Revenue Accounting System Flashcards
The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure that would gather relevant evidence would be to:
A.) Trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger
B.) Select a sample of duplicate sales invoices and trace each to related shipping documents
C.) Trace a sample of shipping documents to related duplicate sales invoices
D.) Compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger
C.) Trace a sample of shipping documents to related duplicate sales invoices.
What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected?
A.) Determination of correct delivery address
B.) Matching of shipping document with sales invoice
C.) Receipt of sales order from the customer
D.) Credit approval
D.) Credit approval
Which of the following procedures performed for the billing function may provide evidence that the accounts receivable subsidiary ledger is in agreement with the accounts receivable control account?
A.) Making sure that all shipments have been billed
B.) Making sure that each shipment is billed at the correct amount
C.) Making sure that no shipment has been billed more than twice
D.) Making sure that each shipment is billed to the proper customer
B.) Making sure that each shipment is billed at the correct amount
One key internal control to prevent fictitious transactions in the sales and collection cycle is:
A.) to include the sales price list of all products in the computer files
B.) having bank reconciliations prepared by one who is independent of the treasury function
C.) assign a specific customer number for each customer in the computer files
D.) to account for the integrity of the numerical sequence of sales orders
C.) assign a specific customer number for each customer in the computer files
Which of the following is the appropriate point at which the auditor deems authorization to be critical?
Credit Granting | Price Authorization | Shipment of Goods
A.) Yes | Yes| Yes
B.) Yes | No | Yes
C.) No | Yes| No
D.) No | No | No
A.) Yes | Yes| Yes
The total of the individual account balances in the accounts receivable subsidiary ledger should equal the:
A.) balance of the sales account in the general ledger
B.) balance of the accounts receivable account in the general ledger
C.) total sales for the period
D.) total sales less the total cash received for the period
B.) balance of the accounts receivable account in the general ledger
In the sales and collection cycle, when is, generally, the earliest point at which revenue can be recognized?
A.) shipment of goods
B.) cash collection
C.) sales approval
D.) credit approval
A.) shipment of goods
In determining the level of audit efficiency, once the auditor has identified the key internal controls and identified any deficiencies in order to determine the level of control risk appropriate for a private company client, it is appropriate to decide whether:
A.) tests of controls can be reduced sufficiently to justify costs of performing substantive tests
B.) tests of controls can be increased sufficiently to justify costs of performing substantive tests
C.) substantive tests can be reduced sufficiently to justify costs of performing tests of controls
D.) substantive tests can be increased sufficiently to justify costs of performing tests of controls
C.) substantive tests can be reduced sufficiently to justify costs of performing tests of controls
The document that the accounting staff will use as the primary basis for recording sales transactions and updating the customers accounts receivable subsidiary ledger is the:
A.) bill of lading
B.) sales order
C.) sales journal
D.) sales invoice
D.) sales invoice
When designing audit procedures, tracing of source documents to the customers subsidiary ledger and subsequently to the general ledger is done to satisfy what assertion?
A.) completeness
B.) cutoff
C.) classification
D.) valuation
A.) completeness
For a firm that practices good internal controls in the sales and collections cycle, the function of indicating credit approval should be recorded on which of the following documents?
A.) sales order
B.) customer order
C.) sales invoice
D.) remittance advice
A.) sales order
Which one of the following procedures performed for the billing function provides evidence for the completeness assertion?
A.) Making sure that each shipment is billed at the correct amount
B.) Making sure that each shipment is billed to the proper customer
C.) Making sure that all shipments have been billed
D.) Making sure that no shipment has been billed more than twice
C.) Making sure that all shipments have been billed
A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the:
A.) remittance advice
B.) monthly statement
C.) sales invoice
D.) accounts receivable subsidiary ledger
B.) monthly statement
An effective procedure to test for unbilled shipments is to trace from the:
A.) sales journal to the accounts receivable ledger
B.) sales journal to the general ledger sales account
C.) shipping documents to the sales journal
D.) sales journal to the shipping documents
D.) sales journal to the shipping documents
