Chap 14

Question 1

20) In designing audit procedures for the sales returns and allowances account, the auditor would
primarily rely on the following accounts, except for:
A) sales returns and allowances transaction file.
B) accounts receivable master file.
C) cash receipts journal.
D) sales returns and allowances will be recorded in all of the above.

Answer 1

C

Question 2

1) Transaction-related audit objectives are essentially the same for processing credit memos as for sales
with certain differences. Which of the following are two key differences?
A) Risk and emphasis on the completeness objective.
B) Materiality and emphasis on the accuracy objective.
C) Risk and emphasis on the classification objective.
D) Materiality and emphasis on the occurrence objective.

Answer 2

D

Question 3

7) Cash receipts from sales on account have been misappropriated. Which of the following acts would
conceal this fraud and be least likely to be detected by an auditor?
A) Understating the sales journal by not recording cash sales.
B) Overstating the accounts receivable control account by intentionally misstating prices charged for
goods sold.
C) Overstating the accounts receivable subsidiary ledger by not recording payments made by customers.
D) Understating the cash receipts journal by purposely recording incorrect amounts.

Answer 3

A