Chapter 16 Excercises

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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’ meetings....
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