AT-5911_test of control procedures

AT-5911_test of control procedures - Page 1 of 6 CPA REVIEW...

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Page 1 of 6 CPA REVIEW SCHOOL OF THE PHILIPPINES M a n i l a AUDITING THEORY TEST OF CONTROL PROCEDURES Revenue and Receipt Cycle 1. After the auditor has prepared a flowchart of internal control for sales, and cash receipts transactions and evaluated the design of the system, the auditor would perform tests of controls on all control procedures a. Documented in the flowchart. b. Considered to be deficiencies that might allow errors to enter the accounting system. c. Considered to be strengths that the auditor plans to rely on in assessing control risk. d. That would aid in preventing irregularities. 2. Which of the following is not a universal rule for achieving control over cash? a. Separate the cash-handling and record-keeping functions. b. Deposit each day’s cash receipts by the end of the day. c. Have bank reconciliation’s performed by employees who do not handle cash. d. Decentralize the receiving of cash as much as possible. 3. The least crucial element of control over cash is a. Separation of cash record keeping from custody of cash. b. Preparation of the monthly bank reconciliation. c. Separation of cash receipts from cash disbursements. d. Batch processing of checks. 4. The use of fidelity bonds protects a company from embezzlement losses and also a. Minimizes the possibility of employing persons with dubious records in positions of trust. b. Protects employees who make unintentional errors form possible monetary damages resulting from such errors. c. Allows the company to substitute the fidelity bonds for various parts of internal control. d. Reduces the company’s need to obtain expensive business interruption insurance. 5. An auditor is reviewing internal control for accounts receivable: I. The billing function should not be assigned to the person who is responsible for maintaining accounts receivable records. II. Responsibility for approval of the write-off of accounts receivable that are uncollectible should not be assigned to the cashier. a. Only I is true c. Both I and II are true b. Only II is true d. Neither I nor II is true 6. Which of the following is an effective internal control over accounts receivable? a. Only persons who handle cash receipts should be responsible for the preparation of documents that reduce accounts receivable balances. b. Responsibility for approval of the write-off of uncollectible accounts receivable should be assigned to the cashier. c. Balances in the subsidiary accounts receivable ledger should be reconciled to the general ledger control account once a year, preferably at year-end. d. The billing function should be assigned to persons other than those responsible for maintaining accounts receivable subsidiary records . 7.
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This note was uploaded on 11/22/2010 for the course CAC BSA taught by Professor Kairus during the Spring '10 term at Korea University.

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AT-5911_test of control procedures - Page 1 of 6 CPA REVIEW...

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