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Chapter 16 Excercises

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Chapter 16 Excercises
Chapter 16 Exercises

1-The two primary classes of transactions in the sales and collection cycle are: | a. sales and sales discounts. | b. sales and cash receipts. | c. sales and sales returns. | d. sales and accounts receivable. |

2- Which of the following types of receivables would not deserve the special attention of the auditor? | a. Accounts receivables with credit balances. | b. Accounts that have been outstanding for a long time. | c. Receivables from affiliated companies. | d. Each of the above would receive special attention. |

3- Auditors are often concerned with three aspects of internal controls related to the sales and collection cycle. Which of the following is not one of those controls? | a. Controls that detect or prevent embezzlements. | b. Controls over cutoff. | c. Controls over acquisitions. | d. Controls related to the allowance for doubtful accounts. |

4- Analytical procedures are substantive tests and, if the results of the analytical procedures are favorable, the auditor will: | a. reduce the extent of tests of details of balances. | b. reduce the extent of tests of controls. | c. reduce the tests of transactions. | d. reduce all of the other tests. |

5- Tests of details of balances are directed to: | a. balance sheet accounts for all cycles. | b. income statement accounts for all cycles. | c. balance sheet accounts for some cycles and income statement accounts for other cycles. | d. all general ledger accounts for all cycles. |

6- Because of its central role in auditing of accounts receivable, the ______________ is one of the first items tested. | a. accounts receivable master file | b. customer file | c. aged trial balance | d. sales register |

7- Which of the following audit procedures would not likely detect a client’s decision to pledge or factor accounts receivable? | a. A review of the minutes of the board of directors’

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