Q&A Hero

Q: Certain types of misstatements that affect cash may be detected in the audit of tests of controls. Which of the following misstatements would be detected in the audit of the sales and collection cycle? A) A defalcation of cash hidden by an unauthorized write off of a bad debt B) Accidental duplicate payment of a vendor's invoice C) Payment for raw materials that were not received D) Payment to an employee at an incorrect wage rate

Q: A significant part of the total audit, that relates to cash , is the audit of A) physical inventory on hand using an inventory count. B) assessment of the accounting policies in use. C) substantive testing of the ending accounts payable balance. D) sales and collections, payables payments and payroll payments.

Q: During the audit of cash, the focus of the audit is to A) do substantive tests of payments for supplies. B) conduct control tests of sales transactions. C) verify the bank reconciliation. D) conduct control tests over payments.

Q: There is a greater risk of defalcation for cash than for other types of assets because A) it is easier to steal. B) most other assets must be converted to cash to make them usable. C) companies usually have weak internal controls surrounding cash. D) most employees have access to cash.

Q: When are short-term investments that are readily converted to cash included in the cash account in the financial statements? A) If they are held in local currencies (i.e. Canadian dollars) B) When there is little risk of change in value C) When they are under the control of the treasury department D) If interest has been paid up to the year end date

Q: A branch bank account is helpful for A) limiting the impact of a fraud. B) improving internal controls. C) empowering the different branches of the company. D) building public relations in local communities.

Q: From an audit perspective, an imprest bank account at a client can A) require less time for the audit of general cash. B) increase audit risk. C) result in an increase in control risk. D) improve client internal controls.

Q: The general cash account is considered significant in almost all audits A) where the ending balance is material. B) where either the beginning or ending balance is material. C) even when the ending balance is immaterial. D) except those of not-for-profit organizations.

Q: 14.1 Identify the different types of cash accounts

Q: Whenever a statistical method is used, a decision rule determines whether the population is acceptable. The decision rule for dollar-unit sampling is "Accept the conclusion that the book value is not misstated by a material amount if A) the upper error bound falls between the understatement and overstatement tolerable misstatement amounts." B) both the lower and upper error bound falls between the understatement and overstatement tolerable misstatement amounts." C) both the understatement and overstatement tolerable misstatement amounts fall between the upper and lower error bound." D) the overstatement tolerable misstatement amount falls between the lower and upper error bound."

Q: When errors are found, a common and standard assumption in practice is to assume A) a 100% assumption for all errors. B) that the actual sample errors are representative of the population errors. C) that the population errors are larger than the sample errors. D) that the population errors are smaller than the sample errors.

Q: In monetary-unit sampling, the values of the estimated likely maximum misstatements are referred to as the A) point estimates. B) precision intervals. C) confidence intervals. D) misstatement bounds.

Q: Your audit client is a large retail chain with its own credit card, with annual sales of about $100 million. On December 31, there were approximately 40,000 open accounts with total receivables of approximately $18.5 million. Very few customer balances exceed $1,000. The company's general office maintains the accounts receivable records. The large volume of transactions processed by the company has necessitated extensive segregation of duties and frequent balancing of data during processing. Accordingly, the company's general and system controls are considered to be very good. A complete record of each customer's account is stored on a relational database and includes the following information: Description of field contents Type of account (personal, corporate) Customer account number Customer name and address Credit limit (code for 8 credit levels) Status code (Active, inactive, bad debt) Number of transactions this month Current month's charges Current month's payments Total Outstanding Balance Aged balance over 30 days Aged balance over 60 days Aged balance over 90 days Aged balance over 120 days Year account opened Year last active Total purchases this year to date Total returns this year to date Number of months active Total purchases last year Number of months active last year Source transactions are store purchase invoices, payments, and adjustments. Daily, all the orders are received and entered into the computer and processed against the customer master file. Each account is updated and automatically analyzed to determine whether the transactions just processed have created a condition that should be brought to the attention of the authorization or collection sections. Exception reports are automatically printed and forwarded to these groups. The company sends monthly statements to customers on a cyclical basis. About 2,000 statements are mailed each billing day. As the accounts are updated, the day's transactions are accumulated and added to the starting control figure for each cycle. The new control figures are balanced with the sum of all the individual accounts in the cycle (accumulated as each account is processed). In addition, a detailed transaction and cycle control report is prepared, providing an audit trail in customer account number sequence. Required: Describe the audit procedures you would perform in your year end audit work of accounts receivable for this company. For each audit test, state the relevant audit assertion(s). Be sure to include different types of tests as necessary (e.g. manual, or using computer assisted audit techniques), and clearly identify those tests that can be completed using CAATs.

Q: Following are three different situations with respect to the audit of accounts receivable and sales. For each, specify the evidence mix that you would use (tests of control, substantive tests, type of confirmation/timing), and explain why. A) The client is in a volatile industry, selling products that can quickly become technically obsolete. Total accounts receivable is $65 million, with a bad debt allowance of $7 million. The company has recently laid off three accounting staff to save money. B) A small company has 45 different customers, with balances ranging from $500 to $25,000 per customer. There is one accountant on staff, and a professional accountant comes in once per week for three hours to review the work and prepare journal entries. Bad debts are rare, as the owner is actively involved in accounts receivable collection. C) Big Department Store Finance Corporation has fifty staff in the accounting department, a sophisticated software package, and about $250 million in accounts receivable. The corporation manages the department store credit cards. About 100,000 credit card customers have balances less than $300 on their accounts, while the balances for the remaining customers range up to a maximum of $5,000.

Q: You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable: 2012 2011 Accounts receivable $ 3,343,000 $ 2,694,000 Allowance for doubtful accounts 212,150 207,660 Sales 25,640,000 24,630,000 Required: A) What are the audit implications of these figures? B) Identify key audit steps that you would perform for any of the above accounts.

Q: A) Describe the differences between positive and negative confirmations. Which type is more reliable? B) Discuss the advantages and disadvantages of using negative accounts receivable confirmations rather than positive confirmations. C) Discuss the circumstances in which it is acceptable to use negative confirmation requests. D) The auditor's decision regarding the type of accounts receivable confirmation to use involves a continuum, starting with using no confirmations in some circumstances, to using only negatives, to using both positives and negatives, to using only positives. Discuss the primary factors affecting this decision.

Q: A) Assuming the client's internal controls are adequate, describe how the auditor can verify proper cutoff of sales transactions. B) Describe how the auditor tests the rights objective for accounts receivable.

Q: A) An auditor is concerned that accounts receivable may be understated due to sales to customers that have been omitted from the sales journal and from the accounts receivable master file. Describe the procedure(s) the auditor should perform in these circumstances. B) Describe how the auditor tests the classification objective for accounts receivable.

Q: Discuss the alternative procedures an auditor can perform to test the existence objective for accounts receivable when customers do not respond to confirmation requests.

Q: You are the auditor of Foundry Inc., a company that manufactures chocolate bars and assorted candies. The description of the sales and collection cycle for Foundry is as follow: Clients & Credit Limits Foundry has 50 clients as they mostly sell to grocery stores' central purchasing departments or distributors. For each customer, Foundry performs a credit check prior to setting the credit limit for the client. The credit limit is reviewed each year. In the past year, the credit limits were increased by 10%. This is due to the growth in product lines of Foundry and increased demand from customers. This also came at the same time the CEO of Foundry set the objective of growing the company's revenue by 25% over the next two years. Increasing the credit limit has helped Foundry move towards that objective. Allowance for Doubtful Accounts The allowance for doubtful accounts is calculated by the controller by taking a percentage of the total sales for the month. The controller has been taking 3% of total sales. The estimate has not been revised in the current year, but it has always been sufficient to cover for any write-off incurred. Required: For each of the two areas discussed above, identify the risk areas and the most likely misstatements for Foundry.

Q: State the five specific balance-related audit objectives as applied to accounts receivable.

Q: Positive accounts receivable confirmations were circularized, and there were many differences where the client stated that the goods had not been received as of the date of the confirmation. In addition to the possibility that the goods were not received by the client, this type of reported difference could be an indication of A) a cutoff misstatement. B) timing differences with respect to recording sales returns. C) improper recording of sales allowances. D) theft of cash or lapping.

Q: An auditor should perform alternative procedures to substantiate the existence of accounts receivable when A) no reply to a positive confirmation request is received. B) no reply to a negative confirmation request is received. C) collectability of the accounts receivable is in doubt. D) pledging of the accounts receivable is probable.

Q: After the items for confirmation have been selected, the auditor must maintain control of the confirmations until A) the names are provided to client's personnel to type the envelopes. B) the sealed envelopes are provided to client's personnel to be mailed. C) the responses are received by the client with the return mail. D) they are returned by the debtor to the auditor.

Q: Frag Jones Company has a December year end, with a tight reporting deadline, so the auditors confirmed the accounts receivable as of November 30 using positive confirmations. In addition to following up confirmation discrepancies, the auditor should A) test December transactions. B) send negative confirmations as of the end of December. C) text November transactions. D) do cut-off testing for the month of October.

Q: The most reliable evidence from confirmations is obtained when they are sent A) several months before the year-end, so the auditor will have adequate time to perform alternate procedures if they are required. B) at various times throughout the year to different sections of the sample, so that the entire sample is representative of account balances scattered throughout the year. C) as close to the balance sheet date as possible. D) at various times throughout the year to the same group in the sample, so that the sample will not have a time bias.

Q: Beltrand, PA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent property taxes or receivables over the due date. The internal controls at the municipality are weak. To determine the existence of the accounts receivable balances at the balance sheet date, Beltrand would most likely A) send positive confirmation requests. B) send negative confirmation request. C) examine evidence of subsequent cash receipts. D) inspect the internal records such as copies of the tax invoices that were mailed to the residents.

Q: The use of the negative (as opposed to the positive) form of receivables confirmation is indicated when A) internal control surrounding accounts receivable is considered to be ineffective. B) there is reason to believe that a substantial number of accounts may be in dispute. C) a large number of small balances are involved. D) accounts receivable consists of current balances only.

Q: Which one of the following circumstances would indicate that positive confirmations should be used on this engagement? A) A significant portion of the total accounts receivable balance is represented by a small number of accounts with large balances. B) The internal control over accounts receivable is good. C) The recipients are mostly businesses rather than individuals. D) The auditor is unaware of disputed or inaccurate accounts.

Q: The auditor obtains corroborating audit evidence for accounts receivable by using positive or negative confirmation requests. Under which of the following circumstances might the negative form of the accounts receivable confirmation be useful? A) A substantial number of accounts are in dispute. B) Internal control over accounts receivable is ineffective. C) Client records include a large number of relatively small balances. D) The auditor believes that recipients of the requests are unlikely to give them consideration.

Q: Negative confirmations of accounts receivable is less effective than positive confirmations of accounts receivable because A) a majority of recipients usually lack the willingness to respond objectively. B) some recipients may report incorrect balances that require extensive follow-up. C) the auditor cannot infer that all nonrespondents have verified their account information. D) negative confirmations do not produce evidential matter that is statistically quantifiable.

Q: A positive confirmation is more reliable evidence than a negative confirmation because A) the auditor has a document which can be used in court. B) follow-up procedures can be performed if a response is not received from the debtor. C) the debtor's lack of response indicates agreement with the stated balance. D) fewer confirmations can be sent out.

Q: A communication addressed to the debtor requesting him or her to confirm whether the balance as stated on the communication is correct or incorrect is a A) legal confirmation. B) negative confirmation. C) positive confirmation. D) bank confirmation.

Q: There are two important assumptions that underly the auditor's use of external confirmations. The first is that the person returning the confirmation is independent of the company and so will provide an unbiased response. The second is that A) only authorized employees of the company have prepared the response. B) the person completing the response has carefully checked the data being confirmed. C) the respondent has not been coerced or bribed to respond to the confirmation. D) adequate controls exist at the client company to prevent unauthorized responses.

Q: The primary purpose of accounts receivable confirmation is to satisfy the A) existence objective. B) existence and cutoff objectives. C) accuracy and cutoff objectives. D) existence, accuracy, and cutoff objectives.

Q: Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the accounts receivable's A) valuation. B) classification. C) existence. D) completeness.

Q: Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide evidence concerning the A) collectability of the balances confirmed. B) ownership of the balances confirmed. C) existence of the balances confirmed. D) internal control over balances confirmed.

Q: One of the most important test of details of balances for accounts receivable is A) recalculation of the aged receivables and uncollectible accounts. B) confirmations. C) tracing from shipping documents to journals to the accounts receivable ledger. D) tracing credit memos for returned merchandise to receiving room reports.

Q: Trade accounts receivable should exclude A) accounts receivables denominated in foreign currencies. B) past-due accounts receivable. C) related party accounts receivable. D) accounts receivable of clients entitled to receive discounts.

Q: If accounts receivable accounts with credit balances are significant, they should be A) written off. B) reclassified as accounts payable. C) corrected by making adjusting entries. D) moved to the debit side.

Q: IFRS, ASPE and ASNPO require that related party transactions be disclosed. Gregorio Limited has a materiality threshold of $50,000. Which of the following standards apply to the disclosure of related party transactions for Gregorio Limited? Disclose A) all transactions that are greater than the current year's materiality. B) all related party transactions, even those below materiality. C) those related party transactions that relate to officers or directors of the corporation. D) those related party transactions that could affect the decisions of a user.

Q: If the internal controls for recording sales returns and allowances are evaluated as ineffective, A) a larger sample is needed to verify cutoff. B) sampling is not appropriate. C) all sales returns must be traced to supporting documentation. D) all sales returns must be confirmed with the customer.

Q: Celebra sold some goods to Frankfurt Corp. Frankfurt sent a cheque to Celebra to pay for the goods on December 24th. Celebra received the check on January 4th. At December 31st, Celebra still showed an account receivable from Frankfurt while Frankfurt no longer had an account payable to Celebra. This situation represents a A) cut-off error. B) timing difference. C) error in presentation. D) lack of communication between the two companies.

Q: When the client's internal control structure is adequate, the cutoff can usually be verified by A) the client's representation letter. B) inquiries of the controller. C) obtaining the last shipping document number of the year and comparing it with current and subsequent period recorded sales. D) confirmation of the receivable for the last recorded sale.

Q: The auditor would like to conduct dual purpose tests verifying that the programs performing the totaling and aging of accounts receivable are functioning correctly as well as quantifying any error. Which of the following is a dual purpose test that the auditor could use? A) use analytical review and compare amounts from current to prior B) inquire how the calculations are performed C) use test data and observe how the invoice(s) of the test are aged D) use generalized audit software to reperform the calculations

Q: The auditor has elected to conduct the following audit tests: reperform addition of the aged accounts receivable trial balance for the total column and for the columns depicting the aging. Which audit objective is associated with these audit tests? A) valuation B) classification C) accuracy D) occurrence

Q: As part of the audit testing, the auditor is conducting substantive analytical review over time (trend analysis) of bad debts to evaluate the quality of the accounts receivable. Which audit assertion is this associated with? A) valuation B) classification C) rights and obligations D) occurrence

Q: A common way to evaluate the adequacy of the bad debt allowance is to A) review the results of tests of controls that are concerned with the client's credit policy. B) inspect carefully the noncurrent accounts on the aged trial balance to determine which ones have not been paid subsequent to the balance sheet date. C) examine the program logic that is used to prepare the aged trial balance and to monitor the implementation of credit policies. D) send positive confirmations to all accounts with balances over 90 days based upon the aged trial balance.

Q: The most important test of details of balances to determine the existence of recorded accounts receivable is A) tracing sales entries to shipping documents. B) tracing the credits in accounts receivable to bank deposits. C) tracing sales returns entries to credit memos issued and receiving room reports. D) sending external confirmations of customers' balances.

Q: Which of the following presentation and disclosure related audit objectives does not have a parallel audit objective for both the transaction related audit objectives and balance-related audit objectives? A) allocation B) classification C) understandability D) rights and obligations

Q: Which of the following presentation and disclosure related audit objectives has a matching transaction related audit objective, but not a matching balance-related audit objective? A) accuracy B) classification C) occurrence D) completeness

Q: Glee Inc. is a manufacturer of musical instruments and its year end is September 30th. Copa Loca, a local music school, has purchased some instruments from Glee, but was not satisfied with the quality and returned the goods to Glee during the last week of September. Being very busy with year end, Glee received the goods from Copa Loca on September 30th, but only processed the returned merchandised and issued a credit note in October. This represents a A) cut-off (allocation) misstatement. B) understandability misstatement. C) significant misstatement. D) classification misstatement.

Q: Discuss three examples of analytical procedures an auditor might perform while auditing the sales and collection cycle. Also discuss the potential misstatement(s) that may be revealed by each analytical procedure. Note: students could also be asked to separately discuss ratios for planning and ratios as substantive tests.

Q: Stefano is performing a review of the accounts receivable for large and unusual amounts. Of the following accounts receivables, Stefano should pay special attention to an account receivable A) from a related party. B) for a large dollar amount. C) recorded close to year end. D) that is recurring.

Q: Comparison of individual customer balances with previous years will detect what type of possible misstatement? A) misstatement in gross profit and bad debt expense B) overstatement or understatement of bad debt expense C) overstatement or understatement of allowance for uncollectible accounts D) misstatements in accounts receivable and related income statement accounts

Q: Analytical procedures are substantive tests and, if the results of the analytical procedures are favourable, they will reduce A) the extent of tests of details of balances. B) the extent of tests of controls. C) the analytical procedures. D) all of the other tests.

Q: As part of audit planning, you have calculated accounts receivable turnover for the last five years, and compared it to industry averages. Your client's accounts receivable has decreased by about 1.25 times in the current year, while the industry rate has improved. One possible cause of this lowered accounts receivable turnover is A) higher cost of goods sold. B) increased bad debt expenses. C) fictitious revenue. D) fictitious expenses.

Q: As part of audit planning, you have calculated gross margin for the last five years, and compared gross margin to industry averages. Your client's gross margin has increased by about 5% in the current year, while the industry gross average has declined. One possible cause of this increased gross margin is A) higher cost of goods sold. B) increased bad debt expenses. C) premature revenue recognition. D) fictitious expenses.

Q: As part of audit planning, you have calculated gross margin for the last five years, and compared gross margin to industry averages. Your client's gross margin has increased by about 5% in the current year, while the industry gross average has declined. One possible cause of this increased gross margin is A) higher cost of goods sold. B) increased bad debt expenses. C) fictitious revenue. D) fictitious expenses.

Q: Comparing bad debt expense as a percentage of gross sales with previous years will detect what kind of possible misstatement? A) cut-off errors in recording cash receipts B) overstatement of sales and accounts receivable C) understatement of sales and accounts receivable D) understatement of allowance for uncollectible accounts

Q: You are the auditor for GreenAcres, a non-profit home for homeless elderly. GreenAcres has a December 31 year end. It receives government funding, and also relies upon donations for revenue. GreenAcres has a major funding drive in November, when it collects pledges by means of activities at a garage sale, a walkathon, and fall bake sale events in the community. During late February you had a meeting with Ellen Famous, the President of GreenAcres, at the organization's premises. Ellen reviews and approves bank statements and is the second and final cheque signer. Two other accounting staff have the following responsibilities: Paul approves pledge write-offs (which normally average about 15%), opens the mail, endorses cheques received in the mail, prepares and delivers bank deposits, and posts transactions into the accounting system. Diana, a retired bookkeeper, volunteers about 10 hours per week to reconcile the bank account, review journal entries posted to the general ledger, and prepare payroll and accounts payable transactions for processing. Ellen normally reviews pledge write-offs, but was very busy in February, so she took a look while you were there. To her surprise, she found that about 40% of the pledges had been written off. She asked Diana to investigate, and Diana found that most of the write-offs had actually been paid. Required: A) What are possible causes of the inconsistency with the pledge write-offs? B) What are the weaknesses in internal control that could allow the excess write-offs to occur? Provide recommendations for improvement. C) Identify audit procedures that you would complete to quantify any potential misstatement with respect to the pledges receivable balance as at December 31.

Q: In the sales and collection cycle, the results of the tests of controls determine A) the extent to which planned detection risk is satisfied for each accounts receivable objective. B) whether assessed control risk for sales and cash receipts needs to be revised. C) if tests of details of balances need to be performed. D) whether positive or negative confirmations should be used for this engagement.

Q: Your audit client has many different types of accounts receivable: Canadian, American, and other international accounts, short term and long-term. There are also some sales on consignment. The company has used forward exchange contracts to reduce its exposure due to foreign exchange fluctuations. How will this affect the audit engagement? A) control risk will increase B) inherent risks of error will decrease C) risk of material misstatement increases D) audit risk will be increased

Q: At every audit engagement, the auditor is required to consider that there could be significant risks of misstatement for revenue recognition. At ABC Ltd., the auditor has concluded that, yes, there are material risks of misstatement associated with revenue recognition. How does this affect the extent of testing for accounts receivable? A) audit risk will be increased B) inherent risks will be decreased C) decreased control testing is required D) increased substantive testing is required

Q: In the planning phase, Denis conducted an analytical procedure to compare the allowance for doubtful accounts balance to the accounts receivable balance. In the prior years, the allowance for doubtful accounts/ accounts receivable ratio was between 2.5% to 3.5%. This year, the number is 1.25%. What should Denis do? A) Change the assessed inherent risk B) Conduct additional testing to justify the lower bad debt C) Advise management that they should increase the allowance for doubtful accounts provision D) Document this difference and continue with audit work to see if this is pervasive bias of management

Q: Three presentation and disclosure audit objectives are not affected by assessed control risk for the sales transactions. These are A) rights and obligations, valuation, understandability. B) understandability, valuation, occurrence. C) valuation, rights and obligations, classification. D) classification, understandability, rights and obligations.

Q: Two accounts receivable balance-related audit objectives are not affected by assessed control risk for the sales and cash receipts classes of transactions. These are A) valuation allocation. B) allocation, rights and obligations. C) valuation, rights and obligations. D) accuracy, existence.

Q: For cash receipts, the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable. Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect? A) allocation B) completeness C) rights and obligations D) existence

Q: For sales, the occurrence transaction-related audit objective affects the existence balance-related audit objective. For cash receipts, the occurrence transaction-related audit objective affects which balance-related audit objective? A) existence B) completeness C) cut-off D) valuation

Q: The two primary classes of transactions in the sales and collection cycle are A) sales and sales returns. B) sales and sales discounts. C) sales and accounts receivable. D) sales and cash receipts.

Q: Audit risk is assessed for A) the financial statements as a whole and is not usually allocated to various accounts or objectives. B) the financial statements as a whole and then allocated to various accounts. C) various accounts but not for the financial statements as a whole. D) various accounts and objectives, and the sum is then assigned to the financial statements as a whole.

Q: A risk of material misstatement in accounts receivable associated with the allocation balance-related audit objective is that "long term service revenue is recorded as current revenue or in the wrong period, overstating revenue and accounts receivable." Which of the following tests of detail of balances would respond to this risk? A) read customer contracts and audit the criteria used to allocate revenue to components of the sales contract B) check cash received after the year end and trace to accounts receivable master file C) read the notes to the financial statements and compare to audited financial information D) inquire of management about the process used to make sure that revenue is recorded in the correct period

Q: A risk of material misstatement in accounts receivable associated with the accuracy balance-related audit objective is that "sales recorded at the incorrect price result in revenue and accounts receivable that are over or under stated." Which of the following tests of detail of balances would respond to this risk? A) select a sample of master file change forms and verify that all sales prices changes were appropriately authorized B) use audit software to match sales invoice price details to authorized prices in the sales price master files C) inquire of management with respect to the procedures used to update sales price master file D) match shipping details for a sample of invoices to the invoice details, on an item by item basis

Q: A risk of material misstatement in accounts receivable associated with the rights and obligations balance-related audit objective is that "consignment goods are recorded as revenue, overstating both revenue and accounts receivable. Which of the following tests of detail of balances would respond to this risk? A) include confirmation of terms of sale with accounts receivable confirmations B) check cash received after the year end and trace to accounts receivable master file C) read the notes to the financial statements and compare to audited financial information D) compare accounts receivable balances by customer last year end to this year

Q: Tests of details of balances relate to which part of the Audit Risk Model? A) control risk B) inherent risk C) substantive risk D) planned detection risk

Q: 13.1 Identify and describe the risk-based process for designing tests of details of balances for accounts receivable

Q: To determine that sales are accurately charged, the unit prices on the duplicate sales invoices are normally compared with A) the original invoices. B) the amounts recorded in the sales journal for that transaction. C) the amounts posted to the customer's account in the accounts receivable master file. D) an approved item master file.

Q: Which of the following procedures would ordinarily be expected to best reveal unrecorded sales at the balance sheet date? A) Compare shipping documents with sales invoices. B) Apply gross profit rates to inventory disposed of during the period. C) Trace payments received subsequent to the balance sheet date. D) Send accounts receivable confirmation requests.

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

Q: Which of the following control procedures may prevent the failure to bill customers for some shipments? A) Each shipment should be supported by a prenumbered sales invoice that is accounted for. B) Each sales order should be approved by authorized personnel. C) Sales journal entries should be reconciled to daily sales summaries. D) Each sales invoice should be supported by a shipping document.