Audit

Ch 12

- The accounting system will not post a sales transaction to the sales journal without a valid bill of lading
number. This control is most relevant to which transaction-related objective for sales?

(2) Occurrence

- Which of the following controls would be most effective in detecting a failure to record cash received
from customers paying on their accounts?

(3) Monthly statements are sent to customers and any discrepancies are resolved by someone
independent of cashhandling and accounting.

- Which of the following controls most likely will be effective in offsetting the tendency of sales
personnel to maximize sales volume at the expense of high bad debt write-offs?

(2) Employees involved in the credit-granting function are separated from the sales function

- An auditor is performing substantive tests of transactions for sales. One step is to trace a sample of
debit entries from the accounts receivable master file back to the supporting duplicate sales invoices.
What will the auditor intend to establish by this step?

(4) Debit entries in the accounts receivable master file are correctly supported by sales invoices

- Which audit procedure is most effective in testing credit sales for overstatement?

(2) Vouch a sample of recorded sales from the sales journal to shipping documents.

- To determine whether internal control relative to the revenue cycle of a wholesaling entity is operating
effectively in minimizing the failure to prepare sales invoices, an auditor would most likely select a
sample of transactions from the population represented by the

(3) Shipping document file

- A key internal control in the sales and collection cycle is theseparation of duties between cash handling
and record keeping. Theobjective most directly associated with this control is to verify that

(4) existing cash receipts are recorded

- A manufacturing company received a substantial sales return in the last month of the year, but the
credit memorandum for the return was not prepared until after the auditors had completed their
testing. The returned merchandise was included in the physical inventory

(4)Receiving reports are prepared for all materials received and such reports are accounted for on a
timely basis
- A sales invoice for $5,200 was computed correctly but, by mistake, was entered as $2,500 to the sales
journal and posted to the accounts receivable master file. The customer remitted only $2,500, the
amount on his monthly statement.

(1) Prelistings and predetermined totals are used to control postings

- Shipments occurring in December 2011 did not get recorded until the first few days of January 2012.

(2) As goods leave the shipping dock, the system generates a bill of lading and associated sales invoice,
which is automatically recorded in the sales journal

- The accounting system automatically obtains the unit price based on scans of bar codes for
merchandise sold. This control is most relevant to which transaction-related objective for sales?

(1) Accuracy

- Proper authorization of write-offs of uncollectible accounts should be approved in which of the

following departments?

(2) Credit

Ch 15

- If all other factors specified in a sampling plan remain constant, changing the ARO from 5% to 10% will
cause the required sample size to

(3) decrease

- Of the four factors that determine the initial sample size in attributes sampling (population size,
tolerable exception rate, acceptable risk of overreliance, and expected population exception rate),
which factor has the least effect on sample size?

(1) Population size

- The sample size of a test of controls varies inversely with:

(1) EPER No, TER Yes

- The upper precision limit (CUER) in statistical sampling is

(3) a statistical measure, at a specified confidence level, of the maximum rate of occurrence of an
attribute.

- In addition to evaluating the frequency of deviations in tests of controls, an auditor should also
consider certain qualitative aspects of the deviations. The auditor most likely would give additional to
the implications of a deviation if it was
(4) initially concealed by a forged document

- An auditor who uses statistical sampling for attributes in testing internal controls should reduce the
planned reliance on a prescribed control when the

(4) sample exception rate plus the allowance for sampling risk exceeds the tolerable rate

- An advantage of statistical sampling over non-statistical sampling is that statistical sampling helps an
auditor

(4) measure the sufficiency of the audit evidence by quantifying sampling risk

- which of the following best illustrates the concept of sampling risk?

(3) a randomly chosen sample may not be representative of the population of a whole for the
characteristic f interest

- For which of the following tests would an auditor most likely use attribute sampling?

(2) inspecting employee time cards for proper approval by supervisors

- As compared to a nonstatistical sampling plan, a statistical sampling plan

(4) makes greater use of mathematical methods in determining an appropriate sample size.

- The digagram below depicts an auditor's computed upper exception rate (CUER) compared with the
tolerable exception rate (TER), and also depicts the true population exception rate compared with the
TER.

(3) III

- In assessing sampling risk, the risk of underreliance (i.e. the risk of assessing control risk too high)
relates to the

(1) efficiency of the audit