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Auditing & Assurance 101 Practice Test: Audit of the Sales and Collection Cycle - Tests of Controls and Substantive Tests of Transactions
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Tests of controls and substantive tests of transactions for the sales and collection cycle can affect the balances in accounts receivable, cash, bad debt expense, and allowance for doubtful accounts.  Here are some tests of controls and substantive tests of transactions for cash receipts: Determine whether cash received was recorded, Prepare proof of cash receipts, and Test to discover lapping of accounts receivable.  Here are some substantive tests of transactions: Recalculate information in the accounting records Compare prices on duplicate sales invoices with an approved price... Show more
Auditing & Assurance 101 Practice Test: Audit of the Sales and Collection Cycle - Tests of Controls and Substantive Tests of Transactions
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25 Questions

1. For each significant internal control deficiency identified by the auditor, he or she should design one or more tests of controls to assess the extent of the deficiency and its effect on the financial statements.
2. ________ tests are for omitted transactions, while ________ tests are for nonexistent transactions.
3. Credit should be approved before goods are shipped to a customer.
4. The total of the individual account balances in the accounts receivable subsidiary ledger should equal the:
5. The ________ is a contract between a carrier (e.g., a trucking company) and the seller of goods that dictates the details surrounding the shipment of goods.
6. Sales returns and allowances are often ignored by auditors because they are often immaterial.
7. Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?
8. In many audits, no substantive tests of transactions are made for the ________ assertion on the grounds that understatement of sales is not a concern.
9. A bill of lading is a written contract between the seller and the buyer.
10. Which of the following would least concern an auditor regarding the lack of a specific authorization to conduct the sales transaction?
11. Which one the following procedures performed for the billing function provides evidence for the completeness assertion?
12. The shipping point is critical because it is the first point at which company assets are released to another party.
13. What event initiates a transaction in the sales and collection cycle?
14. The auditor's objectives for the sales and cash collections activities when the client is primarily an e-commerce business as compared to a 'bricks and mortar' business are:
15. Preparation of a proof of cash would not be useful in discovering differences between the actual and reported cash balances if the differences were due to:
16. What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected?
17. The auditor's primary concern about authorization centers on shipment of goods to customers.
18. Footing the sales journal and tracing the totals to the general ledger are tests relating to the accuracy objective for sales.
19. The auditor would expect that an account receivable from a customer would be written off by the client when which of the following occurs:
20. In many audits of sales transactions substantive tests of transactions can be reduced in determining the completeness objective because:
21. Prenumbered documents will only be useful for control purposes if:
22. A document that initiates shipment of goods and indicates the description of the merchandise, the quantity shipped, and customer name and address is the:
23. A bill of lading is a special type of sales invoice used when goods are shipped interstate.
24. Misstatements involving the completeness objective for sales lead to overstatements of assets and income.
25. One key internal control to prevent fictitious transactions in the sales and collection cycle is:

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