Acc403 Auditing and Assurance Services: Week 9 Quiz 7 (Chapter 14 and 15) - Version 1

Acc403 Auditing and Assurance Services
Week 9 Quiz 7 (Chapters 14 and 15) - Version 1

Question 1
A document that initiates shipment of goods and indicates the description of the merchandise, the quantity shipped, and customer name and address is the:
A) bill of lading.
B) sales invoice.
C) picking ticket.
D) vendor invoice.

Question 2
When an employee who is authorized to make customer entries in the accounts receivable subsidiary ledger, purposefully enters cash received into the wrong customer's account that employee may be suspected of:
A) kiting.
B) lapping.
C) floating.
D) shorting.

Question 3
Before goods are shipped on account, a properly authorized person must:
A) prepare the sales invoice.
B) approve the journal entry.
C) approve the customer's credit.
D) verify that the unit price is accurate.

Question 4
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:
A) trial balance.
B) working trial balance.
C) accounts receivable trial balance.
D) aged accounts receivable trial balance.

Question 5
The document that requires adjustments to the customers subsidiary ledger account is the:
A) bill of lading.
B) sales invoice.
C) credit memo.
D) monthly statement.

Question 6
The total of the individual account balances in the accounts receivable subsidiary ledger should equal the:
A) total sales for the period.
B) balance of the sales account in the general ledger.
C) total sales less the total cash received for the period.
D) balance of the accounts receivable account in the general ledger.

Question 7
An effective procedure to test for unbilled shipments is to trace from the:
A) sales journal to the shipping documents.
B) shipping documents to the sales journal.
C) sales journal to the accounts receivable ledger.
D) sales journal to the general ledger sales account.

Question 8
When assessing risk control, the auditor must do all of the following except:
A) assess control risk for each objective by evaluating the controls and deficiencies for each objective.
B) perform the detailed test of balances.
C) identify the key internal controls and deficiencies.
D) associate the key controls and deficiencies with the objectives.

Question 9
________ tests are for omitted transactions, while ________ tests are for nonexistent transactions.
A) Tracing, vouching
B) Vouching, tracing
C) Verifying, tracking
D) Tracking, verifying

Question 10
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:
A) accounts receivable subsidiary ledger.
B) monthly statement.
C) remittance advice.
D) sales invoice.

Question 11
Credit memos are normally issued to:
A) adjust the customers balance to the amount owed to the company because of returned goods or an allowance.
B) assist in the aging of accounts receivable.
C) reduce customer frustration and sales losses.
D) inform the customer of the balance due.

Question 12
Generally, when is the earliest point in the sales and collection cycle in which revenue can be
A) When the sale is approved
B) When the credit approval process is finalized
C) When the cash is collected
D) When the goods have been shipped

Question 13
Most companies recognize sales revenue when:
A) sales are invoiced.
B) payment is received from the customer.
C) goods are shipped.
D) the customer's order is received.

Question 14
What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected?
A) Determination of correct delivery address
B) Credit approval
C) Matching of shipping document with sales invoice
D) Receipt of sales order from the customer

Question 15
When designing audit procedures, tracing of source documents to the customers subsidiary ledger and subsequently to the general ledger is done to satisfy what assertion?
A) Valuation
B) Cutoff
C) Completeness
D) Classification

Question 16
Which of the following is the exception rate that the auditor expects to find before testing?
A) Sample exception rate
B) Estimated population exception rate
C) Computed exception rate
D) Tolerable exception rate

Question 17
Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?
A) Sampling risk
B) Nonsampling risk
C) Audit risk
D) Detection risk

Question 18
A sample in which the characteristics of the sample are the same as those of the population is a(n):
A) variables sample.
B) representative sample.
C) attributes sample.
D) random sample.

Question 19
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:
A) stratified sampling.
B) classical sampling.
C) proportional sampling.
D) attributes sampling.

Question 20
When auditors wish to evaluate a sample statistically, an acceptable selection method is:
A) systematic sample selection.
B) judgmental selection.
C) haphazard selection.
D) block sample selection.

Question 21
Auditors often use the ________ to determine the estimated population exception rate.
A) current year's audit results
B) tolerable exception rate
C) preceeding year's audit results
D) estimated computed by management

Question 22
The most serious shortcoming of the haphazard sample selection method is:
A) it is not subject to statistical sampling methods.
B) it is time consuming to use.
C) it is costly to use.
D) it is difficult to remain completely unbiased in the selection.

Question 23
The advantage of systematic sample selection is that:
A) it is easy to use.
B) there is limited possibility of it being biased.
C) it is unnecessary to determine if the population is arranged randomly.
D) it automatically selects items material to the financial statements.

Question 24
Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?
A) Review sales transactions for large and unreasonable amounts.
B) Observe whether the duties of the accounts receivable clerk are separate from handling cash.
C) Examine a sample of duplicate sales invoices for credit approval by the credit manager.
D) Review the aged schedule of accounts receivable to determine if receivables from officers are

Question 25
When the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify?
A) Reduce the tolerable exception rate so as to accept the sample results.
B) Expand the sample size and perform more tests.
C) Revise the assessed control risk.
D) Write a letter to management which outlines the control deficiencies.

Question 26
One of the causes of nonsampling risk is:
A) improper supervision and instruction of the client's employees.
B) ineffective audit procedures.
C) inadequate sample size.
D) exceptions being found in the sample.

Question 27
The sample exception rate equals:
A) the number of exceptions in the population divided by the sample size.
B) the number of items in the population multiplied by the number of exceptions in the sample.
C) the number of exceptions in the sample divided by the sample size.
D) the number of exceptions in the population divided by the population size.

Question 28
In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the:
A) sampling interval.
B) tolerable exception rate.
C) computed upper exceptions rate.
D) mean.

Question 29
Which of the following would have the least impact in determining sample size?
A) Acceptable risk of overreliance
B) Risk of assessing control risk too low
C) Tolerable exception rate
D) Population size

Question 30
When using statistical sampling, the auditor would most likely require a smaller sample if the:
A) population increases.
B) desired reliability decreases.
C) desired precision interval narrows.
D) expected exception rate increases.
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