20111108_Tuesday_SU 11 The Sales-Receivable-Cash Cycle

20111108_Tuesday_SU 11 The Sales-Receivable-Cash Cycle - SU...

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SU 11 The Sales-Receivable- Cash Cycle Fall 2011
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Evidence - Substantive Testing of Sales and Receivables 1 . Which of the following comparisons would be most useful to an auditor in evaluating the results of an entity’s operations? A. Prior-year accounts payable to current-year accounts payable. B. Prior-year payroll expense to budgeted current-year payroll expense. C. Current-year revenue to budgeted current- year revenue.
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Evidence - Substantive Testing of Sales and Receivables Ø 2. An auditor most likely would limit substantive audit tests of sales transactions when the risk of material misstatement is assessed as low for the existence and occurrence assertions concerning sales transactions and the auditor has already gathered evidence supporting A. Opening and closing inventory balances. B. Cash receipts and accounts receivable.
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Evidence - Substantive Testing of Sales and Receivables Ø 3. If the objective of a test of details is to detect overstatements of sales, the auditor should compare transactions in the A. Cash receipts journal with the sales journal. B. Sales journal with the cash receipts journal. C. Source documents with the accounting records. D. Accounting records with the source documents.
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Evidence - Substantive Testing of Sales and Receivables Ø 4. Tracing shipping documents to prenumbered sales invoices provides evidence that A. No duplicate shipments of billings occurred. B. Shipments to customers were properly invoiced. C. All goods ordered by customers were shipped. D. All prenumbered sales invoices were accounted for.
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Evidence - Substantive Testing of Sales and Receivables Ø 5. An auditor most likely would review an entity’s periodic accounting for the numerical sequence of shipping documents and invoices to support management’s financial statement assertion of A. Occurrence. B. Rights and Obligations. C. Valuation and allocation.
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Evidence - Substantive Testing of Sales and Receivables Ø 6 . An entity’s financial statements were misstated over a period of years because large amounts of revenue were recorded in journal entries that involved debits and credits to an illogical combination of accounts. The auditor could most likely have been alerted to this fraud by A. Scanning the general journal for unusual entries.
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Evidence - Substantive Testing of Sales and Receivables Ø 7. Which of the following might be detected by an auditor’s review of the client’s sales cutoff? A. Excessive goods returned for credit. B. Unrecorded sales discounts. C. Lapping of year-end accounts receivable. D. Inflated sales for the year.
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of Sales and Receivables Ø 8. An audit client sells 15 to 20 units of product annually. A large portion of the annual sales occur in the last month of the fiscal year. Annual sales have not materially changed over the past 5 years. Which of the following approaches would be most effective concerning the timing of audit procedures for revenue? A.
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This note was uploaded on 11/10/2011 for the course ACCT 3222 taught by Professor Delaune,l during the Spring '08 term at LSU.

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20111108_Tuesday_SU 11 The Sales-Receivable-Cash Cycle - SU...

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