1multiple choice12When control risk for the existence assertion is assessed at a high level, which of the

following is a likely effect with respect to the auditors' confirmation of receivables? a. The account
balances as of year-end will generally be confirmed. b. The auditors will in general use blank rather than
positive confirmation requests. c. The auditors will be required to confirm accounts as of an interim date
(during the year under audit) and as of year-end. d. Confirmation will not in general be used as the
auditor will rely primarily upon support such as vendors' invoices, purchase orders and receiving
reports.1. a
2. b
3. c
4. d
1
179_231467_
CORRECT12multiple choice12Confirmation requests should contain a "business reply" envelope
addressed to the auditors at the client's address. A. true B. false1. a
2. b
2
179_865164_
CORRECT13multiple choice12Which of the following is most likely to be used in determining a proper
amount to be included in the allowance for doubtful accounts? a. Accounts receivable divided by Cost of
goods sold. b. Aging of accounts receivable. c. Cash Sales divided by Accounts receivable. d. Year 2
accounts receivable compared to year one accounts receivable.1. a
2. b
3. c
4. d
2
179_716680_
CORRECT14multiple choice12An aged trial balance of accounts receivable may provide evidence on the
adequacy of the allowance for uncollectible accounts. A. true B. false1. a
2. b
1
179_261005_
CORRECT15multiple choice12A client might overstate December 31 accounts receivable balances by
dating and recording January transactions in December. Such entries recorded in which journal are most
likely to achieve this end? a. Cash receipts. b. Payroll. c. Purchases. d. Sales.1. a
2. b
3. c
4. d
4
179_691411_
CORRECT16multiple choice12Which of the following is a likely procedure to test the adequacy of the
allowance for doubtful accounts? a. Examine cash receipts received after year-end. b. Confirm
receivables. c. Examine dates of purchase orders. d. Foot the receivables lead schedule.1. a
2. b
3. c
4. d
1
179_405264_
CORRECT17multiple choice12To test the existence assertion for recorded receivables, an auditor would
select a sample from the: a. Sales orders file. b. Customer purchase orders. c. Accounts receivable
subsidiary ledger. d. Shipping documents (bills of lading) file.1. a
2. b
3. c
4. d
3
179_340536_
CORRECT18multiple choice12Analytical procedures performed during an audit indicate that accounts
receivable doubled since the end of the prior year. However, the allowance for doubtful accounts as a
percentage of accounts receivable remained about the same. Which of the following client explanations
would satisfy the auditor? a. A greater percentage of accounts receivable are listed in the "more than
120 days overdue" category than in the prior year. b. Internal control activities over the recording of
cash receipts have been improved since the end of the prior year. c. The client opened a second retail
outlet during the current year and its credit sales approximately equaled the older outlet. d. The client
tightened its credit policy during the current year and sold considerably less merchandise to customers
with poor credit ratings.1. a
2. b
3. c
4. d
3
179_430235_
CORRECT19multiple choice12Accounts receivable that are written off should not be turned over to a
collection agency. A. true B. false1. a
2. b
2
179_368298_
CORRECT110multiple choice12The department approving a sales transaction should be the shipping
department. A. true B. false1. a
2. b
2
179_606470_
CORRECT111multiple choice12Which procedure would be of most assistance to an auditor discovering a
large credit sale that has erroneously been recorded twice? a. Footing the sales journal. b. Confirming
accounts receivable. c. Tracing the total sales in the sales journal to the general ledger. d. Observation of
the physical inventory count at year-end.1. a
2. b
3. c
4. d
2
179_911216_
CORRECT112multiple choice12For effective internal control, the billing function should not be
performed by the: a. a. Sales department. b. b. ccounting department. c. c. Finance department. d. d.
Information Processing department.1. a
2. b
3. c
4. d
1
179_966004_
CORRECT113multiple choice12Confirmation of accounts receivable by direct communication with the
debtor tests the existence of accounts receivable. A. true B. false1. a
2. b
1
179_374274_
CORRECT114multiple choice12CPAs use negative accounts receivable confirmation requests more
frequently than positive accounts receivable confirmation requests. A. true B. false1. a
2. b
2
179_282180_
CORRECT115multiple choice12Your client performed the physical count of inventory as of November 30,
one month prior to year-end. Subsequently, your client closed the sales journal on 12/29/XX, two days
before year-end, and reported those two days' credit sales in January of the next year. Assuming the
client uses a perpetual inventory system, which of the following is most likely to be overstated relating
to the year XX financial statements? a. Sales. b. Cash. c. Inventory. d. Accounts receivable.1. a
2. b
3. c
4. d
3
179_142229_
CORRECT116multiple choice12Which of the following would be least likely to diminish the validity of
evidence obtained through confirmation of accounts receivable? a. The confirmation requests are sent
on the client's letterhead. b. The confirmation requests are mailed to customers by the internal auditors.
c. The client's mailroom personnel closely monitor and inspect confirmation requests during mailing. d.
The return address on the envelope used to send the confirmation request is that of the client.1. a
2. b
3. c
4. d
1
179_139035_
CORRECT117multiple choice12Material accounts receivable from related parties should be stated
separately from other receivables. A. true B. false1. a
2. b
1
179_274629_
CORRECT118multiple choice12Which of the following is not typically considered to be an alternate
procedure for handling non-replies to accounts receivable confirmation requests? a. Examine sales
invoices. b. Inclusion of the information in the engagement letter. c. Examine correspondence. d.
Examine any subsequent cash receipts.1. a
2. b
3. c
4. d
2
179_135156_
CORRECT119multiple choice12Which of the following manipulations would understate receivables on
the financial statements? a. Understatement of cash sales. b. Closing the sales journal prior to year-end.
c. Closing the cash receipts journal prior to year-end. d. Underestimating the allowance for doubtful
accounts.1. a
2. b
3. c
4. d
2
179_900574_
CORRECT120multiple choice12An audit basically consists of having the auditor form an opinion
regarding management's financial statement assertions. The auditor therefore develops general and
specific procedures to apply to the accounts and transactions. In a particular case, s/he might do this by:
a. Tracing sales invoices to shipping documents to tests the completeness of reported sales. b. Tracing
shipping documents to sales invoices to test the occurrence of reported sales. c. Tracing sales invoices to
shipping documents to test the occurrence of reported sales. d. Tracing sales invoices to shipping
documents to test the completeness of recorded accounts receivable.1. a
2. b
3. c
4. d
3
179_158942_
CORRECT121multiple choice12The confirmation of accounts receivable is most closely associated with:
a. Business risk. b. Detection risk. c. Inherent risk. d. Relative risk.1. a
2. b
3. c
4. d
2
179_572501_
CORRECT122multiple choice12Which of the following is least likely to be typically considered to be an
alternate procedure for handling nonreplies to accounts receivable confirmation requests? a. Examine
bills of lading. b. Physically examine items sold. c. Examine correspondence. d. Examine subsequent cash
receipts.1. a
2. b
3. c
4. d
2
179_54046_
CORRECT123multiple choice12When it is impossible to confirm accounts receivable, the auditors may be
able to satisfy themselves as to the existence of accounts receivable by alternative procedures. A. true B.
false1. a
2. b
1
179_214299_
CORRECT124multiple choice12Analytical procedures are used by auditors to gain evidence about the
adequacy of the allowance for uncollectible accounts. A. true B. false1. a
2. b
1
179_682540_
CORRECT125multiple choice12Confirmation of accounts receivable provides some assurance that no
lapping or other manipulation affecting accounts receivable is being carried on. A. true B. false1. a
2. b
1
179_408230_
CORRECT1TOTAL POINTS GAINED25