Substantive Audit Testing Revenue
Substantive Audit Testing: Revenue Cycle
1. Substantive Audit Testing: Revenue Cycle
2. MULTIPLE CHOICE:
3. 1. Which of the following might be detected by an auditor's review of the client's sales cut-off?
4. a. Excessive goods returned for credit.
5. b. Unrecorded sales discounts. c. Lapping of year end accounts receivable. d.
Inflated sales for the year.
6. ANSWER: D
7. 2. Which of the following forms of evidence represents the most competent evidence that a receivable actually exists?
8. a. A positive confirmation. b. A sales invoice. c. A receiving report. d. A bill of lading. 9. ANSWER: A
10. 3. During the process of confirming receivables as of December 31, 2002, a positive confirmation was returned indicating the "balance owed as of December
31 was paid on January 9, 2003." The auditor would most likely
11. a. Determine whether there were any changes in the account between January 1 and January 9, 2003.
12. b. Determine whether a customary trade discount was taken by the customer.
13. c. Reconfirm the zero balance as of January 10, 2003.
14. d. Verify that the amount was received.
15. ANSWER: D
16. 4. Which of the following analytical audit findings would most likely indicate a possible problem?
17. a. A material decrease in the receivables turnover. b. A material increase in inventory turnover. c. A material decrease in days' sales outstanding. d. A material increase in the acid test ratio.
18. ANSWER: A
19. 5. When the objective of the auditor is to evaluate the appropriateness of adjustments to sales, the best available evidence would normally be
20. a. Oral evidence obtained by discussing adjustment-related procedures with controller personnel.
21. b. Analytical evidence obtained by comparing sales adjustments to gross sales for a period of time.
22. c. Physical evidence obtained by inspection of goods returned for credit.
23. d. Documentary evidence obtained by inspecting documents supporting entries to adjustment accounts.
24. ANSWER: D
25. 6. An
1. Substantive Audit Testing: Revenue Cycle
2. MULTIPLE CHOICE:
3. 1. Which of the following might be detected by an auditor's review of the client's sales cut-off?
4. a. Excessive goods returned for credit.
5. b. Unrecorded sales discounts. c. Lapping of year end accounts receivable. d.
Inflated sales for the year.
6. ANSWER: D
7. 2. Which of the following forms of evidence represents the most competent evidence that a receivable actually exists?
8. a. A positive confirmation. b. A sales invoice. c. A receiving report. d. A bill of lading. 9. ANSWER: A
10. 3. During the process of confirming receivables as of December 31, 2002, a positive confirmation was returned indicating the "balance owed as of December
31 was paid on January 9, 2003." The auditor would most likely
11. a. Determine whether there were any changes in the account between January 1 and January 9, 2003.
12. b. Determine whether a customary trade discount was taken by the customer.
13. c. Reconfirm the zero balance as of January 10, 2003.
14. d. Verify that the amount was received.
15. ANSWER: D
16. 4. Which of the following analytical audit findings would most likely indicate a possible problem?
17. a. A material decrease in the receivables turnover. b. A material increase in inventory turnover. c. A material decrease in days' sales outstanding. d. A material increase in the acid test ratio.
18. ANSWER: A
19. 5. When the objective of the auditor is to evaluate the appropriateness of adjustments to sales, the best available evidence would normally be
20. a. Oral evidence obtained by discussing adjustment-related procedures with controller personnel.
21. b. Analytical evidence obtained by comparing sales adjustments to gross sales for a period of time.
22. c. Physical evidence obtained by inspection of goods returned for credit.
23. d. Documentary evidence obtained by inspecting documents supporting entries to adjustment accounts.
24. ANSWER: D
25. 6. An