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1

The best control to prevent lapping is:
A)Separation of recordkeeping for receivables from custody of cash.
B)Separation of authorization of sales transactions from recordkeeping for accounts receivable.
C)Timely reconciliation of the bank account by an individual not involved in recordkeeping for receivables.
D)Comparison of the total per the daily bank deposit ticket with the total recorded in the cash receipts journal by an individual otherwise independent of the cash receipts function.
2

The most practical and effective audit procedure for detecting lapping is:
A)Preparing an interbank transfer schedule.
B)Comparing recorded cash receipts in detail against items making up the bank deposit as shown on duplicate deposit slips validated by the bank.
C)Tracing recorded cash receipts to postings in customers' ledger cards.
D)Preparing a proof of cash.
3

An analysis of the aged accounts receivables is most directly related to which substantive test objective?
A)Existence and occurrence.
B)Presentation and disclosure.
C)Rights and obligations.
D)Valuation.
4

Which of the following is one of the most conclusive forms of evidence in establishing the existence of accounts receivable?
A)Close inspection of notes on hand and verification with company personnel.
B)Comparisons of last year's receivables with current year amounts to test for reasonableness.
C)The confirmation of accounts.
D)Contacting a credit reporting agency to determine the credit worthiness of customers.
5

Which of the following would be least likely to diminish the validity of evidence obtained from confirmation of accounts receivable?
A)The confirmation requests are sent on the client's letterhead.
B)The confirmation requests are mailed to clients by the internal auditors.
C)The mailing addresses on the confirmation requests are verified by the client's mailroom personnel.
D)The return address on the envelopes used to send the confirmation requests is the exact office address that the CPAs work in at the client's premises.
6

When scheduling audit work, the auditors are most likely to confirm accounts receivable balances at an interim date if:
A)Negative confirmations are being used.
B)Internal control is weak.
C)Internal control is strong.
D)There is a simultaneous examination of cash and accounts payable.
7

Which of the following is the best argument against the use of negative accounts receivable confirmations?
A)The cost-per-response is excessively high.
B)There is no way of knowing if the intended recipients received them.
C)Recipients are likely to feel that in reality the confirmation is a subtle request for payment.
D)The inference drawn from receiving no reply may not be correct.
8

Which of the following procedures is least likely to help auditors to assess the adequacy of management's accounting estimate of the allowance for doubtful accounts?
A)Investigate confirmation exceptions for indication of amounts in dispute.
B)Review amounts of accounts which have been written off as uncollectible prior to year-end.
C)Investigate credit ratings for large accounts receivable.
D)Discuss with the credit manager the current status of doubtful accounts.
9

Which of the following is a proper alternative audit procedure for nonresponses to positive accounts receivable confirmation requests?
A)Examination of subsequent cash receipts in payment of the receivable.
B)Mailing negative confirmation requests to nonrespondents.
C)Expansion of the sample by the number of nonrespondents.
D)Reduction of accounts receivable by the amount of the nonresponses.
10

Tracing copies of shipping documents to sales invoices will provide evidence that all
A)Billed sales were shipped.
B)Debits to the subsidiary accounts receivable ledger are for sales shipped.
C)Shipments to customers were billed.
D)Accounts receivable are recorded.
11

Which of the following is statements is correct about "window dressing?"
A)Window dressing involves intentional overstatements of receivables and sales through decreases in the percentage complete of long-term construction projects.
B)An audit is not developed to provide assurance of detecting any forms of window dressing.
C)A number of window dressing practices represent proper and appropriate business practices.
D)Window dressing ordinarily involves the intentional overstatement of liability and equity accounts.
12

Which statement is correct concerning the audit of notes receivable?
A)An aged schedule of notes receivable is ordinarily used to estimate an allowance for uncollectible notes.
B)Because note forms are tightly controlled by banks, physical inspection is ordinarily a particularly effective audit technique.
C)Confirmation in writing from the holder of the note is ordinarily considered as an acceptable alternative to inspection of the note.
D)The inspection of notes receivable on hand is ordinarily performed concurrently with the inspection of notes payable.







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