Acc403 Auditing and Assurance Services: Week 9 Quiz 7 (Chapter 14 and 15) - Version 2

Acc403 Auditing Week 9 Quiz 7 (Chapters 14 and 15) - Version 2 Question 1 A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the: accounts receivable subsidiary ledger. monthly statement. remittance advice. sales invoice. Question 2 To determine that sales are accurately recorded, the unit prices on the duplicate sales invoices are normally compared with: the original invoices. an approved master price list. the amounts recorded in the sales journal for that transaction. the amounts posted to the customer's account in the accounts receivable master file Question 3 In the sales and collection cycle when is, generally, the earliest point at which revenue can be recognized? sales approval credit approval cash collection shipment of goods Question 4 Before goods are shipped on account, a properly authorized person must: prepare the sales invoice. approve the journal entry. approve the customer's credit. verify that the unit price is accurate Question 5 Who is generally responsible for opening receipts when a company uses a lockbox to speed the handling of cash receipts? company personnel temporary employees in the town where the lockbox is located bank employees company controller Question 6 When designing audit procedures, tracing of source documents to the customer’s subsidiary ledger and subsequently to the general ledger is done to satisfy what assertion? valuation cutoff completeness classification Question 7 The document that requires adjustments to the customers subsidiary ledger account is the: bill of lading. sales invoice. credit memo. monthly statement Question 8 A document prepared to initiate shipment of the goods sold by an independent shipper is the: sales order. bill of lading. sales invoice. customer order. Question 9 Which of the following is not an account affected by the sales and collection cycle? Cash Accounts receivable Allowance for doubtful accounts Sales of Accounts Receivables Question 10 What event initiates a transaction in the sales and collection cycle? receipt of cash delivery of product to a customer identification of a new customer customer request for goods Question 11 In the accounts receivable subsidiary ledger the length of time the account has been due can be useful to the client and the auditor in preparing the: trial balance. working trial balance. accounts receivable trial balance. aged accounts receivable trial balance. Question 12 The document used to indicate to the customer the amount of a sale and payment due date is the: sales invoice. bill of lading. purchase order. sales order. Question 13 Which of the following is not a business function within the "Sales" class of transactions? processing customer orders granting credit processing and recording sales returns and allowances shipping goods Question 14 What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected? determination of correct delivery address credit approval matching of shipping document with sales invoice receipt of sales order from the customer Question 15 The total of the individual account balances in the accounts receivable subsidiary ledger should equal the: total sales for the period. balance of the sales account in the general ledger. total sales less the total cash received for the period. balance of the accounts receivable account in the general ledger. Question 16 Correspondence is established between the random number table and the population by: identifying each item in the population with a unique number. deciding the number of digits to use in the random number table and their association with the population numbering system. defining which digits the auditor uses in a column and the method of reading the table. selecting a random starting point on the table. Question 17 To determine if a sample is truly representative of the population, an auditor would be required to: conduct multiple samples of the same population. never use sampling because of the expense involved. audit the entire population. use systematic sample selection Question 18 When the auditor goes through a population and selects items using nonprobalistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called: block sample selection. haphazard selection. systematic sample selection. statistical selection. Question 19 Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population? Sampling risk Nonsampling risk Audit risk Detection risk Question 20 The auditor's best estimate of the population exception rate is the: current year's sample exception rate. tolerable exception rate. prior year's sample exception rate. computed upper exception rate Question 21 Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%. In auditing client invoices Rodgers should use: stratified sampling. classical sampling. proportional sampling. attributes sampling. Question 22 A sample in which the characteristics of the sample are the same as those of the population is a(n): variables sample. representative sample. attributes sample. random sample. Question 23 The process which requires the calculation of an interval and then selects the items based on the size of the interval is: statistical sampling. random sample selection. systematic sample selection. computerized sample selection. Question 24 When auditors wish to evaluate a sample statistically, an acceptable selection method is: systematic sample selection. judgmental selection. haphazard selection. block sample selection Question 25 Sampling risk may be controlled by: Adjusting the sample size Always using random sampling Yes Yes Adjusting the sample size Always using random sampling No No Adjusting the sample size Always using random sampling Yes No Adjusting the sample size Always using random sampling No Yes Question 26 Which of the following would have the least impact in determining sample size for tests of controls? Expected population exception rate. Risk of assessing control risk too low. Tolerable exception rate. Population size. Question 27 The advantage of systematic sample selection is that: it is easy to use. there is limited possibility of it being biased. it is unnecessary to determine if the population is arranged randomly. it automatically selects items material to the financial statements. Question 28 One of the ways to eliminate nonsampling risk is through: proper supervision and instruction of the client's employees. proper supervision and instruction of the audit team. the use of attributes sampling rather than variables sampling. controls which ensure that the sample drawn is random and representative. Question 29 A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a: random sample. statistical sample. judgment sample. representative sample. Question 30 When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use: audit sampling. representative sampling. poor judgment. estimation sampling