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Auditing & Assurance 101 Practice Test: Auditing Tests in the Sales and Collection Cycle - Accounts Receivable
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An auditor can use several procedures to test accounts receivable in the sales and collection cycle: Verifying individual transactions Auditors can send confirmation letters to customers to verify the balance is correct. They can also select sales transactions from the sales ledger and verify that there are legitimate sales receipts. Analyzing customer orders Auditors can compare invoices sent to customer orders to ensure they match. Assessing internal controls Auditors can evaluate the effectiveness of the company's internal controls related to accounts receivable. This includes... Show more
Auditing & Assurance 101 Practice Test: Auditing Tests in the Sales and Collection Cycle - Accounts Receivable
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25 Questions

1. Which of the following audit procedures would not likely detect a client's decision to pledge or factor accounts receivable?
2. An auditor is performing a credit analysis of customers with balances over 60 days due. She is most likely obtaining evidence for which audit related objective?
3. The most effective audit evidence gathered for accounts receivable is the:
4. Which of the following is the principle 'weakness' of using negative confirmations for your tests of details of balances for accounts receivable?
5. Tests of detail tie-in are normally conducted last in the audit of the sales and collections cycle.
6. Favorable results from analytical procedures may reduce the extent to which the auditor needs to test details of balances.
7. A positive confirmation is more reliable evidence than a negative confirmation because:
8. Analytical procedures are substantive tests and, if the results of the analytical procedures are favorable, the auditor would normally:
9. An auditor should perform alternative procedures to substantiate the existence of accounts receivable when:
10. When a customer disagrees with the amount shown on an account receivable confirmation, the auditor should not ask the client to reconcile the difference.
11. When a customer does not return an accounts receivable confirmation, it is acceptable, without performing alternative procedures, to assume the amount is 100% overstated when generalizing from the sample to the population.
12. For most audits, inherent risk for accounts receivable is moderate or low except for which balance-related audit objectives?
13. The audit procedure of tracing sales invoices to shipping documents will provide the auditor evidence that:
14. Tests of details of balances focus on testing the year-end balances of balance sheet accounts.
15. When should auditors not perform alternative procedures in testing the accounts receivable balance?
16. The most reliable evidence from confirmations is obtained when they are sent:
17. An auditor would be least likely to use confirmations in connection with the examination of:
18. Because of its central role in auditing of accounts receivable, which of the following would normally be one of the first items tested?
19. Which of the following is likely to be determined first when performing tests of details for accounts receivable?
20. For cash receipts, the occurrence transaction-related audit objective affects which of the following balance-related audit objective?
21. Auditors must maintain control of confirmations until they are returned from the customer.
22. Communication addressed to the debtor requesting him or her to confirm whether the balance as stated on the communication is correct or incorrect is a:
23. Cutoff misstatements occur:
24. Blank confirmations are considered less reliable than standard positive confirmations.
25. Confirmation of accounts receivable balances normally provides evidence concerning the:

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