Hypostatic Audit Tests: Revenue Cycle
1 . Substantive Audit Assessment: Revenue Routine
2 . MULTIPLE CHOICE:
a few. 1 . Which usually of the subsequent might be detected by a great auditor's report on the customer's sales cut-off?
4. a. Excessive merchandise returned intended for credit.
your five. b. Unrecorded sales savings. c. Terme conseille of season end accounts receivable. g. Inflated product sales for the year.
6. RESPONSE: D
several. 2 . Which will of the pursuing forms of proof represents one of the most competent data that a receivable actually is available?
8. a. A positive verification. b. A sales account. c. A receiving report. d. Legislation of lading.
9. ANSWER: A
15. 3. During the process of credit reporting receivables since December 23, 2002, a good confirmation was returned implying the " balance owed as of Dec 31 was paid on January 9, 2003. " The auditor would almost certainly 11. a. Determine if there were any changes in the accounts between January 1 and January being unfaithful, 2003.
12. b. Identify whether a normal trade lower price was used by the customer. 13. c. Reconfirm the actually zero balance by January 10, 2003.
16. d. Confirm that the volume was received.
15. SOLUTION: D
sixteen. 4. Which of the following analytical audit findings might most likely reveal a possible difficulty?
17. a. A materials decrease in the receivables yield. b. A material embrace inventory turnover. c. A material decline in days' sales outstanding. d. A material increase in the acid test rate.
18. ANSWER: A
nineteen. 5. If the objective in the auditor is always to evaluate the appropriateness of alterations to revenue, the best obtainable evidence would normally be 20. a. Oral data obtained by discussing adjustment-related procedures with controller employees.
21. n. Analytical facts obtained by comparing product sales adjustments to gross sales to get a period of time.
twenty two. c. Physical evidence attained by inspection of goods went back for credit rating. 23. d. Documentary data obtained by inspecting papers supporting articles to modification accounts.
twenty four. ANSWER: M
25. six. An auditor will most likely find kiting by simply
26. a. Completing an analysis of interbank transfers and obtaining cutoff traditional bank statements directly from all
twenty eight. b. Reconciling all bank accounts as of season end.
30. c. Reconciling Bank A as of year end and Bank M at the end in the first week following year end.
30. d. Reconciling Lender B since year end and Financial institution A at the end of the first week following year end.
23. ANSWER: A
32. six. An auditor should carry out alternative types of procedures to verify the existence of accounts receivable the moment
33. a. No answer a positive confirmation request is usually received. n. No reply to a negative confirmation request is usually received. c. Collectability with the receivables is at doubt. m. Pledging with the receivables can be probable.
thirty four. ANSWER: A
35. 8. Two types of accounts receivable confirmation demands are thirty six. used in practice-positive and unfavorable. Negative
thirty seven. confirmations may be used
38. a. When inner control over product sales and accounts
39. receivable is fragile.
40. w. Only where the auditor features assessed inherent risk and control risk as low, the auditor believes that the recipient will review the ask for, and many small bills are involved.
41. c. Just where inside control over product sales and accounts receivable can be strong. 42. d. Only where the auditor has evaluated inherent risk and control risk since, the auditor believes the fact that recipient will certainly review the request, and a small number of significant balances are participating.
43. RESPONSE: B
forty-four. 9. The moment counting funds on hand, the auditor must exercise control over all cash and other negotiable assets to
46. a. Theft. b. Irregular endorsement. c. Substitution. m. Deposits in transit. forty seven. ANSWER: C
48. 12. An auditor would generally rely upon which kind of certain matter when ever evaluating the collectability of accounts receivable?
49. a. Positive verification. b. Unfavorable confirmation. c. Aged accounts receivable real estate. d. Management's...