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    Chap4 Theory

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    Anonymous LC5kFdtc
    The document is a chapter quiz on sales and receivables for a BA 120.2 class. It contains 10 multiple choice questions testing understanding of key concepts regarding auditing of accounts receivable, sales transactions, internal controls over revenue recognition processes, and evidence obtained from confirmation of account balances and other substantive procedures. The questions cover topics such as reliable evidence for account balances, tracing sales transactions to supporting documentation, sales cutoff procedures, segregation of duties, assertions addressed by confirmation of receivables, and the purpose of transaction walkthroughs.

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    Chap4 Theory

    Uploaded by

    Anonymous LC5kFdtc
    495 views2 pages
    The document is a chapter quiz on sales and receivables for a BA 120.2 class. It contains 10 multiple choice questions testing understanding of key concepts regarding auditing of accounts receivable, sales transactions, internal controls over revenue recognition processes, and evidence obtained from confirmation of account balances and other substantive procedures. The questions cover topics such as reliable evidence for account balances, tracing sales transactions to supporting documentation, sales cutoff procedures, segregation of duties, assertions addressed by confirmation of receivables, and the purpose of transaction walkthroughs.

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    Accounting Auditing Current Assets Internal Control

    Original Title

    Chap4-Theory

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    The document is a chapter quiz on sales and receivables for a BA 120.2 class. It contains 10 multiple choice questions testing understanding of key concepts regarding auditing of accounts receivable, sales transactions, internal controls over revenue recognition processes, and evidence obtained from confirmation of account balances and other substantive procedures. The questions cover topics such as reliable evidence for account balances, tracing sales transactions to supporting documentation, sales cutoff procedures, segregation of duties, assertions addressed by confirmation of receivables, and the purpose of transaction walkthroughs.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    495 views2 pages

    Chap4 Theory

    Uploaded by

    Anonymous LC5kFdtc
    The document is a chapter quiz on sales and receivables for a BA 120.2 class. It contains 10 multiple choice questions testing understanding of key concepts regarding auditing of accounts receivable, sales transactions, internal controls over revenue recognition processes, and evidence obtained from confirmation of account balances and other substantive procedures. The questions cover topics such as reliable evidence for account balances, tracing sales transactions to supporting documentation, sales cutoff procedures, segregation of duties, assertions addressed by confirmation of receivables, and the purpose of transaction walkthroughs.

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    © All Rights Reserved
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    You are on page 1of 2

    BA 120.

    2 CHAPTER QUIZ – SALES and RECEIVABLES

    I. THEORY. Select the best answer for each of the following items.

    1. In determining validity of accounts receivable, which of the following would be considered most reliable?
    a. Direct telephone communication between auditor and debtor.
    b. Documentary evidence that supports the accounts receivable balance.
    c. Confirmation replies received directly from customers.
    d. Credits to accounts receivable from the cash receipts book after the close of business at year end.

    2. An auditor is testing sales transactions. One step is to trace a sample of debit entries from the accounts
    receivable subsidiary ledger back to the supporting sales invoices. This step establishes that
    a. Sales invoices represent bona fide sales.
    b. Debit entries in the accounts receivable subsidiary ledger are properly supported by sales invoices.
    c. All sales invoices have been recorded.
    d. All sales invoices have been properly posted to customer accounts.

    3. Which of the following might be detected by an auditor’s review of the client’s sales cutoff?
    a. Lapping of year-end accounts receivable c. Unrecorded sales discounts
    b. Excessive goods returned by credit d. Inflated sales for the year

    4. Evaluate the following statements:


    I. The billing function should not be assigned to the person who is responsible for maintaining
    accounts receivable records.
    II. Responsibility for approval of the write-off of accounts receivable that are uncollectible should not
    be assigned to the cashier.

    a. True, True b. True, False c. False, True d. False, False

    5. An auditor most likely would review an entity’s periodic accounting for the numerical sequence of shipping
    documents and invoices to support management’s assertion of:
    a. Existence b. Rights c. Valuation d. Completeness

    6. What is the proper presentation of accounts receivable pledged against borrowings?


    a. Include in receivables, w/ disclosure c. Exclude from receivables, w/ disclosure
    b. Include in receivables, w/out disclosure d. Exclude from receivables, w/out disclosure

    7. Two assertions for which confirmation of accounts receivable balances provides primary evidence are
    a. Completeness and valuation c. Valuation and rights
    b. Rights and existence d. Existence and completeness

    8. An auditor who wishes to substantiate the gross balance of the account "Trade Notes Receivable" is
    considering the advisability of performing the four procedures listed below. Which pair of procedures is
    best suited to this objective?
    I. Age the receivables.
    II. Confirm the notes with the makers.
    III. Inspect the notes.
    IV. Trace a sample of postings from the sales journal to the notes receivable ledger.

    a. I and III b. II and III c. I and IV d. I and IV


    9. The negative request form of accounts receivable confirmation may be used when the
    a b c d
    Combined assessed level of inherent and control risk Low Low Low High
    Number of small balances Few Many Many Few
    Consideration by the recipient Unlikely Unlikely Likely Likely

    10. In considering internal control within the revenue cycle, what is the purpose of a transaction walkthrough?
    a. To select documents for detailed tests of controls.
    b. To verify the results of the auditor’s sampling plan.
    c. To confirm the auditor’s understanding of the internal control structure.
    d. To assure that employees are performing assigned functions accurately.

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