Substantive Audit Testing Revenue

5050 WordsApr 4, 201521 Pages
Substantive Audit Testing: Revenue Cycle 1. Substantive Audit Testing: Revenue Cycle 2. MULTIPLE CHOICE: 3. 1. Which of the following might be detected by an auditor's review of the client's sales cut-off? 4. a. Excessive goods returned for credit. 5. b. Unrecorded sales discounts. c. Lapping of year end accounts receivable. d. Inflated sales for the year. 6. ANSWER: D 7. 2. Which of the following forms of evidence represents the most competent evidence that a receivable actually exists? 8. a. A positive confirmation. b. A sales invoice. c. A receiving report. d. A bill of lading. 9. ANSWER: A 10. 3. During the process of confirming receivables as of December 31, 2002, a positive confirmation was returned indicating the "balance owed as of…show more content…
After the client's treasurer had signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? 52. a. The confirmation request was signed by the treasurer. b. Sending the request was meaningless because the account was closed. c. The request was mailed by the assistant treasurer. d. The CPA did not sign the confirmation request before it was mailed. 53. ANSWER: C 54. 12. A client who wishes to inflate earnings decides to hold the sales record open beyond year-end and record Year 2 sales in Year 1. Although the invoices are dated as of year end, the shipments were made in the following period. Moreover, the goods were included in the ending inventory of the period under audit. Which of the following auditing procedures would not assist in detecting this form of fraudulent financial reporting? 55. a. The auditor confirms accounts receivable on a positive basis as of year end. 56. b. The auditor examines shipping documents relating to sales recorded during the last few days of the year. 57. c. The auditor examines shipping documents relating to sales recorded during the first few days of the year following the period under audit. 58. d. The auditor applies analytical procedures that compare gross profit rates and sales volume by month for the current and preceding years. 59. ANSWER: C 60. 13. Which of the substantive field work procedures

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