11/11 Class

Question 1

sales and accounts receivable cycle

Answer 1

balance sheet
   Cash
   trade accounts receivable
   allowance for uncollectible accounts
   deferred revenue
income statement

Question 2

Audit objectives

Answer 2

Existence/Occurrence
Completeness
Valuation/Allocation
Cutoff
Rights & Obligations
Presentation & Disclosure

Question 3

sales orders - controls

Answer 3

password/User ID’s
Validity Test
Customer authorization
prenumbered (independent testing)

Question 4

credit manager controls

Answer 4

financial statements
credit reports
approvals
programmed controls - credit limits

Question 5

issuance of inventory controls

Answer 5

separate duties
   accounting(recording)
   from storekeeper(access)
computer accuracy controls
passwords & user IDs

Question 6

shipping controls

Answer 6

use numerical shipping documents
account for prenumbered documents
shipping documents provide evidence of title transfer
separate from other sales & A/R duties

Question 7

billing controls

Answer 7

every shipped product should be billed
sales invoices created by computer
system verifies pricing & discounts
system produces monthly statements
passwords/User IDs 
Input validation controls
Batch controls(semi manual system)

Question 8

sales returns controls

Answer 8

serially numbered credit memos - authorized by someone who does not handle cash or access/record customer ledgers

Question 9

Writeoffs controls

Answer 9

initiated by credit manager
approved by authorized person
turned over to collections
sequential documentation

Question 10

cash receipts controls

Answer 10

separate custody from recording

Question 11

finance & accounting - cash controls

Answer 11

controls should provide assurance that all cash that should be received was actually
cash disbursements were made for authorized purposes & recorded
cash balances are maintained at adequate, not excessive levels

Question 12

cash controls

Answer 12

dual control

encourage customers to take receipts & observe register totals

Question 13

fraud

Answer 13

lapping - AR
Kiting - cash
stealing cash

Question 14

lapping

Answer 14

take cash from one check and deposit on the next customer so no one notices

Question 15

kiting

Answer 15

taking cash and putting it into another bank account and having it show up in both bank accounts

Question 16

sales cycle substantive

Answer 16

volume of substantive procedures varies
   risk assessments
   internal controls 
confirmation of A/R
confirmation of sales
must know accounting & audit literature
revenue recognition is often misapplied

Question 17

positive response

Answer 17

respond either way

Question 18

negative response

Answer 18

respond if you are wrong

Question 19

confirmation by sampling

Answer 19

subject all accounts to sample
few customers
select significant balances & stratify remaining population
focus on old accounts

Question 20

audit of cash balances

Answer 20

types of cash accounts
   general cash account
   imprest accounts/ZBA
   Branch accounts
   Petty Cash
   Cash equivalents

Question 21

analytical procedures

Answer 21

compare expenses with prior years