Ch14%20Solutions[1]

Ch14%20Solutions[1] - Chapter 14 - Audit of the Sales and...

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Chapter 14 - Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions Multiple Choice Questions From CPA Examinations 14-21 a. (4) b. (4) c. (1) d. (3) 14-22 a. (4) b. (2) c. (1) d. (1) 14-23 a. (2) b. (4) c. (4) 14-24 1. a. Recorded sales are for the amount of goods ordered and are correctly billed and recorded. (Accuracy) b. Examine indication of internal verification on sales documents. c. Incorrect prices may be charged, the customer may be billed for the wrong quantity, or the total amount may be computed incorrectly. d.Recompute information on the sales invoices. Trace details on sales invoices to shipping records, price lists, and customers' orders. 2. a. Recorded sales and credit transactions are for shipments actually made and existing sales transactions are recorded. (Existence and Completeness) b. Account for the numerical sequences of sales orders, invoices, and credit memoranda. c. Shipments or returns are not recorded. Orders from customers are misplaced and not filled. d. Examine correspondence concerning credit memoranda to assure that they were properly issued. Trace sample of shipping documents to related sales invoices and entries into the sales journal and accounts receivable master file. Confirm accounts receivable. 3. a. Existing transactions are recorded; recorded transactions exist. (Completeness and Existence) b. The auditor should observe the employees and discuss the procedures with personnel. c. Sales could be made and not recorded, with the employee keeping the proceeds of the sale. d. Trace selected shipping documents to related duplicate sales invoices, the sales journal, and accounts receivable master file. 4. a. Existing transactions are recorded. (Completeness) b. The auditor should observe the activities of those employees and discuss the procedures with personnel. c. These unusual sales could be made but not recorded and the proceeds kept from the company. d. Examine sales documents for these sales and trace the entries into the cash receipts journal.
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14-24, continued 5. a. Existing transactions are recorded and recorded sales are for the amount of goods ordered and are correctly billed. (Completeness and Accuracy)
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This note was uploaded on 05/31/2011 for the course ACC 2442 taught by Professor Mo during the Spring '11 term at Western Michigan.

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Ch14%20Solutions[1] - Chapter 14 - Audit of the Sales and...

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