1.
Which of the following is not a balance-related audit objective
evaluated in the audit of accounts receivable?
a. Timing
b. Realizable value
c. Completeness
d. Accuracy
2. The most important test of details of balances to determine the
existence of recorded accounts receivable is:
a. tracing details of sales invoices to shipping documents.
b. tracing the credits in accounts receivable to bank deposits.
c. tracing sales returns entries to credit memos issued and
receiving room reports.
d. the confirmation of customers’ balances.
3. Most tests of accounts receivable are based on what schedule, file, or
listing?
a. Sales master file.
b. Aged accounts receivable trial balance.
c. Accounts receivable master file.
d. Accounts receivable general ledger account.
4. 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.
b. Discussions with the client.
c. Confirmation of receivables.
d. Examination of correspondence files.
5. When do most companies record sales returns and allowances?
a. During the month in which the sale occurs.
b. During the accounting period in which the return occurs.
c. Whenever the customer contacts the company regarding the
credit.
d. During the month after the sale occurs.
6. A positive confirmation is more reliable evidence than a negative
confirmation because:
a. fewer confirmations can be sent out.
b. the auditor has a document which can be used in court.
c. the debtor’s lack of response indicates agreement with the
stated balance.
d. follow-up procedures are performed if a response is not
received from the debtor.
7. The advantage of using the negative form of confirmations is that:
a. larger sample sizes can be used without increasing the costs
above what would have been required for positive confirmations.
b. a non-response from the customer proves that the balance is
correct.
c. follow-up procedures are scheduled automatically.
d. they provide greater reliance.
8. For which of the following accounts is cutoff least important?
a. Sales
b. Sales returns and allowances
c. Cash collections
d. Inventory
9. An auditor should perform alternative procedures to substantiate the
existence of accounts receivable when:
a. no reply to a positive confirmation request is received.
b. no reply to a negative confirmation request is received.
c. collectibility of the receivables is in doubt.
d. pledging of the receivables is probable.
10. Which of the following is the least important consideration in
determining the sample size of confirmations?
a. The types of confirmations being sent; that is, positive or
negative.
b. The results of related analytical procedures.
c. Total annual credit sales.
d. The auditor’s assessment of detection risk.
11. For most audits, a proper cash receipts cutoff is less important than
the sales cutoff because the improper cutoff of cash:
a. is detected and correct when cash is separately audited.
b. is unlikely to have a material impact on the balance sheet or
the income statement.
c. affects on the cash and accounts receivable balances on the
balance sheet and does not affect net income.
d. rarely occurs given the control consciousness of most entities.
12. Negative confirmations of receivables are less effective than positive
confirmations of receivables because:
a. they do not produce evidence that is statistically quantifiable.
b. the auditor cannot infer that all non-respondents have verified
their account information.
c. some recipients may report incorrect balances that require
extensive follow-up.
d. a majority of recipients usually lack the willingness to respond
objectively.
