18 Questions
What is the primary focus of the auditor when auditing cash receipts?
Identification of material weaknesses in internal control
What is the purpose of tests of controls in auditing cash receipts?
To evaluate the operating effectiveness of internal controls
What is the relationship between the methodology for designing tests of controls and substantive tests of transactions for cash receipts and sales?
The same methodology is used for both cash receipts and sales
What is the objective of substantive tests of transactions for cash receipts?
To detect material misstatements in cash receipts
What is the first step in designing tests of controls and substantive tests of transactions for cash receipts?
Determine the key internal controls for each objective
What is the purpose of identifying weaknesses in internal control when auditing cash receipts?
To assess control risk
What is the primary concern of the auditor when verifying the existence of recorded sales?
That sales are included in the journals for which no shipment was made
Which of the following is a common procedure used in designing substantive tests of transactions?
Reviewing reports for unusual or incorrect items
What is the purpose of tests of controls in auditing?
To evaluate the effectiveness of internal controls
What is a common weakness in internal controls that may lead to fictitious sales?
Inadequate segregation of duties
Which of the following is a consideration when designing substantive tests of transactions for sales?
All of the above
What is the primary objective of substantive tests of transactions for sales?
To detect material misstatements in sales transactions
What procedure would an auditor perform to verify the existence of recorded sales when there is no shipment?
Trace selected entries from the sales journal to make sure that related copies of the shipping and other supporting documents exist
What is a potential indicator of a control weakness in the sales recording process?
The person recording sales is also in a position to authorize shipments
What is the purpose of tracing a credit in the A/R master file to its source?
To identify potential fictitious sales transactions
What is the main purpose of performing a substantive test for completeness?
To verify the existence of recorded sales
What is the procedure for testing for unbilled shipments?
Tracing selected shipping documents from a file in the shipping department to related duplicate sales invoices and the sales journal
What is the main reason why substantive tests of transactions are emphasized when controls are inadequate?
Because the client does not perform independent internal tracing from shipping documents to the sales journal
This quiz covers the methodology for designing tests of controls and substantive tests of transactions for cash receipts in auditing. It includes determining key internal controls and developing tests of controls and substantive tests of transactions.
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