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Chapter 10: Auditing Revenue and Related Accounts Chapter 10: Auditing Revenue and Related Accounts Student: ___________________________________________________________________________ 1. The revenue cycle considered by auditors includes the sales process but not cash collections. True False 2. The revenue cycle involves the procedures in generating a sales order, shipping the products, recording the transaction and collecting the receivable. True False 3. The shipping department confirms the shipment of goods by completing the packing slip and returning it to the purchasing department. True False 4. Monthly statements provide a detailed list of the customers activity for the previous month and a listing of all open items. True False 5. Invoices are processed, including their mailing to customers, only subsequent to proof of valid delivery to customers. True False 6. The use of prenumbered sales invoices is the primary control procedure to satisfy the assertion of completeness. True False 7. A comprehensive chart of accounts and a review of complex or unusual transactions by supervisory personnel are control procedures necessary for proper classification of accounts. True False 8. Formal procedures for approving acceptance of returns that are beyond the warranty period are an appropriate control procedure for identifying and recording returned goods. True False 9. One of the benefits of establishing a formal credit policy for granting credit is that management does not need to perform monitoring of accounts receivable. True False 10. Monitoring of the revenue cycle may be accomplished partially through the use of exception reporting True False 11. Monitoring is one of the five components of the COSO internal control framework. True False 12. The audit team is required by auditing standards to make an ordinary presumption of the risk of fraud due to revenue misstatements on every engagement. True False 13. A company that ships a large quantity of its products from its manufacturing plant to a warehouse that it leases until the customer is ready for the product should record the delivery as revenue. True False 14. The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues. True False 15. All companies attempting to comply with GAAP should refer to the Securities and Exchange Commission for guidance as it supersedes all AICPA, PCAOB, FASB and EITF literature. True False 16. A tendency for fraud exists when stock options are close to becoming exercised by executives and financial personnel. True False 17. A red flag that may alert the auditor to fraud in the revenue cycle is a trend of revenue growth that is consistent with industry results. ... View Full Document

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