Chapter 14: Audit of Sales And Collection Answers
1 Fraudulent use of corporate credit cards will be minimized by which of the following controls?
A.
Subjecting credit card charges to the same expense controls as those used on regular company expense forms.
B.
Periodically reviewing the validity of the need for credit cards at executive and operating levels.
C.
Establishing a corporate policy on the issuance of credit cards to authorized employees.
D.
Reconciling the monthly statement from the credit card company with the submitted copies of the cardholders’ charge slips.
2 What is a possible consequence of an employee’s being able to visit the safe-deposit box unaccompanied?
A.
It would be impossible to obtain a fidelity bond on the employee.
B.
The employee could pledge corporate investments as security for a short-term personal bank loan.
C.
The employee could steal securities, and the theft would never be discovered.
D.
There would be no record of when company personnel visited the safe-deposit box.
3 The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because
A.
Evidence supporting accrued liabilities is nonexistent, whereas evidence supporting accounts payable is readily available.
B.
Accrued liability balances are less material than accounts payable balances.
C.
Accrued liabilities usually pertain to services of a continuing nature whereas accounts payable are the result of completed transactions.
D.
Accrued liabilities at year end will become accounts payable during the following year.
4 A client’s procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor’s primary concern with respect to liabilities resulting from the procurement system?
A.Accounts payable are not materially understated.
B.Acquisition of materials is not made from one vendor or one group of vendors.
C.Authority to incur liabilities is restricted to one
A.
Subjecting credit card charges to the same expense controls as those used on regular company expense forms.
B.
Periodically reviewing the validity of the need for credit cards at executive and operating levels.
C.
Establishing a corporate policy on the issuance of credit cards to authorized employees.
D.
Reconciling the monthly statement from the credit card company with the submitted copies of the cardholders’ charge slips.
2 What is a possible consequence of an employee’s being able to visit the safe-deposit box unaccompanied?
A.
It would be impossible to obtain a fidelity bond on the employee.
B.
The employee could pledge corporate investments as security for a short-term personal bank loan.
C.
The employee could steal securities, and the theft would never be discovered.
D.
There would be no record of when company personnel visited the safe-deposit box.
3 The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because
A.
Evidence supporting accrued liabilities is nonexistent, whereas evidence supporting accounts payable is readily available.
B.
Accrued liability balances are less material than accounts payable balances.
C.
Accrued liabilities usually pertain to services of a continuing nature whereas accounts payable are the result of completed transactions.
D.
Accrued liabilities at year end will become accounts payable during the following year.
4 A client’s procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor’s primary concern with respect to liabilities resulting from the procurement system?
A.Accounts payable are not materially understated.
B.Acquisition of materials is not made from one vendor or one group of vendors.
C.Authority to incur liabilities is restricted to one