AUD Revenue Cycle - AUD FOR REV PDF

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AUD FOR REV...

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An auditor tests an entity’s policy of obtaining credit approval before shipping goods to customers in support of management’s financial statement assertion of A. Valuation or allocation. B. Completeness. C. Existence or occurrence. D. Rights and obligations.

Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded? A. The billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account balances. B. The accounting department supervisor independently reconciles the accounts receivable subsidiary ledger to the accounts receivable control account monthly. C. The accounting department supervisor controls the mailing of monthly statements to customers and investigates any differences reported by customers. D. The billing department supervisor matches prenumbered shipping documents with entries in the sales journal.

Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs? Employees responsible for authorizing sales and bad debt write-offs are denied access to A. cash. B. Shipping documents and sales invoices are matched by an employee who does not have authority to write off bad debts. C. Employees involved in the credit-granting function are separated from the sales function. D. Subsidiary accounts receivable records are reconciled to the control account by an employee independent of the authorization of credit.

Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments? A. Accounts receivable. B. Credit. C. Accounts payable. D. Treasurer.

Employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals and A. Protect employees who make unintentional misstatements from possible monetary damages resulting from their misstatements. B. Deter dishonesty by making employees aware that insurance companies may investigate and prosecute dishonest acts. Facilitate an independent monitoring of the receiving and depositing of cash C. receipts. Force employees in positions of trust to take periodic vacations and rotate their assigned D. duties. During the consideration of a small business client’s internal control, the auditor discovered that the accounts

. receivable clerk approves credit memos and has access to cash. Which of the following controls would be most effective in offsetting this weakness? A. The owner reviews errors in billings to customers and postings to the subsidiary ledger. B. The controller receives the monthly bank statement directly and reconciles the checking accounts. C. The owner reviews credit memos after they are recorded. D. The controller reconciles the total of the detail accounts receivable accounts to the amount shown in the ledger. 32 .

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When a customer fails to include a remittance advice with a payment, it is common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees? A. Credit manager. B. Receptionist. C. Sales manager. D. Accounts receivable clerk.

At which point in an ordinary sales transaction of a wholesaling business is a lack of specific authorization of least concern to the auditor in the conduct of an audit? A. Granting of credit. B. Shipment of goods. C. Determination of discounts. D. Selling of goods for cash.

Which of the following internal control procedures most likely would assure that all billed sales are correctly posted to the accounts receivable ledger? A. Daily sales summaries are compared to daily postings to the accounts receivable ledger. B. Each sales invoice is supported by a prenumbered shipping document The accounts receivable ledger is reconciled daily to the control account in the general C. ledger D. Each shipment on credit is supported by a prenumbered sales invoice

An auditor would consider a cashier’s job description to contain compatible duties if the cashier receives remittances from the mail room and also prepares the A. Prelist of individual checks. B. Monthly bank reconciliation. C. Daily deposit slip. D. Remittance advices.

Immediately upon receipt of cash, a responsible employee should A. Record the amount in the cash receipts journal. B. Prepare a remittance listing. C. Update the subsidiary accounts receivable records. D. Prepare a deposit slip in triplicate. Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

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Understating the sales journal. Overstating the accounts receivable control account. Overstating the accounts receivable subsidiary ledger. Understating the cash receipts journal.

Which of the following internal control procedures most likely would deter lapping of collections from customers? A. Independent internal of dates of entry in the cash receipts journal with dates of daily cash summaries. B. Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval. C. Segregation of duties between receiving cash and posting the accounts receivable ledger. D. Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.

An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using A. Employee fidelity bonds. B. Independently prepared mailroom prelists. C. Daily check summaries. D. A bank lockbox system.

Which of the following most likely would be the result of ineffective internal control policies and procedures in the revenue cycle? A. Final authorization of credit memos by personnel in the sales department could permit an employee defalcation scheme. B. Fictitious transactions could be recorded, causing an understatement of revenues and an overstatement of receivables. Irregularities in recording transactions in the subsidiary accounts could result in a delay in goods C. shipped. Omission of shipping documents could go undetected, causing an understatement of D. inventory....