ACCT550 - Becker 4

Which of the following procedures would be appropriate to test the existence assertion during an audit of accounts receivable ?

Send confirmation to customers

Which of the following internal control activities is not usually performed in the vouchers payable department?

Accounting for unused prenumbered purchase orders and receiving reports.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is:

Stamped “paid” by the check register.

Which of the following audit procedures would be an auditor most likely perform to test controls relating to management’s assertion concerning the completeness of sales transactions ?

inspect the entity’s reports of prenumbered shipping documents that have not been recorded in the sales journal.

An auditor of a nonissuer’s financial statements obtained scanned version of executed sales contracts from the nonissuer’s sales department. The auditor has not tested the operating effectiveness of the controls around the execution of the original contracts. In order to validate the reliability of the scanned contracts that the auditor plans to use as a audit evidence, the auditor would most appropriately:

Confirm the key terms of the contracts with the customer/

Which of the following strategies most likely could improve the response rate of the confirmations of accounts receivable

Include a list of items or invoices that constitute the account balance.

Which of the following represents a inappropriate segregation of duties ?

The cash receipts clerk credits customer accounts when payment is received.

Sound internal control dictates that, immediately upon receiving checks from customers by mail, a responsible employee should:

Prepare a duplicate listing of checks recieved.

Which of the following internal controls most likely would assure that all billed sales are correctly posted to the accounts receivable ledger ?

Daily sales summaries are compared to daily postings to the account receivable ledger.

To determine whether internal control relative to the revenue cycle of a wholesaling entity is operating effectively in minimizing the failure to prepare sales invoices, an auditor most likely would select a sample of transactions from the population represented by the:

Shipping document file.

An auditor suspects that certain client employees are ordering merchandise for themselves over the internet without recording the purchase or receipts of the merchandise. When vendors’ invoices arrive, one of the employee approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all:

Cash disbursement.

To determine whether accounts payable are complete, an auditor performs a test to verify that all merchandise received is recorded. The population of documents for this consists of all:

Receiving reports.

Under properly designed internal control, the same employee most likely would match vendors’ invoices with receiving reports and also:

Recompute the calculations on vendor’s invoices.

When performing an audit, a CPA notes that credit loss expense is unusually high relative to similar firms in the industry. The CPA should recommend which of the following controls ?

Require credit checks on all new customers.

To reduce the risks associated with accepting e-mail responses to requests for confirmation of accounts receivable, an auditor most likely would:

Request senders to mail the original form to the auditor.

Which of the following procedures is performed first for unreturned positive confirmations of accounts receivable?

Sending second requests for confirmation of accounts receivable.

Under which of the following circumstances would using the blank form of confirmation of accounts receivable most likely be preferable to other types of positive confirmations?

Recipients are likely to sign other types of positive confirmations without careful investigation.

Which of the following represents an insufficient control over cash receipts for a large company ?

Checks received are endorsed by the cashier and deposited by the mail custodian on a daily basis.

Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because:

There is likely to be other reliable external evidence available to support the balances.

Which of the following procedures would an auditor least likely perform the balance sheet date?

Confirmation of accounts payable.

Which of the following controls is least likely to be used to safeguard cash ?

Receiving reports.

Tracing bills of lading to sales invoices provides evidence that:

Shipments to customers were invoiced.

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts recievable because:

The auditor cannot infer that all nonrespondents have verified their account information.

The confirmation of customer’s accounts receivables rarely provide reliable evidence about the completeness assertion because:

Customers may not be inclined to report understatement errors in their accounts.

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases ?

Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for ?

During the confirmation of accounts receivable, an auditor receives a response to a mailed confirmation via electronic communication with the customer. Which of the following actions should an auditor take?

Accept the confirmation but verify the source and content through a telephone call to the respondent.

Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?

Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash.

After receiving responses to accounts receivable confirmations, the auditor determined that the evidence was not sufficient to form a conclusion regarding the accounts receivable balance. Which of the following actions should the auditor take next concerning the accounts receivable balance?

Request additional confirmations and perform alternative procedures.

Which of the following circumstances most likely would cause an auditor to believe that material misstatements may exist in an entity's financial statements?

Accounts receivable confirmation requests yield significantly fewer responses than expected.

An auditor would consider a cashier's job description to contain compatible duties if the cashier receives remittances from the mailroom and also prepares the:

Daily deposit slip.

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

When an auditor does not receive replies to positive requests for year-end accounts receivable confirmations, the auditor most likely would:

Ask the client to contact the customers to request that the confirmations be returned.

Upon receipt of customers' checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:

Accounts receivable bookkeeper to update the subsidiary accounts receivable records.

Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments?

Treasurer.

During a recent audit of the revenue cycle, a CPA found the client had $1 million in accounts receivable recorded for fictitious customers. Which of the following tests most likely facilitated identification of the fraud?

Sending positive confirmations to all of the client's customers with balances on December 31.

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?

Inspect the shipping records documenting the merchandise sold to the debtors.

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

An employee obtains a blank check, makes it payable to a fictitious company, and then cashes it. Each of the following control procedures should prevent this threat to the expenditure cycle, except:

Bank reconciliations.

An auditor is performing a preliminary assessment of the client’s internal control over purchases. Which of the following would be considered improper segregation of duties over purchase transactions for a large client?

The purchasing department prepares a pre-numbered requisition and obtains all required approvals.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is:

Stamped "paid" by the check signer.

An auditor who uses a transaction cycle approach to assessing control risk most likely would test control activities related to transactions involving the sale of goods to customers with the:

Collection of receivables.

Tracing shipping documents to prenumbered sales invoices provides evidence that:

Shipments to customers were properly invoiced.

Mailing disbursement checks and remittance advices should be controlled by the employee who:

Signs the checks last.

Generally accepted auditing standards have not been followed in which of the following situations?

The auditor receives several faxed and emailed confirmation responses related to confirmations that were mailed indicating that the amount stated is correct. The auditor does not perform any additional procedures related to these electronic responses.

Which of the following is the most effective control activity to detect vouchers that were prepared for the payment of goods that were not received?

Match purchase order, receiving report, and vendor's invoice for each voucher in accounts payable department.

An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to:

Determine that purchases were properly recorded.

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also:

Is responsible for mailing the checks.

To reduce the risks associated with accepting fax responses to requests for confirmations of accounts receivable that were sent by mail, an auditor most likely would:

Verify the sources and contents of the faxes in telephone calls to the senders.

The authority to accept incoming goods in receiving should be based on a (an):

Approved purchase order.

Which of the following statements is correct concerning the use of negative confirmation requests?

Unreturned negative confirmation requests rarely provide significant explicit evidence.