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Question(s) / Instruction(s):


1) The auditor traces items from the source documents to the journals in order to satisfy the:

A) valuation objective.

B) ownership objective.

C) existence objective.

D) completeness objective.


2) When designing tests of controls, the emphasis is on testing controls that:

A) are material.

B) the auditor believes may not be functioning effectively.

C) the auditor intends to rely on to reduce control risk.

D) are associated with material account balances.


3) A document prepared to initiate shipment of the goods sold is the:

A) sales order.

B) bill of lading.

C) sales invoice.

D) customer order.


4) Procedures to test whether sales are accurately recorded are normally:

A) skipped unless fraud is suspected.

 B) conducted in every audit.

C) necessary only if the controls are weak.

D) superfluous during substantive testing.


5) The business functions mainly related to the provision for doubtful debts account include:

A) Billing customers.

B) Writing off uncollectible accounts receivable.

C) Granting credit.

D) All of the above.


6) It is important that sales be billed and recorded in the journal as soon as possible after:

A) shipment takes place.

B) credit is approved and it is verified that there is enough inventory to fill the order.

C) the order is received and credit is approved.

D) the order is received.


7) Proper accounting requires that an account receivable must be written off by the client when:

A) a collection agency cannot inspire customer to pay the debt.

B) the account is at least six months old.

C) the client company concludes that an amount is no longer collectible.

D) the customer files for bankruptcy.


8) For the most part, the evidence gathered during the audit of the sales and collection cycle can be

subjectively combined with the other parts of the audit:

A) only after the audit of the sales and collection cycle is concluded.

B) only when all fieldwork processes of the engagement are completed.

C) after the conclusion of both the cash cycle and the sales and collection cycle.

D) as the evidence accumulation process proceeds.



9) The business functions mainly related to the bad debts expense account include:

A) Billing customers.

 B) Granting credit.

C) Providing for bad and doubtful debts.

D) All of the above.


10) Which one of the following types of cash defalcation is least likely to be detected by an auditor?

A) that which occurs after the cash is recorded but before it is deposited in the bank.

B) that which involves EFT.

C) lapping.

D) that which occurs before the cash is recorded.


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