Cash Receipts Controls and Tests Quiz

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Questions and Answers

What are the general categories from which cash receipts may result?

Revenue transactions, short and long-term borrowing, and issuance of share capital

Sales transactions, short-term borrowing, issuance of share capital, long-term investments, and other assets

Revenue transactions, short and long-term borrowing, issuance of share capital, and sale of marketable securities (correct)

Revenue transactions, borrowing, issuance of share capital, sale of marketable securities, investments, and other assets

What is the focus of tests of controls over cash receipts transactions related to 'Existence or Occurrence'?

Recording cash receipts transactions in accordance with PAS/PFRS

Ensuring all receipts are processed and recorded

Ensuring recorded receipts represent actual cash collections from customers (correct)

Valuing debits to cash and credits to accounts receivable at amounts received

What is the objective of the control where a trustworthy employee prepares a prelisting of cash receipts before further processing?

To ensure all receipts are processed and recorded

To verify that all cash receipts are deposited intact in the client's account

To verify that recorded receipts represent actual cash collections from customers

To prevent misappropriation of cash (correct)

What is the focus of tests of controls related to 'Rights and Obligations' in cash receipts transactions?

Verifying that all cash receipts are deposited intact in the client's account Signup and view all the answers

What is the purpose of aggregating total cash received in cash receipts transactions?

To facilitate efficient processing and recording of cash receipts Signup and view all the answers

What is the focus of tests of controls related to 'Valuation or Allocation' in cash receipts transactions?

Valuing debits to cash and credits to accounts receivable at amounts received Signup and view all the answers

What is the objective of substantive test of cash receipts transactions related to existence or occurrence?

To determine that recorded receipts represent actual collections of cash from customers Signup and view all the answers

What could discrepancies between the prelisting of cash receipts and the entries in the cash receipts journal suggest?

Lapping of cash receipts Signup and view all the answers

What is the purpose of footing the cash receipts journal and reconciling it to the accounts receivable subsidiary ledger?

To verify the mathematical accuracy of cash collections Signup and view all the answers

What is the auditor's objective in reviewing account coding for a sample of entries in the cash receipts journal?

To ensure proper presentation and disclosure Signup and view all the answers

What is the purpose of verifying that all cash receipts are recorded by reconciling daily listings of cash receipts and validated deposit ticket to cash receipt journal?

To detect lapping of cash receipts Signup and view all the answers

What is the primary focus of substantive test of cash receipts transactions related to valuation or allocation?

To ensure proper valuation of debits to cash and credits to accounts receivable Signup and view all the answers

What evidence does an auditor use to verify that a collection was made from a customer?

Remittance advice and validated deposit ticket Signup and view all the answers

What does the auditor verify to determine whether the credit to accounts receivable is proper?

Recompute the cash discounts allowed to customers who made payments Signup and view all the answers

What is the purpose of segregating duties of handling cash receipts from posting to accounts receivable?

To prevent misappropriation Signup and view all the answers

What is the purpose of restrictively endorsing checks upon receipt?

To reduce the likelihood of misappropriation Signup and view all the answers

Why should cash receipts be recorded at the amount indicated on the remittance advice?

To serve as strong evidence Signup and view all the answers

What is the purpose of an accounting supervisor approving classifications made in journalizing?

To reduce the likelihood of mispostings Signup and view all the answers

What is an example of a possible error resulting from control weaknesses in cash receipts handling?

Lack of segregation of duties Signup and view all the answers

What is the purpose of reconciling the daily cash summary to prelisting and over-the-counter receipts?

To ensure all cash receipts are deposited and recorded Signup and view all the answers

Study Notes

Summary of Cash Receipts Controls and Tests

Daily deposits are validated with deposit slips and compared to cash receipts summary
Duties of handling cash receipts are segregated from posting to accounts receivable to prevent misappropriation
Bank reconciliation is prepared monthly by an independent employee not involved in cash handling
Completeness is ensured by processing and recording all receipts, and reconciling cash receipts journal total with accounts receivable
Controls include prelisting and cash register procedures being monitored, and checks being restrictively endorsed upon receipt
Daily cash summary is reconciled to prelisting and over-the-counter receipts, ensuring all cash receipts are deposited and recorded
Cash receipts journal total is reconciled independently to the total posted to accounts receivable
Cash receipts are deposited intact daily in the company’s bank account, reducing the likelihood of misappropriation
Cash receipts should be recorded at the amount indicated on the remittance advice, serving as strong evidence
An accounting supervisor should approve classifications made in journalizing to reduce the likelihood of mispostings
Audit program for test of controls includes comparing remittances with entries, testing cash discounts, and reviewing cash receipts for unusual items
Possible errors resulting from control weaknesses include lack of segregation of duties, inadequate reconciliations, and failure to list and deposit cash receipts on a timely basis

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Description

Test your knowledge of cash receipts controls and tests with this quiz. Challenge yourself with questions about daily deposits validation, segregation of duties, bank reconciliation, completeness checks, and more. Sharpen your understanding of important controls to prevent misappropriation and ensure accuracy in cash receipts processing.