45.Tracing shipping documents to prenumbered salesinvoices
Inquire about the entity’s credit granting policies and
provides evidence that
a. No duplicate shipments or billings occurred.
b. Shipments to customers were properly invoiced.
c. All goods ordered by customers were shipped.
d. All prenumbered sales invoices were accounted for.
46.Which of the following controlsmostlikely would treduce the
risk of diversion of customer receipts by an entity’s employees?
a. A bank lockbox system.
b. Prenumbered remittance advices.
c. Monthly bank reconciliations.
d. Daily deposit of cash receipts.
47.An auditor suspects that a client’s cashier is misappropriating
cash receipts for personal use by lapping customer checks
received in the mail. In attempting to uncover this embezzlement
scheme, the auditormostlikely would compare the t
a. Dates checks are deposited per bank statements with
the dates remittance credits are recorded.
b. Daily cash summaries with the sums of the
cashreceipts journal entries.
c. Individual bank deposit slips with the details of the
monthly bank statements.
d. Dates uncollectible accounts are authorized to be
written off with the dates the write-offs are actually
recorded.
48.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 a. Internal
auditor to investigate the listing for unusual transactions.
b. Treasurer to compare the listing with the monthly
bank statement.
c. Accounts receivable bookkeeper to update the
subsidiary accounts receivable records.
d. Entity’s bank to compare the listing with the cashier’s
deposit slip.
49.Which of the following proceduresmostlikely wouldnot be a
control designed to reduce the risk of misstatements in the billing
process?
a. Comparing control totals for shipping documents
withcorresponding totals for sales invoices.
b. Using computer programmed controls on the pricing
and mathematical accuracy of sales invoices.
c. Matching shipping documents with approved sales
orders before invoice preparation.
d. Reconciling the control totals for sales invoices with
the accounts receivable subsidiary ledger
50.Which of the following audit procedures would an auditor
mostlikely perform to test controls relating to management’s
assertion concerning the completeness of sales transactions?
a. Verify that extensions and footings on the entity’s
sales invoices and monthly customer statements have
been recomputed
b. Inspect the entity’s reports of prenumbered shipping
documents that havenotbeen recorded in the sales
journal.
c. Compare the invoiced prices on prenumbered sales
invoices to the entity’s authorized price list.
d.
the consistent application of credit checks.
51.Which of the following controlsmostlikely would assure that
all billed sales are correctly posted to the accounts receivable
ledger?
a. Daily sales summaries are compared to daily postings
to the accounts receivable ledger.
b. Each sales invoice is supported by a prenumbered
shipping document.
c. The accounts receivable ledger is reconciled daily to
the control account in the general ledger.
d. Each shipment on credit is supported by a
prenumbered sales invoice.
52.An auditor tests an entity’s policy of obtaining credit approval
before shipping goods to customers in support of management’s
financial statement assertion of
a. Valuation or allocation.
b. Completeness.
c. Existence or occurrence.
d. Rights and obligations.
53.Which of the following controls most likely would help ensure
that all credit sales transactions of an entity are recorded?
a. The billing department supervisor sends copies of
approved sales orders to the credit department for
comparison to authorized credit limits and current
customer account balances.
b. The accounting department supervisor independently
reconciles the accounts receivable subsidiary ledger to
the accounts receivable control account monthly.
c. The accounting department supervisor controls the
mailing of monthly statements to customers and
investigates any differences reported by customers.
d. The billing department supervisor matches
prenumbered shipping documents with entries in the
sales journal.
54.Which of the following controls most likely would be effective
in offsetting the tendency of sales personnel to maximize sales
volume at the expense of high bad debt write-offs?
a. Employees responsible for authorizing sales and bad
debt write-offs are denied access to cash.
b. Shipping documents and sales invoices are matched
by an employee who does not have authority to write off
bad debts.
c. Employees involved in the credit-granting function
are separated from the sales function.
d. Subsidiary accounts receivable records are reconciled
to the control account by an employee independent of
the authorization of credit
55.Proper authorization of write-offs of uncollectibleaccounts
should be approved in which of the followingdepartments?
a. Accounts receivable.
b. Credit.
c. Accounts payable.
d. Treasurer.
56.Employers bond employees who handle cash receiptsbecause
fidelity bonds reduce the possibility of employingdishonest
individuals and
a. Protect employees who make
unintentionalmisstatements from possible monetary
damages resulting from their misstatements.
 b. Deter dishonesty by making employees aware that
insurance companies may investigate and prosecute
dishonest acts.
c. Facilitate an independent monitoring of the receiving
and depositing of cash receipts.
d. Force employees in positions of trust to take periodic
vacations and rotate their assigned duties.
c. Indicating the asset and expense accounts to be
debited.
d. Accounting for unused prenumbered purchase orders
and receiving reports.
63.With properly designed internal control, the same
employeemostlikely would match vendors’ invoices with
receiving reports and also

57.During the consideration of a small business client’s internal
control, the auditor discovered that the accounts receivable clerk
approves credit memos and has access to cash. Which of the
following controls would be most effective in offsetting this
weakness?
a. The owner reviews errors in billings to customers
and postings to the subsidiary ledger.
b. The controller receives the monthly bank statement
directly and reconciles the checking accounts.
c. The owner reviews credit memos after they are
recorded.
a. Post the detailed accounts payable records.
b. Recompute the calculations on vendors’ invoices.
c. Reconcile the accounts payable ledger.
d. Cancel vendors’ invoices after payment.
64.An entity’s internal control requires for every check request
that there be an approved voucher, supported by a prenumbered
purchase order and a prenumbered receiving report. To determine
whether checks are being issued for unauthorized expenditures,
an auditormostlikely would select items for testing from the
population of all

d. The controller reconciles the total of the detail a. Purchase orders.

accounts receivable accounts to the amount shown in the b. Canceled checks.
ledger.
c. Receiving reports.
58.When a customer fails to include a remittance advice with a
payment, it is common practice for the person opening the mail to d. Approved vouchers.
prepare one. Consequently, mail should be opened by which of
the following four company employees? 65.Which of the following questions wouldmostlikely be included
in an internal control questionnaire concerning the completeness
a. Credit manager. assertion for purchases?

b. Receptionist. a. Is an authorized purchase order required before the

c. Sales manager.
d. Accounts receivable clerk. C.2.Purchases, Payables,
and Cash Disbursements
59.To provide assurance that each voucher is submitted and paid
only once, an auditormostlikely would examine a sample of paid
vouchers and determine whether each voucher is
a. Supported by a vendor’s invoice.
b. Stamped “paid” by the check signer.
receiving department can accept a shipment or the
vouchers payable department can record a voucher?
b. Are purchase requisitions prenumbered and
independently matched with vendor invoices?
c. Is the unpaid voucher file periodically reconciled with
inventory records by an employee who does not have
access to purchase requisitions?
d. Are purchase orders, receiving reports, and vouchers
prenumbered and periodically accounted for

c. Prenumbered and accounted for.

d. Approved for authorized purchases.

60.In testing controls over cash disbursements, an auditormost

likely would determine that the person who signs checks also

a. Reviews the monthly bank reconciliation.

b. Returns the checks to accounts payable.

c. Is denied access to the supporting documents.

d. Is responsible for mailing the checks.

61.In assessing control risk for purchases, an auditor vouches a

sample of entries in the voucher register to the supporting
documents. Which assertion would this test of controlsmost likely
support?

a. Completeness.

b. Existence or occurrence.

c. Valuation or allocation.

d. Rights and obligations.

62.Which of the following controls isnotusually performed in the

vouchers payable department?

a. Matching the vendor’s invoice with the related

receiving report.

b. Approving vouchers for payment by having an

authorized employee sign the vouchers.