiers has been covering a personal embezzlement
by lapping.
B.One of the sales clerks has not been preparing charge slips
for credit sales to family and friends.
C.One of the IT control clerks has been removing all sales
invoices applicable to his account from the data file.
D.The credit manager has misappropriated remittances from
customers whose accounts have been written off.
39.An auditor should normally perform alternative procedures to
substantiate the existence of accounts receivable when
A.No reply to a positive confirmation request is received.
B.No reply to a negative confirmation request is received.
C.Collectability of the receivables is in doubt.
D.Pledging of the receivables is probable.
40.A customer reply on a positive confirmation says "We dispute
the $250 charge. We believe it is excessive." This confirmation
A.Provides evidence of existence.
B.Does not provide evidence of existence because the customer
may refuse to pay the $250 charge.
C.Provides evidence that the account was understated.
D.Provides evidence that the account should be written off.
41.The primary consideration when planning whether to send
confirmations of accounts receivable before the balance sheet date
is the
A.Type of confirmation to be used.
B.Client's internal control over transactions affecting
receivables.
C.Availability of staff auditors.
D.Number of customer accounts.
42.In the revenue and collection cycle, the auditor checks the
numerical sequence of shipping documents. This procedure is related
to which of the following assertions?
A.Existence.
B.Completeness.
C.Rights and obligations.
D.Valuation or allocation.
43.The auditor selects a sample of recorded sales invoices and
vouches them to shipping documents. This procedure is related to
which of the following assertions?
A.Occurrence.
B.Completeness.
C.Accuracy.
D.Cutoff.
44.In which of the following circumstances would the use of the
negative form of accounts receivable confirmation most likely be
justified?
A.A substantial number of accounts may be in dispute and the
accounts receivable balance arises from sales to a few major
customers.
B.A substantial number of accounts may be in dispute and the
accounts receivable balance arises from sales to many customers
with small balances.
C.A small number of accounts may be in dispute and the accounts
receivable balance arises from sales to a few major customers.
D.A small number of accounts may be in dispute and the accounts
receivable balance arises from sales to many customers with small
balances.
45.Which of the following controls most likely would help ensure
that all credit sales transactions of an entity are recorded?
A.The billing department supervisor sends copies of approved
sales orders to the credit department for comparison to authorized
credit limits and current customer account balances.
B.The accounting department supervisor independently reconciles
the accounts receivable subsidiary ledger to the accounts
receivable control account monthly.
C.The accounting department supervisor controls the mailing of
monthly statements to customers and investigates any differences
reported by customers.
D.The billing department supervisor matches prenumbered shipping
documents with entries in the sales journal.
46.Which of the following internal control activities most
likely would ensure that all billed sales are correctly posted to
the accounts receivable ledger?
A.Daily sales summaries are compared to daily postings to the
accounts receivable ledger.
B.Each sales invoice is supported by a prenumbered shipping
document.
C.The accounts receivable ledger is reconciled daily to the
control account in the general ledger.
D.Each shipment on credit is supported by a prenumbered sales
invoice.
47.In evaluating the adequacy of the allowance for doubtful
accounts, an auditor most likely reviews the entity's aging of
receivables to support management's financial statement assertion
of
A.Existence.
B.Valuation or allocation.
C.Completeness.
D.Rights and obligations.
48.Which of the following procedures would an auditor most
likely perform for year-end accounts receivable confirmations when
the auditor did not receive replies to second requests?
A.Review the cash receipts journal for the month prior to the
year-end.
B.Intensify the study of the internal control structure
concerning the revenue cycle.
C.Increase the assessed level of detection risk for the
existence assertion.
D.Inspect the shipping records documenting the merchandise sold
to the debtors.
49.Which of the following most likely would be detected by an
auditor's review of a client's sales cutoff?
A.Shipments lacking sales invoices and shipping documents.
B.Excessive write-offs of accounts receivable.
C.Unrecorded sales at year-end.
D.Lapping of year-end accounts receivable.
50.Tracing shipping documents to prenumbered sales invoices
provides evidence that
A.No duplicate shipments or billings occurred.
B.Shipments to customers were properly invoiced.
C.All goods ordered by customers were accounted for.
D.All prenumbered sales invoices were accounted for.
51.Which of the following statements is correct concerning the
use of negative confirmation requests?
A.Unreturned negative confirmation requests rarely provide
significant explicit evidence.
B.Negative confirmation requests are effective when detection
risk is low.
C.Unreturned negative confirmation requests indicate that
alternative procedures are necessary.
D.Negative confirmation requests are effective when
understatements of account balances are suspected.
52.The confirmation of customers' accounts receivable rarely
provides reliable evidence about the completeness assertion
because
A.Many customers merely sign and return the confirmation without
verifying its details.
B.Recipients usually respond only if they disagree with the
information on the request.
C.Customers may not be inclined to report understatement errors
in their accounts.
D.Auditors typically select many accounts with low recorded
balances to be confirmed.
53.Negative confirmation of accounts receivable is less
effective than positive confirmation of accounts receivable
because
A.A majority of recipients usually lacks the willingness to
respond objectively.
B.Some recipients may report incorrect balances that require
extensive follow up.
C.The auditor cannot infer that all nonrespondents have verified
their account information.
D.Negative confirmations do not produce evidential matter that
is statistically quantifiable.
54.Which of the following responses to a confirmation of
balances at December 31 would be most troubling to an auditor?
A.We paid this amount on December 28.
B.We received these goods on January 2.
C.We returned this amount on December 28 under our standing
agreement with the company.
D.This amount is not due until January 15.
55.Revenues are normally considered to have been earned when
A.All possibility of return has expired.
B.The company has substantially accomplished what it must to be
entitled to the benefits.
C.The cash is collected.
D.Goods have been shipped.
56.Sales are normally recorded on the date of the
A.Customer purchase order.
B.Bill of lading.
C.Sales invoice.
D.Payment check.
57.When auditing the revenue and collection cycle, auditors
normally select balances to confirm from the
A.Sales journal.
B.Accounts receivable listing.
C.General ledger.
D.Cash receipts listing.
58.Which of the following accounts is not normally part of the
revenue and collection cycle?
A.Sales.
B.Accounts Receivable.
C.Cash.
D.Purchases Returns and Allowances.
59.The control activity "credit sales approved by credit
department" is directed toward which transaction assertion?
A.Occurrence.
B.Completeness.
C.Accuracy.
D.Cutoff.
60.Which of the following would be the best protection for a
company that wishes to prevent the "lapping" of trade accounts
receivable?
A.Separate duties so that the bookkeeper in charge of the
general ledger has no access to incoming mail.
B.Separate duties so that no employee has access to both checks
from customers and currency from daily cash receipts.
C.Have customers send payments directly to the company's
depository bank.
D.Request that customer's payment checks be made payable to the
company and addressed to the treasurer.
61.Which of the following internal control activities will most
likely prevent the concealment of a cash shortage by improperly
writing off a trade account receivable?
A.Write-offs must be approved by a responsible officer after
review of credit department recommendations and supporting
evidence.
B.Write-offs must be supported by an aging schedule showing that
only receivables overdue several months have been written off.
C.Write-offs must be approved by the cashier who is in a
position to know if the receivables have, in fact, been
collected.
D.Write-offs must be authorized by company field sales employees
who are in a position to determine the financial standing of the
customers.
62.Auditors sometimes use comparisons of ratios as audit
evidence. An unexplained decrease in the ratio of gross profit to
sales may suggest which of the following possibilities?
A.Unrecorded purchases.
B.Unrecorded sales.
C.Merchandise purchases being charged to selling and general
expense.
D.Fictitious sales.
63.An audit team is auditing sales transactions. One step is to
vouch a sample of debit entries from the accounts receivable
subsidiary ledger back to the supporting sales invoices. The
purpose of this audit procedure is to establish that
A.Sales invoices represent bona fide sales.
B.All sales have been recorded.
C.All sales invoices have been properly posted to customer
accounts.
D.Entries in the accounts receivable subsidiary ledger were
properly invoiced.
64.An auditor noted that client sales had increased 10 percent
for the year. At the same time, cost of goods sold as a percentage
of sales had decreased from 45 percent to 40 percent and year-end
accounts receivable had increased by 8 percent. The auditor is most
likely concerned about
A.Unrecorded costs.
B.Improper credit approvals.
C.Improper sales cut-off.
D.Fictitious sales.
65.An auditor noted that client sales had increased 10 percent
for the year. At the same time, cost of goods sold as a percentage
of sales had decreased from 45 percent to 40 percent and year-end
accounts receivable had increased by 8 percent. The auditor
interviewed the sales manager who stated that the increase in sales
without a corresponding increase in cost of goods sold was due to a
price increase enacted by the company during the year. How would
the auditor best test the sales manager's representation?
A.Perform additional inquiries with sales personnel.
B.Obtain copies of all price lists in use during the year and
vouch the prices to sales invoices.
C.Send confirmations asking customers about unit prices paid for
product.
D.Vouch vender invoices to payments made after year-end.
66.To conceal defalcations involving receivables, a dishonest
bookkeeper might charge which of the following accounts?
A.Miscellaneous income.
B.Petty cash.
C.Miscellaneous expense.
D.Sales returns.
67.Which of the following responses to an accounts receivable
confirmation at December 31 would cause an audit team the most
concern?
A."This amount was paid on December 30th."
B."We received this shipment on January 2nd."
C."These goods were returned for credit on November 15th."
D."The balance does not reflect our sales discount for paying by
January 5th."
68.A client has a separate sales group for its largest
"preferred" customers. This is a select group of customers that
normally make purchases in excess of $250,000 and often have
accounts receivable balances in excess of $1 million. Which of the
following audit procedures would the auditor most likely
perform?
A.Prepare a schedule of purchases and payments for these
customers.
B.Send out negative confirmations on a large sample of these
customers.
C.Inquire of the sales manager regarding the accounts receivable
terms.
D.Send out positive confirmations on a large sample of these
customers.
69.Audit documentation often includes a client-prepared, aged
trial balance of accounts receivable as of the balance sheet date.
The audit team uses this aging primarily to
A.Evaluate internal control over credit sales.
B.Test the accuracy of recorded charge sales.
C.Estimate credit losses.
D.Verify the existence of the recorded receivables.
70.Which of the following might be detected by auditors' cutoff
review and examination of sales journal entries for several days
prior to the balance sheet date?
A.Lapping year-end accounts receivable.
B.Inflating sales for the year.
C.Kiting bank balances.
D.Misappropriating merchandise.
71.Confirmation of individual accounts receivable balances
directly with debtors will, of itself, normally provide the
strongest evidence concerning the
A.Collectability of the balances confirmed.
B.Ownership of the balances confirmed.
C.Existence of the balances confirmed.
D.Internal control over balances confirmed.
72.Which of the following is the best reason for prenumbering in
sequence such documents as sales orders, shipping documents, and
sales invoices?
A.Enables company personnel to determine the accuracy of each
document.
B.Enables personnel to determine the proper period for recording
of sales revenue and receivables.
C.Enables personnel to check the numerical sequence for missing
documents and unrecorded transactions.
D.Enables personnel to determine the validity of recorded
transactions.
73.When a sample of customer accounts receivable is selected for
vouching debits, auditors will vouch them to
A.Sales invoices with shipping documents.
B.Records of accounts receivable write-offs.
C.Cash remittance lists and bank deposit slips.
D.Credit files and reports.
74.In the audit of accounts receivable, the most important
emphasis should be on the
A.Completeness assertion.
B.Existence assertion.
C.Rights and obligations assertion.
D.Presentation and disclosure assertion.
75.When accounts receivable are confirmed at an interim date,
auditors need not be concerned with
A.Obtaining a summary of receivables transactions from the
interim date to the year-end date.
B.Obtaining a year-end trial balance of receivables, comparing
it to the interim trial balance, and obtaining evidence and
explanations for large variations.
C.Sending negative confirmations to all the customers as of the
year-end date.
D.Considering the necessity for some additional confirmations as
of the balance sheet date if balances have increased
materially.
76.The negative request form of accounts receivable confirmation
is useful particularly when the
A.Option A
B.Option B
C.Option C
D.Option D
77.When an audit team traces a sample of shipping documents to
the related sales invoice copies, they are trying to find relevant
evidence that
A.Shipments to customers were invoiced.
B.Shipments to customers were recorded as sales.
C.Recorded sales were shipped.
D.Invoiced sales were shipped.
78.Write-offs of doubtful accounts should be approved by
A.The salesperson.
B.The credit manager.
C.The treasurer.
D.The cashier.
79.When an audit team does not receive a response on a positive
accounts receivable confirmation, auditors should do all of the
following except
A.Send a second request.
B.Do nothing for immaterial balances.
C.Examine shipping documents.
D.Examine client correspondence files.
80.Cash receipts from sales on account have been
misappropriated. Which of the following acts would conceal this
defalcation and be least likely to be detected by an auditor?
A.Understating the sales journal.
B.Overstating the accounts receivable control account.
C.Overstating the accounts receivable subsidiary ledger.
D.Understating the cash receipts journal.
81.Which of the following internal control activities most
likely would deter lapping of collections from customers?
A.Independent internal verification of dates of entry in the
cash receipts journal with dates of daily cash summaries.
B.Authorization of write-offs of uncollectible accounts by a
supervisor independent of credit approval.
C.Separation of duties between receiving cash and posting the
accounts receivable ledger.
D.Supervisory comparison of the daily cash summary with the sum
of the cash receipts journal entries.
82.The financial records of the Movitz Company show that Mr.
Dennis owes $4,100 on an account receivable. An independent audit
is being carried out and the auditors send a positive confirmation
to Mr. Dennis. What is the most likely reason as to why a positive
confirmation rather than a negative confirmation was used here?
A.Control risk was particularly low for accounts receivable.
B.Inherent risk was particularly high for accounts
receivable.
C.Mr. Dennis's account was not yet due.
D.Mr. Dennis's account was not with a related party.
83.In the revenue and collection cycle, the order of the
activities in the cycle is best illustrated by
A.Delivering goods, billing customer, granting credit, and
performing collection activities.
B.Customer ordering, delivering goods, granting credit, and
billing customers.
C.Processing customer orders, granting credit, delivering goods,
and billing customers.
D.Granting credit, billing customers, delivering goods, and
processing cash receipts.
84.Prenumbering invoices, shipping documents, and sales orders
is a practice to achieve which of the following assertions?
A.Completeness.
B.Occurrence.
C.Accuracy.
D.Presentation or disclosure.
85.An internal control questionnaire for evaluating the
occurrence objective of revenues would not include which of the
following questions?
A.Is customer credit approved before orders are shipped?
B.Are customer statements mailed monthly by the accounts
receivable department?
C.Are direct confirmations of receivables obtained periodically
by the internal auditor?
D.Are returned goods checked against necessary reports?
86.The positive form of confirmation is best used when
A.Account balances are relatively large.
B.Account balances are small in amount but numerous.
C.Accounts are not in dispute.
D.Internal control is considered effective.
87.Which of the following is not an alternative procedure when a
confirmation is not received?
A.Examine sales invoices and vouch them to underlying shipping
documents.
B.Examine payments received before the end of the period.
C.Examine customer purchase orders.
D.Examine client correspondence with the customer.
88.A person who has access to both cash and accounts receivable
records may be able to take cash receipts by
A.Kiting.
B.Lapping.
C.Overstating cash receipts.
D.Underfooting the bank reconciliation.
Fill in the Blank Questions89._________________________________
of accounts receivable records implies the power to alter them
directly or enter transactions to alter
them.________________________________________
90.The pending sales orders can be reviewed for evidence of the
_________________________________ of recorded
_________________________________ and
________________________________.________________________________________
91.Internal control assessment is important because it governs
the ________________________________,
_________________________________ and
_________________________________ of substantive
procedures.________________________________________
92.Information about the internal control system can be gathered
by completing an
__________________________________________.________________________________________
93.Another way to obtain information about the internal control
system is to take a single example of a transaction and
__________________________ the process from its initiation to its
recording in the accounting
records.________________________________________
94.The actions in tests of controls involve
________________________________, ________________________________,
________________________________, _________________________________
and
________________________________.________________________________________
95.Dual direction testing involves samples of transactions
selected to obtain evidence about control over
_________________________________ in one direction and control over
_________________________________ in the other
direction.________________________________________
96.A procedure to gather evidence on both account balances and
controls is called a ______________________________________
procedure.________________________________________
97.Assertions related to account balances are
________________________________, ________________________________,
_________________________________ ________________________________,
_________________________________ and
________________________________.________________________________________
98.Confirmations provide evidence of
_________________________________ and, to a limited extent,
________________________________ of accounts and notes
receivable.________________________________________
99.___________________________ may be used to access
computerized receivable files to select and print
confirmations.________________________________________
100.Two widely used confirmation forms to test accounts
receivable are _________________________________ and
_________________________________
confirmations.________________________________________
101.The ____________________________ confirmation form is used
when individual balances are ____________________________ or
accounts are in
______________________________.________________________________________
102.Auditing the details of customer payments listed in bank
deposits in comparison to details of customer payment postings can
detect
_________________________________.________________________________________
Short Answer Questions103.For each of the tests of controls for
sales and receivables, indicate the assertion that is supported by
placing the correct letter in the blank.
Essay Questions104.What is dual direction testing?
105.Is the confirmation of cash and accounts receivable required
according to auditing standards? Explain.
106.In tests of controls auditing, auditors need to define
"deviations" in advance. Give seven examples of control compliance
deviations related to a client's processing of credit sales
transactions and the related assertion that was violated.
107.You are the auditor for Wilson Wholesale Products, Inc. As
part of the audit of accounts receivable, Wilson has provided you
an electronic file representing its accounts receivable as of its
fiscal year-end. The file includes the customer name, customer
address, customer number, sales invoice number, sales invoice date,
and amount.
Required:
Describe three or more substantive audit procedures you might
perform using computer-assisted audit tools and techniques (CAATs)
with this computer file.
108.What procedures should an auditor perform for a positive
confirmation that is not returned by the client's customer?
109.The following question appeared on an internal control
questionnaire for sales. Next to each of the question indicate the
related assertion.
Chapter 07 Revenue and Collection Cycle Answer Key
True / False Questions1.A price list master file contains the
product unit prices that are used for billing
customers.TRUEReference: Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
2.The accountants who record cash receipts and credits to
customer accounts should not handle the cash.TRUEReference:
Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
3.Credit checks should be performed by the sales department
before credit is approved.FALSEReference: Question also found in
study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
4.The aging information for accounts receivable is typically
used in connection with assessing the allowance for doubtful
accounts.TRUEReference: Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
5.A comparison of checks listed on a sample of deposit slips to
the detail of customer credits posted to customer accounts
receivable can be an audit test for lapping.TRUEReference: Question
also found in study guide
AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN:
Risk AnalysisBlooms: UnderstandDifficulty: 2 MediumLearning
Objective: 07-03 Give examples of tests of controls over customer
credit approval; delivery; and recording of accounts
receivable.Topic: Control Risk Assessment
6.If control risk is assessed very low, the substantive audit
procedures on account balances must be expanded.FALSEReference:
Question also found in study guide
AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN:
Risk AnalysisBlooms: UnderstandDifficulty: 2 MediumLearning
Objective: 07-03 Give examples of tests of controls over customer
credit approval; delivery; and recording of accounts
receivable.Topic: Control Risk Assessment
7.A confirmation procedure scheduled on the year-end date with a
large sample of customer account balances is necessary if tests of
controls reveal control weaknesses.TRUEReference: Question also
found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-04 Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Topic: Substantive Procedures in
the Revenue and Collection Cycle
8.Auditors should not place total reliance on controls to the
exclusion of other substantive testing procedures.FALSEReference:
Question also found in study guide
AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN:
Risk AnalysisBlooms: UnderstandDifficulty: 2 MediumLearning
Objective: 07-03 Give examples of tests of controls over customer
credit approval; delivery; and recording of accounts
receivable.Topic: Control Risk Assessment
9.An objective for an audit is to obtain evidence related to
management's financial statement assertions.TRUEReference: Question
also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
10.When obtaining evidence about accounts receivable, auditors
must put emphasis on the completeness and obligations
assertions.FALSEReference: Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-04 Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Topic: Substantive Procedures in
the Revenue and Collection Cycle
11.Inquiries of management usually do not provide very
convincing evidence about the existence and rights
assertions.TRUEReference: Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
12.A computer generally cannot be used for scanning large files
of accounts receivable for unusual credit balances.FALSEReference:
Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-02 Describe the revenue and collection cycle; including typical
source documents and control procedures.Topic: Revenue and
Collection Cycle: Typical Activities
13.The use of confirmations to test accounts receivable is
considered a generally accepted audit procedure.TRUEReference:
Question also found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-04 Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Topic: Substantive Procedures in
the Revenue and Collection Cycle
14.Confirmations yield evidence about existence and the gross
valuation of a receivable balance.TRUEReference: Question also
found in study guide
AACSB: AnalyticAICPA BB: IndustryAICPA FN: Decision
MakingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-04 Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Topic: Substantive Procedures in
the Revenue and Collection Cycle
Multiple Choice Questions15.To be recognized, revenues must also
be realized or realizable and
A.Foreseeable.
B.Collected.
C.Earned.
D.Shipped.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-01 Discuss
inherent risks related to the revenue and collection cycle with a
focus on improper revenue recognition.Source: OriginalTopic:
Revenue Recognition
16.The SEC requires all of the following for revenue to be
recognized except
A.Cash is collected.
B.Persuasive evidence of an arrangement exists.
C.Delivery has occurred or services have been rendered.
D.The seller's price to the buyer is fixed or determinable.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-01 Discuss
inherent risks related to the revenue and collection cycle with a
focus on improper revenue recognition.Source: OriginalTopic:
Revenue Recognition
17."Bill and hold" refers to an arrangement where
A.Sales are recorded but are not shipped.
B.Sales are shipped but are not recorded.
C.Sales are billed but not collected.
D.Inventory is held but not billed.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 3 HardLearning Objective: 07-05 Describe some
common errors and frauds in the revenue and collection cycle and
design some audit and investigation procedures for detecting
them.Source: OriginalTopic: Revenue Recognition
18.Custody of inventory is transferred to the shipping area upon
authorization of
A.The customer order.
B.The shipping order.
C.The invoice.
D.The purchase order.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
19.The document that generates recording of a sale is the
A.The customer order.
B.The shipping order.
C.The invoice.
D.The purchase order.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
20.The sum of customers' unpaid balances that is compared to the
general ledger balance comes from
A.A total of sales invoices.
B.A total of shipping orders.
C.The sales journal.
D.The accounts receivable trial balance.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-04 Give examples
of substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Cycle
21.The file that contains sales transactions that were initiated
in the system but are not yet completed is the
A.Credit check file.
B.Sales detail.
C.Inventory master.
D.Pending order master.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
22.The assertion that auditors will probably emphasize in the
revenue and collection cycle is
A.Occurrence.
B.Completeness.
C.Accuracy.
D.Classification.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
UnderstandDifficulty: 2 MediumLearning Objective: 07-01 Discuss
inherent risks related to the revenue and collection cycle with a
focus on improper revenue recognition.Source: OriginalTopic:
Revenue Cycle
23.A small business owner can best offset the lack of separation
of duties by
A.Creating an internal audit department.
B.Installing the latest computer equipment and software.
C.Being actively involved in the accounting process.
D.Relying on the external auditor to detect errors.
AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN:
Risk AnalysisBlooms: EvaluateDifficulty: 2 MediumLearning
Objective: 07-03 Give examples of tests of controls over customer
credit approval; delivery; and recording of accounts
receivable.Source: OriginalTopic: Revenue Controls
24.Accountants should be under orders to record sales and
accounts receivable when
A.The customer's order is received.
B.All supporting documentation of shipping is in order.
C.The item has been paid for.
D.The terms are agreed upon.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
25.Which of the following is an example of a control activity
that satisfies the accuracy control objective for sales
invoices?
A.Recorded sales in the sales journal are supported by
invoices.
B.Invoices, shipping documents, and sales orders are prenumbered
and the numerical sequence is checked.
C.Sales are recorded in the proper account.
D.Invoice quantities are compared to shipment and customer order
quantities.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-03 Give examples of
tests of controls over customer credit approval; delivery; and
recording of accounts receivable.Source: OriginalTopic: Revenue
Controls
26.Scanning sales invoices for missing numbers in the sequence
would be an activity intended to satisfy what assertion?
A.Completeness.
B.Accuracy.
C.Occurrence.
D.Classification.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 1 EasyLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
27.Vouching debits from a sample selection of customers'
accounts receivable records to supporting sales invoices is an
audit procedure designed to obtain evidence about the assertion
of
A.Occurrence.
B.Completeness.
C.Classification.
D.Accuracy.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
28.Alpha Brewery Corporation recorded sales through January 4,
2005, dating them December 31, 2004. This situation is an example
of a violation of which of the following assertions?
A.Existence or occurrence.
B.Completeness.
C.Classification.
D.Accuracy.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 1 EasyLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
29.Confirmations of accounts receivable provide the most
evidence for which of the following assertions?
A.Existence.
B.Valuation or allocation.
C.Rights and obligations.
D.Completeness.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
30.The auditor maintains control of the mailing and receipt of
confirmations by typically performing all of the following
except
A.Preparing the confirmation letters.
B.Mailing the confirmation letters.
C.Receiving the confirmation letters.
D.None of the above.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-04 Give examples
of substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
31.If the auditor obtains sufficient competent evidence on the
client's accounts receivable balance by alternative procedures
because it is impractical to confirm accounts receivable, the
auditor's opinion should be unqualified and could be expected
to
A.Disclose the fact that alternative procedures were used due to
client-imposed scope limitation.
B.Disclose in the opinion paragraph that confirmation of
accounts receivable was impracticable.
C.Avoid mentioning the alternative procedures.
D.Include an explanatory paragraph that discloses the
performance of alternative procedures.
AACSB: CommunicationAICPA BB: LegalAICPA FN: ReportingBlooms:
ApplyDifficulty: 3 HardLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
32.Which of the following is not a valid reason for an auditor
deciding not to send accounts receivable confirmations?
A.The balance is immaterial.
B.Confirmations would be ineffective.
C.The client requests alternative procedures be performed
instead.
D.Other procedures provide sufficient competent evidence.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-04 Give examples
of substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
33.When an account receivable is considered uncollectible, the
person who generally authorizes the write-off is the client's
A.Credit manager.
B.Treasurer.
C.Accountant.
D.Internal auditor.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-03 Give examples
of tests of controls over customer credit approval; delivery; and
recording of accounts receivable.Source: OriginalTopic: Revenue
Controls
34.Which of the following audit procedures is the most effective
in testing sales for understatement?
A.Analyze the aged trial balance of recorded accounts
receivable.
B.Confirm recorded accounts receivable.
C.Trace a sample of shipping documents to sales invoices
recorded in the sales journal.
D.Vouch a sample of recorded sales from the sales journal to
shipping documents.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
35.To determine whether sales transactions have been recorded in
the proper accounting period, the auditor performs cutoff tests.
Which of the following best describes the overall approach used
when performing cutoff tests?
A.Ascertain that management has included in the representation
letter a statement that transactions have been accounted for in the
proper accounting period.
B.Analyze transactions occurring within a few days before and
after year-end.
C.Confirm year-end transactions with regular customers.
D.Examine cash receipts in the subsequent period.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
ApplyDifficulty: 3 HardLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
36.The most effective audit procedure for determining the
collectability of an account receivable is the
A.Review of the subsequent cash collections.
B.Examination of the related sales invoice(s).
C.Confirmation of the account.
D.Review of authorization of credit sales to the customer and
the previous history of collections.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
37.In determining the adequacy of the allowance for
uncollectible accounts, the least valuable evidence would be
obtained from
A.An aging schedule of past due accounts that the auditor has
tested.
B.Correspondence with the client's collection agency.
C.Financial statements of individual customers.
D.No reply to negative confirmations.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
38.An auditor confirms a representative number of open accounts
receivable as of December 31 and investigates respondents'
exceptions and comments. By this procedure, the auditor would be
most likely to learn of which of the following?
A.One of the cashiers has been covering a personal embezzlement
by lapping.
B.One of the sales clerks has not been preparing charge slips
for credit sales to family and friends.
C.One of the IT control clerks has been removing all sales
invoices applicable to his account from the data file.
D.The credit manager has misappropriated remittances from
customers whose accounts have been written off.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
39.An auditor should normally perform alternative procedures to
substantiate the existence of accounts receivable when
A.No reply to a positive confirmation request is received.
B.No reply to a negative confirmation request is received.
C.Collectability of the receivables is in doubt.
D.Pledging of the receivables is probable.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-04 Give examples
of substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
40.A customer reply on a positive confirmation says "We dispute
the $250 charge. We believe it is excessive." This confirmation
A.Provides evidence of existence.
B.Does not provide evidence of existence because the customer
may refuse to pay the $250 charge.
C.Provides evidence that the account was understated.
D.Provides evidence that the account should be written off.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
41.The primary consideration when planning whether to send
confirmations of accounts receivable before the balance sheet date
is the
A.Type of confirmation to be used.
B.Client's internal control over transactions affecting
receivables.
C.Availability of staff auditors.
D.Number of customer accounts.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
UnderstandDifficulty: 2 MediumLearning Objective: 07-04 Give
examples of substantive procedures in the revenue and collection
cycle and relate them to assertions about account balances at the
end of the period.Source: OriginalTopic: Revenue Substantive
Testing
42.In the revenue and collection cycle, the auditor checks the
numerical sequence of shipping documents. This procedure is related
to which of the following assertions?
A.Existence.
B.Completeness.
C.Rights and obligations.
D.Valuation or allocation.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-03 Give examples of
tests of controls over customer credit approval; delivery; and
recording of accounts receivable.Source: OriginalTopic: Revenue
Controls
43.The auditor selects a sample of recorded sales invoices and
vouches them to shipping documents. This procedure is related to
which of the following assertions?
A.Occurrence.
B.Completeness.
C.Accuracy.
D.Cutoff.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
44.In which of the following circumstances would the use of the
negative form of accounts receivable confirmation most likely be
justified?
A.A substantial number of accounts may be in dispute and the
accounts receivable balance arises from sales to a few major
customers.
B.A substantial number of accounts may be in dispute and the
accounts receivable balance arises from sales to many customers
with small balances.
C.A small number of accounts may be in dispute and the accounts
receivable balance arises from sales to a few major customers.
D.A small number of accounts may be in dispute and the accounts
receivable balance arises from sales to many customers with small
balances.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
45.Which of the following controls most likely would help ensure
that all credit sales transactions of an entity are recorded?
A.The billing department supervisor sends copies of approved
sales orders to the credit department for comparison to authorized
credit limits and current customer account balances.
B.The accounting department supervisor independently reconciles
the accounts receivable subsidiary ledger to the accounts
receivable control account monthly.
C.The accounting department supervisor controls the mailing of
monthly statements to customers and investigates any differences
reported by customers.
D.The billing department supervisor matches prenumbered shipping
documents with entries in the sales journal.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source: AICPATopic:
Revenue Controls
46.Which of the following internal control activities most
likely would ensure that all billed sales are correctly posted to
the accounts receivable ledger?
A.Daily sales summaries are compared to daily postings to the
accounts receivable ledger.
B.Each sales invoice is supported by a prenumbered shipping
document.
C.The accounts receivable ledger is reconciled daily to the
control account in the general ledger.
D.Each shipment on credit is supported by a prenumbered sales
invoice.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: UnderstandDifficulty: 2 MediumLearning Objective:
07-03 Give examples of tests of controls over customer credit
approval; delivery; and recording of accounts receivable.Source:
AICPATopic: Revenue Controls
47.In evaluating the adequacy of the allowance for doubtful
accounts, an auditor most likely reviews the entity's aging of
receivables to support management's financial statement assertion
of
A.Existence.
B.Valuation or allocation.
C.Completeness.
D.Rights and obligations.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: AICPATopic: Revenue Substantive Testing
48.Which of the following procedures would an auditor most
likely perform for year-end accounts receivable confirmations when
the auditor did not receive replies to second requests?
A.Review the cash receipts journal for the month prior to the
year-end.
B.Intensify the study of the internal control structure
concerning the revenue cycle.
C.Increase the assessed level of detection risk for the
existence assertion.
D.Inspect the shipping records documenting the merchandise sold
to the debtors.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
49.Which of the following most likely would be detected by an
auditor's review of a client's sales cutoff?
A.Shipments lacking sales invoices and shipping documents.
B.Excessive write-offs of accounts receivable.
C.Unrecorded sales at year-end.
D.Lapping of year-end accounts receivable.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
50.Tracing shipping documents to prenumbered sales invoices
provides evidence that
A.No duplicate shipments or billings occurred.
B.Shipments to customers were properly invoiced.
C.All goods ordered by customers were accounted for.
D.All prenumbered sales invoices were accounted for.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: AICPATopic: Revenue Substantive Testing
51.Which of the following statements is correct concerning the
use of negative confirmation requests?
A.Unreturned negative confirmation requests rarely provide
significant explicit evidence.
B.Negative confirmation requests are effective when detection
risk is low.
C.Unreturned negative confirmation requests indicate that
alternative procedures are necessary.
D.Negative confirmation requests are effective when
understatements of account balances are suspected.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
52.The confirmation of customers' accounts receivable rarely
provides reliable evidence about the completeness assertion
because
A.Many customers merely sign and return the confirmation without
verifying its details.
B.Recipients usually respond only if they disagree with the
information on the request.
C.Customers may not be inclined to report understatement errors
in their accounts.
D.Auditors typically select many accounts with low recorded
balances to be confirmed.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
53.Negative confirmation of accounts receivable is less
effective than positive confirmation of accounts receivable
because
A.A majority of recipients usually lacks the willingness to
respond objectively.
B.Some recipients may report incorrect balances that require
extensive follow up.
C.The auditor cannot infer that all nonrespondents have verified
their account information.
D.Negative confirmations do not produce evidential matter that
is statistically quantifiable.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
54.Which of the following responses to a confirmation of
balances at December 31 would be most troubling to an auditor?
A.We paid this amount on December 28.
B.We received these goods on January 2.
C.We returned this amount on December 28 under our standing
agreement with the company.
D.This amount is not due until January 15.
Reference: Question also found in textbook
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
55.Revenues are normally considered to have been earned when
A.All possibility of return has expired.
B.The company has substantially accomplished what it must to be
entitled to the benefits.
C.The cash is collected.
D.Goods have been shipped.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue
Recognition
56.Sales are normally recorded on the date of the
A.Customer purchase order.
B.Bill of lading.
C.Sales invoice.
D.Payment check.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
57.When auditing the revenue and collection cycle, auditors
normally select balances to confirm from the
A.Sales journal.
B.Accounts receivable listing.
C.General ledger.
D.Cash receipts listing.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 1 EasyLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
58.Which of the following accounts is not normally part of the
revenue and collection cycle?
A.Sales.
B.Accounts Receivable.
C.Cash.
D.Purchases Returns and Allowances.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
59.The control activity "credit sales approved by credit
department" is directed toward which transaction assertion?
A.Occurrence.
B.Completeness.
C.Accuracy.
D.Cutoff.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 1 EasyLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source:
OriginalTopic: Revenue Controls
60.Which of the following would be the best protection for a
company that wishes to prevent the "lapping" of trade accounts
receivable?
A.Separate duties so that the bookkeeper in charge of the
general ledger has no access to incoming mail.
B.Separate duties so that no employee has access to both checks
from customers and currency from daily cash receipts.
C.Have customers send payments directly to the company's
depository bank.
D.Request that customer's payment checks be made payable to the
company and addressed to the treasurer.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source:
OriginalTopic: Revenue Controls
61.Which of the following internal control activities will most
likely prevent the concealment of a cash shortage by improperly
writing off a trade account receivable?
A.Write-offs must be approved by a responsible officer after
review of credit department recommendations and supporting
evidence.
B.Write-offs must be supported by an aging schedule showing that
only receivables overdue several months have been written off.
C.Write-offs must be approved by the cashier who is in a
position to know if the receivables have, in fact, been
collected.
D.Write-offs must be authorized by company field sales employees
who are in a position to determine the financial standing of the
customers.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source:
OriginalTopic: Revenue Controls
62.Auditors sometimes use comparisons of ratios as audit
evidence. An unexplained decrease in the ratio of gross profit to
sales may suggest which of the following possibilities?
A.Unrecorded purchases.
B.Unrecorded sales.
C.Merchandise purchases being charged to selling and general
expense.
D.Fictitious sales.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
63.An audit team is auditing sales transactions. One step is to
vouch a sample of debit entries from the accounts receivable
subsidiary ledger back to the supporting sales invoices. The
purpose of this audit procedure is to establish that
A.Sales invoices represent bona fide sales.
B.All sales have been recorded.
C.All sales invoices have been properly posted to customer
accounts.
D.Entries in the accounts receivable subsidiary ledger were
properly invoiced.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
64.An auditor noted that client sales had increased 10 percent
for the year. At the same time, cost of goods sold as a percentage
of sales had decreased from 45 percent to 40 percent and year-end
accounts receivable had increased by 8 percent. The auditor is most
likely concerned about
A.Unrecorded costs.
B.Improper credit approvals.
C.Improper sales cut-off.
D.Fictitious sales.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-05
Describe some common errors and frauds in the revenue and
collection cycle and design some audit and investigation procedures
for detecting them.Source: OriginalTopic: Revenue Fraud
65.An auditor noted that client sales had increased 10 percent
for the year. At the same time, cost of goods sold as a percentage
of sales had decreased from 45 percent to 40 percent and year-end
accounts receivable had increased by 8 percent. The auditor
interviewed the sales manager who stated that the increase in sales
without a corresponding increase in cost of goods sold was due to a
price increase enacted by the company during the year. How would
the auditor best test the sales manager's representation?
A.Perform additional inquiries with sales personnel.
B.Obtain copies of all price lists in use during the year and
vouch the prices to sales invoices.
C.Send confirmations asking customers about unit prices paid for
product.
D.Vouch vender invoices to payments made after year-end.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
66.To conceal defalcations involving receivables, a dishonest
bookkeeper might charge which of the following accounts?
A.Miscellaneous income.
B.Petty cash.
C.Miscellaneous expense.
D.Sales returns.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-05
Describe some common errors and frauds in the revenue and
collection cycle and design some audit and investigation procedures
for detecting them.Source: OriginalTopic: Revenue Fraud
67.Which of the following responses to an accounts receivable
confirmation at December 31 would cause an audit team the most
concern?
A."This amount was paid on December 30th."
B."We received this shipment on January 2nd."
C."These goods were returned for credit on November 15th."
D."The balance does not reflect our sales discount for paying by
January 5th."
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
68.A client has a separate sales group for its largest
"preferred" customers. This is a select group of customers that
normally make purchases in excess of $250,000 and often have
accounts receivable balances in excess of $1 million. Which of the
following audit procedures would the auditor most likely
perform?
A.Prepare a schedule of purchases and payments for these
customers.
B.Send out negative confirmations on a large sample of these
customers.
C.Inquire of the sales manager regarding the accounts receivable
terms.
D.Send out positive confirmations on a large sample of these
customers.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
69.Audit documentation often includes a client-prepared, aged
trial balance of accounts receivable as of the balance sheet date.
The audit team uses this aging primarily to
A.Evaluate internal control over credit sales.
B.Test the accuracy of recorded charge sales.
C.Estimate credit losses.
D.Verify the existence of the recorded receivables.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
70.Which of the following might be detected by auditors' cutoff
review and examination of sales journal entries for several days
prior to the balance sheet date?
A.Lapping year-end accounts receivable.
B.Inflating sales for the year.
C.Kiting bank balances.
D.Misappropriating merchandise.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
71.Confirmation of individual accounts receivable balances
directly with debtors will, of itself, normally provide the
strongest evidence concerning the
A.Collectability of the balances confirmed.
B.Ownership of the balances confirmed.
C.Existence of the balances confirmed.
D.Internal control over balances confirmed.
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-04 Give examples of
substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
72.Which of the following is the best reason for prenumbering in
sequence such documents as sales orders, shipping documents, and
sales invoices?
A.Enables company personnel to determine the accuracy of each
document.
B.Enables personnel to determine the proper period for recording
of sales revenue and receivables.
C.Enables personnel to check the numerical sequence for missing
documents and unrecorded transactions.
D.Enables personnel to determine the validity of recorded
transactions.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source:
OriginalTopic: Revenue Controls
73.When a sample of customer accounts receivable is selected for
vouching debits, auditors will vouch them to
A.Sales invoices with shipping documents.
B.Records of accounts receivable write-offs.
C.Cash remittance lists and bank deposit slips.
D.Credit files and reports.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
74.In the audit of accounts receivable, the most important
emphasis should be on the
A.Completeness assertion.
B.Existence assertion.
C.Rights and obligations assertion.
D.Presentation and disclosure assertion.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-04 Give examples
of substantive procedures in the revenue and collection cycle and
relate them to assertions about account balances at the end of the
period.Source: OriginalTopic: Revenue Substantive Testing
75.When accounts receivable are confirmed at an interim date,
auditors need not be concerned with
A.Obtaining a summary of receivables transactions from the
interim date to the year-end date.
B.Obtaining a year-end trial balance of receivables, comparing
it to the interim trial balance, and obtaining evidence and
explanations for large variations.
C.Sending negative confirmations to all the customers as of the
year-end date.
D.Considering the necessity for some additional confirmations as
of the balance sheet date if balances have increased
materially.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
76.The negative request form of accounts receivable confirmation
is useful particularly when the
A.Option A
B.Option B
C.Option C
D.Option D
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
77.When an audit team traces a sample of shipping documents to
the related sales invoice copies, they are trying to find relevant
evidence that
A.Shipments to customers were invoiced.
B.Shipments to customers were recorded as sales.
C.Recorded sales were shipped.
D.Invoiced sales were shipped.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: AICPATopic: Revenue
Substantive Testing
78.Write-offs of doubtful accounts should be approved by
A.The salesperson.
B.The credit manager.
C.The treasurer.
D.The cashier.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 2 MediumLearning Objective: 07-03 Give examples
of tests of controls over customer credit approval; delivery; and
recording of accounts receivable.Source: OriginalTopic: Revenue
Controls
79.When an audit team does not receive a response on a positive
accounts receivable confirmation, auditors should do all of the
following except
A.Send a second request.
B.Do nothing for immaterial balances.
C.Examine shipping documents.
D.Examine client correspondence files.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
80.Cash receipts from sales on account have been
misappropriated. Which of the following acts would conceal this
defalcation and be least likely to be detected by an auditor?
A.Understating the sales journal.
B.Overstating the accounts receivable control account.
C.Overstating the accounts receivable subsidiary ledger.
D.Understating the cash receipts journal.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-05
Describe some common errors and frauds in the revenue and
collection cycle and design some audit and investigation procedures
for detecting them.Source: AICPATopic: Revenue Fraud
81.Which of the following internal control activities most
likely would deter lapping of collections from customers?
A.Independent internal verification of dates of entry in the
cash receipts journal with dates of daily cash summaries.
B.Authorization of write-offs of uncollectible accounts by a
supervisor independent of credit approval.
C.Separation of duties between receiving cash and posting the
accounts receivable ledger.
D.Supervisory comparison of the daily cash summary with the sum
of the cash receipts journal entries.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source: AICPATopic:
Revenue Controls
82.The financial records of the Movitz Company show that Mr.
Dennis owes $4,100 on an account receivable. An independent audit
is being carried out and the auditors send a positive confirmation
to Mr. Dennis. What is the most likely reason as to why a positive
confirmation rather than a negative confirmation was used here?
A.Control risk was particularly low for accounts receivable.
B.Inherent risk was particularly high for accounts
receivable.
C.Mr. Dennis's account was not yet due.
D.Mr. Dennis's account was not with a related party.
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 3 HardLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
83.In the revenue and collection cycle, the order of the
activities in the cycle is best illustrated by
A.Delivering goods, billing customer, granting credit, and
performing collection activities.
B.Customer ordering, delivering goods, granting credit, and
billing customers.
C.Processing customer orders, granting credit, delivering goods,
and billing customers.
D.Granting credit, billing customers, delivering goods, and
processing cash receipts.
AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms:
RememberDifficulty: 1 EasyLearning Objective: 07-02 Describe the
revenue and collection cycle; including typical source documents
and control procedures.Source: OriginalTopic: Revenue Cycle
84.Prenumbering invoices, shipping documents, and sales orders
is a practice to achieve which of the following assertions?
A.Completeness.
B.Occurrence.
C.Accuracy.
D.Presentation or disclosure.
Reference: Question also found in study guide
AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms:
ApplyDifficulty: 2 MediumLearning Objective: 07-03 Give examples of
tests of controls over customer credit approval; delivery; and
recording of accounts receivable.Source: OriginalTopic: Revenue
Controls
85.An internal control questionnaire for evaluating the
occurrence objective of revenues would not include which of the
following questions?
A.Is customer credit approved before orders are shipped?
B.Are customer statements mailed monthly by the accounts
receivable department?
C.Are direct confirmations of receivables obtained periodically
by the internal auditor?
D.Are returned goods checked against necessary reports?
Reference: Question also found in study guide
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 07-03
Give examples of tests of controls over customer credit approval;
delivery; and recording of accounts receivable.Source:
OriginalTopic: Revenue Controls
86.The positive form of confirmation is best used when
A.Account balances are relatively large.
B.Account balances are small in amount but numerous.
C.Accounts are not in dispute.
D.Internal control is considered effective.
Reference: Question also found in study guide
AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Risk
AnalysisBlooms: ApplyDifficulty: 1 EasyLearning Objective: 07-04
Give examples of substantive procedures in the revenue and
collection cycle and relate them to assertions about account
balances at the end of the period.Source: OriginalTopic: Revenue
Substantive Testing
87.Which of the following is not an alternative procedure when a
confirmation is not received?
A.Examine sales invoices and vouch them to underlying shipping
documents.
B.Examine payments received before the end of the period.
C.Examine custome