Question 1

What is dual-direction testing?

Accepted Answer

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Question 2

Is the confirmation of cash and accounts receivable required according to auditing standards? Explain.

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Question 3

Define the response rate as it pertains to positive accounts receivable confirmations.Describe methods that can be utilized to increase the response rate.

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Question 4

In testing controls related to a client's processing of credit sales transactions,auditors need to define "deviations" in advance.Give seven examples of deviations from control objectives.

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Question 5

What are the general internal control objectives for the revenue cycle?

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Question 6

Will the confirmation of accounts,loans,and notes receivable always provide sufficient appropriate audit evidence to cover the ownership assertion made by the client?

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Question 7

Auditors should consider the possibility of kiting if there are frequent deposits of round amounts.

Accepted Answer

Kiting is a fraudulent practice that involves making use of the time it takes for a check to clear the bank. Frequent deposits of round amounts could be an indication of kiting, so auditors should consider this possibility.

Question 8

In-Line Company records accounts receivable from customers arising from both the sale of in-line skates and the provision of repair service.The CA firm of King & King is auditing the financial statements of In-Line Company.Lyon,the audit manager,is aware that the confirmation of customer accounts receivable is a substantive procedure normally used in the audit of accounts receivable.Selected balances from In-Line's financial statements are as follows: accounts receivable,$7,000;current assets,$322,000;total assets,$630,000;shareholders' equity,$570,000;net income,$190,000.
Required:
A)How can Lyon justify deciding not to confirm In-Line's accounts receivable?
B)Briefly describe two types of positive confirmation Lyon could send to In-Line's customers.
C)What alternative procedures can Lyon perform if In-Line's customers fail to respond to the confirmation requests?

Accepted Answer

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Question 9

A cutoff bank statement is a special statement printed by the bank which does not include all paid cheques and deposit slips.

Accepted Answer

A cutoff bank statement is a bank statement issued for a period shorter than the regular statement period, typically at the request of an auditor, to verify the cash transactions at the end of the accounting period. It includes all paid cheques and deposit slips up to the cutoff date.

Question 10

Evidence of ownership can be obtained by studying the title documents for assets.

Accepted Answer

Title documents contain information about the ownership of assets, such as real estate or vehicles, and can therefore provide evidence of ownership.

Quiz 11: The Revenues, Receivables, and Receipts Process and Cash Account Balance