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Question(s) / Instruction(s):

ACC3118

1) When positive confirmations are used, ASA 505 requires follow-up procedures for confirmations

not returned by the customer. In such a situation, which of the following would not be classified as

an alternative procedure?

A) Examine customer’s purchase order and the duplicate sales invoice to determine that the

merchandise was ordered

B) Send a second confirmation request

C) Examine subsequent cash receipts to determine if the receivable has been paid

D) Examine shipping documents to verify that the merchandise was shipped

 

2) A positive confirmation is more reliable evidence than a negative confirmation because:

A) follow-up procedures can be performed if a response is not received from the debtor.

B) the debtors lack of response indicates agreement with the stated balance.

C) the auditor has a document which can be used in court.

D) fewer confirmations can be sent out.

 

3) The following audit procedure tests primarily which balance related audit objective for accounts

receivable: Confirm accounts receivable, using positive confirmations

A) Existence

B) Classification

C) Completeness

D) All of the above.

 

4) Analytical procedures are substantive tests and, if the results of the analytical procedures are

favorable, they will:

A) reduce the tests of transactions.

B) reduce the extent of tests of details of balances.

C) reduce all of the other tests.

D) reduce the extent of tests of controls.

 

5) Set tolerable error for accounts receivable is part of which phase of the audit?

A) Phase I

 B) Phase II

C) Phase IV

D) Phase III

 

6) The following audit procedure tests primarily which balance related audit objective for accounts

receivable: Trace the receivables balance to the general ledger

A) Rights and obligations

B) Presentation and disclosure

C) Detail tie in

D) All of the above.

 

 

7) Returns of positive confirmation requests for accounts receivable were very poor. As an alternative

procedure, the auditor decided to check subsequent collections. The auditor had satisfied himself

that the client satisfactorily listed the customer name next to each cheque listed on the deposit slip;

hence, he decided that for each customer for which a confirmation was not received that he would

add all amounts shown for that customer on each validated deposit slip for the two months

following the balance-sheet date. The major fallacy in the auditor’s procedure is that:

 

A) by looking only at the deposit slip the auditor would not know if the payment was for the

receivable at the balance-sheet date or a subsequent transaction.

B) checking of subsequent collections is not an accepted alternative auditing procedure for

confirmation of accounts receivable.

C) the deposit slip would not be received directly by the auditor as a confirmation would be.

D) a customer may not have made a payment during the two-month period.

 

8) ________ to positive confirmations do not provide audit evidence.

A) Non-responses

B) Follow ups

C) Responses

D) All of the above

 

9) The following audit procedure tests primarily which balance related audit objective for accounts

receivable: Review the minutes of the board of directorsʹ meetings for any indication of pledged

receivables

A) Existence

 B) Presentation and disclosure

C) Rights and obligations

D) Both B and C above.

 

10) In the sales and collection cycle, the results of the tests of controls determine:

A) whether assessed control risk for sales and cash receipts needs to be revised.

B) the extent to which planned detection risk is satisfied or each accounts receivable objective.

C) whether positive or negative confirmations should be used for this engagement.

D) if tests of details of balances need to be performed.

 

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