MULTIPLE CHOICE: 4. Which of the following forms of evidence represents the most competent evidence that a receivable actually exists? A. A sales invoice B. A receiving report C. A positive confirmation D. A bill of lading 5. Confirmation which is a specific type of inquiry is the process of obtaining a representation of information or of an existing condition directly from a third party. Two assertions for which confirmation of accounts receivable balances provides primary evidence are: A. Completeness and valuation B. Valuation and rights and obligations C. Existence and completeness D. Rights and obligations and existence

MULTIPLE CHOICE: 4. Which of the following forms of evidence represents the most competent evidence that a receivable actually exists? A. A sales invoice B. A receiving report C. A positive confirmation D. A bill of lading 5. Confirmation which is a specific type of inquiry is the process of obtaining a representation of information or of an existing condition directly from a third party. Two assertions for which confirmation of accounts receivable balances provides primary evidence are: A. Completeness and valuation B. Valuation and rights and obligations C. Existence and completeness D. Rights and obligations and existence

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 35RQSC

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MULTIPLE CHOICE: 1. Which of the following may be considered to be a primary objective of the auditor in the examination of accounts receivable? A. Establish validity and collectability of receivables B. Determine the approximate time of collectability of receivables C. Determine the relationship of receivables to sales D. Determine the reasonableness of the sales amount 2. Which of the following is not a procedure used by an auditor in the examination of accounts receivable? A. Confirmation B. Reconciliation C. Inquiry D. Physical count and inspection 3. In determining validity of accounts receivable, which of the following would the auditor consider most reliable ? A. Direct telephone communication between the auditor and debtor B. Confirmation replies received directly from customers C. Credits to accounts receivable from the cash receipts book after the close of business at year end D. Documentary evidence that supports the accounts receivable balance 4. Which of the following…
Choose the one correct answer1. In auditing the client’s receivables, the auditor decided to select entries in the sales journal and trace them back to the sales invoice, delivery receipt and the sales order. This procedure is consistent in corroborating which of the following assertions? *A. PresentationB. CompletenessC. RightsD. ExistenceE. None of the above 2. The following are useful source of evidence with regard the reasonableness of the client’s accounting estimation policy regarding the collectability of accounts receivables, except: *A. Reviewing events happening after the balance sheet date but before the issuance of financial statements.B. Sending confirmation letters to customers to determine the customer’s ability to settle their accounts.C. Assessing the client’s historical experience in writing off uncollectible accounts in the prior years.D. Determining the consistency of the client’s policy with the industry practice.E. None of the above
1. Which of the following may be considered to be primary objective of the auditor in the examination of accounts receivables? a. Determine the approximate time of collectability of receivables b. Determine the relationship of receivables to sales c. Determine the reasonableness of the sales figure d. Establish validity and collectability of receivables 2. In determining the validity of accounts receivable, which of the following would the auditor consider most reliable? a. Direct telephone communication between the auditor and debtor b. Confirmation replies received directly from customers c. Credits to accounts receivable from the cash receipts book after the close of business at year end d. Documentary evidence that supports the accounts receivable balance 3. An auditor should perform alternative procedures to substantiate the existence of accounts receivable when a. Pledging of the receivables is probable b. No reply to a negative confirmation request is received c. No reply to a…
Choose the one correct answer 6. In auditing the client’s receivables, the auditor decided to select entries in the sales journal and trace them back to the sales invoice, delivery receipt and the sales order. This procedure is consistent in corroborating which of the following assertion? * A. ValuationB. ExistenceC. CompletenessD. Rights and Obligationse. None of the above 9. Which of the following statements is valid relating to confirmation of accounts receivable? * a. A positive confirmation provides more reliable evidence than the negative confirmation because the auditor can perform follow-up procedures if no response is received from the debtorB. A negative form of confirmation is preferable to use when individual account balances of customers are relatively largec. In positive confirmation, failure to reply must be regarded as a correct response, even though the debtor may have ignored the confirmation requestd. An auditor must consider using the negative form of confirmation…
Sending accounts receivable confirmation letters to the client's customers is consistent with the auditor's objective of validating client's receivable assertion on: A. Completeness and rightsb.Completeness and valuationc. E xistence and rightsd. Existence and valuatione. None of the above
3. An auditor should perform alternative procedures to substantiate the existence of accounts receivable when a. Pledging of the receivables is probable b. No reply to a negative confirmation request is received c. No reply to a positive confirmation request is received d. Collectibility of the receivable sis in doubt
An auditor tested the client's internal controls over granting customers credit and establishing customers' credit limits. This test is relevant to the assertion of Valuation for accounts receivable. Question 47 options: True False
10. The inspection of a vendor's invoice by the auditors is: Select one:a. Direct evidence about occurrence of a transactionb. Part of the client's accounting systemc. Documentary evidence about occurrence of a transactiond. Physical evidence about occurrence of a transact
Choose the one correct answer The following are useful source of evidence with regard the reasonableness of the client’s accounting estimation policy regarding the collectability of accounts receivables, except: *A. Reviewing events happening after the balance sheet date but before the issuance of financial statements.B. Sending confirmation letters to customers to determine the customer’s ability to settle their accounts.C. Assessing the client’s historical experience in writing off uncollectible accounts in the prior years.D. Determining the consistency of the client’s policy with the industry practice.E. None of the above
Confirmations of accounts receivable provide evidence primarily about which two assertions? Select one: a. Valuation and rights and obligations. b. Existence and completeness c. Existence and rights and obligations d. Completeness and valuation.
Choose the one correct answer 3. If the objective of a test of detail of transaction is to detect overstatement of sales, the auditor’s direction of testing should be from: * A. Cash receipts journal to sales journalB. Sales journal to cash receipt journalC. Source documents to accounting recordsD. Accounting records to source documentsE. None of the above 5. The following statements relate to nature of positive and negative confirmation requests. Which statement is true? *A. In positive confirmation, the customer is requested to reply directly to the client stating whether the balance appearing in the reply portion of the confirmation request is correct or not, and if not, to indicate details of difference.B. In a negative confirmation, the customer is asked to sign a confirmation form showing the account balance and return it in a stamped, addressed enveloped that is enclosedC. A positive confirmation request seeks a response from the debtor as to whether or not the balance is…
Confirmations of accounts receivable provide evidence primarily about which two assertions?a. Completeness and valuation.b. Valuation and rights and obligations.c. Existence and rights and obligations.d. Existence and completeness.