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Multiple Choice
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1

Which of the following types of audit procedures would most likely be used to test controls over the revenue process?
A)Confirmations.
B)Observations of client personnel.
C)Analytical procedures.
D)Reasonableness tests.
2

Negative confirmations of accounts receivable are generally used when 1) there are many relatively small account balances, and 2) the internal control structure is:
A)Strong and the individuals receiving the confirmation requests are unlikely to give them adequate consideration.
B)Weak and the individuals receiving the confirmation requests are unlikely to give them adequate consideration.
C)Weak and the individuals receiving the confirmation requests are likely to give them adequate consideration.
D)Strong and the individuals receiving the confirmation requests are likely to give them adequate consideration.
3

An auditor's purpose in reviewing credit ratings of customers with delinquent accounts receivable is most likely to obtain evidence concerning management's assertions relating to:
A)Valuation or allocation.
B)Presentation and disclosure.
C)Existence or occurrence.
D)Rights and obligations.
4

Which of the following is least likely to be of concern to an auditor when the internal control objective of validity is not met for revenue transactions?
A)Revenue is recorded before services are performed.
B)Fictitious revenue is recorded.
C)Goods shipped are not recorded as revenue.
D)Revenue is recorded before goods are shipped.
5

Customers are more likely to complain to the client if which of the following internal control objectives for cash receipts is violated?
A)Validity.
B)Completeness.
C)Authorization.
D)Rights and obligations.
6

Which of the following would not be considered a test of controls in the area of cash receipts that relates to the validity objective?
A)Evaluate proper segregation of duties.
B)Inquire about management's lockbox policy.
C)Trace cash receipts to the accounts receivable subsidiary ledger.
D)Review monthly bank reconciliations for evidence of independent review.
7

Which of the following procedures would an auditor most likely perform related to year-end A/R confirmations when the auditor does not receive replies even after second requests?
A)Review the cash receipts journal for the month prior to year-end.
B)Inspect related shipping records and sales invoices documenting the merchandise sold to customers
C)Intensify the study of internal control concerning the revenue & collection cycle.
D)Increase assessed detection risk related to existence assertion in this area.
8

Tracing bills of lading (shipping reports) to sales invoices as a test of controls related to the sales & collection process provides evidence that:
A)Shipments to customers were recorded in the sales journal
B)Recorded sales were actually shipped
C)Customers were billed for goods shipped to them
D)Customers were billed for the correct amounts
9

In the audit of accounts receivable, the most important emphasis is generally on which of the following assertions?
A)Completeness
B)Existence
C)Rights & Obligations
D)Presentation & Disclosure
10

Which of the following comparisons would be most useful to an auditor in evaluating the overall results of an entity's operations?
A)Current year sales to current year budgeted sales.
B)Current year ending accounts receivable to prior year ending accounts receivable.
C)Current year bad debts expense as a percentage of accounts receivable to the same value for the prior year.
D)Current year gross profit to prior year gross profit.





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