chapter 11 Flashcards
Auditors sometimes use comparisons of ratios as audit evidence. For example, an unexplained decrease in the ratio of gross profit to sales suggests which of the following possibilities?
Unrecorded Sales
When a sample of customer accounts receivable is selected to vouch debits for evidence of existence, the auditors will vouch them to which other items?
Sales invoices with shipping documents and customer sales invoices.
When an auditor selects a sample of shipping documents and takes the tracing direction of a test to find the related sales invoice copies, the evidence is relevant for deciding which of the following?
Shipment to customers was invoiced
The negative request form of accounts receivable confirmation is most likely to be acceptable in which case?
Low Many Likely
Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances?
The cashier posts the receipts to the accounts receivable subsidiary ledger cards
When accounts receivable are confirmed at an interim date, the auditors are not concerned with which of the following?
sending negative confirmations to all the customers as of the year-end date
The audit working papers often include an auditee-prepared aged trial balance of accounts receivable as of the balance sheet date. The aging is best used by the auditor for which of the following?
estimate credit losses
Which of the following internal control procedures will most likely prevent the concealment of a cash shortage from the improper write-off of a trade account receivable?
Write-offs must be approved by a responsible officer after a review of credit department recommendations and supporting evidence.
Which of the following would be the best protection for a company that wishes to prevent the “lapping” of trade accounts receivable?
Have customers send payments directly to the company’s bank by electronic transfer.
Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide evidence concerning which of the following?
Existence of the balances confirmed
An auditor is auditing sales transactions. One step is to vouch a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. What would the auditor intend to establish by this step?
Debit Entries in the accounts receivable subsidiary ledger are properly supported by sales invoices.
If a dishonest bookkeeper is trying to conceal defalcations involving receivables, which of the following accounts would the auditor most likely expect the bookkeeper to charge?
Sales Returns
In the audit of cash and accounts receivable, the main emphasis should be on which assertion?
Existence Assertion
What is the best reason for prenumbering, in sequence, documents such as sales orders, shipping documents, and sales invoices?
Allows checking of the numerical sequence for missing documents and unrecorded transactions
Which of the following might be detected by an auditor’s cutoff review and examination of sales journal entries for several days before the balance sheet date?
Inflating sales for the years
