a. A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested).

You are watching: For which of the following audit tests would an auditor most likely use attribute sampling?

b. An auditor may select audit procedures that are not appropriate to achieve the specific objective.

c. An auditor may fail to recognize errors in the documents examined for the chosen sample.

d. The documents related to the chosen sample may not be available for inspection.


a. A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested).




Jones, CPA, believes the industry-wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. In the review of client invoices, Jones should use

a. discovery sampling

b. attributes sampling

c. stratified sampling

d. variables sampling


The tolerable deviation rate for a test of controls is generally:

a. lower than the expected rate of deviations in the related accounting records.

b. higher than the expected rate of deviations in the related accounting records.

c. identical to the expected rate of deviations in the related accounting records.

d. unrelated to the expected rate of deviations in the related accounting records.


The risk of incorrect acceptance relates to the:

a. effectiveness of the audit

b. efficiency of the audit

c. preliminary estimates of materiality levels

d. tolerable misstatement


The likelihood of assessing control risk too high is the risk that the sample selected to test controls:

a. does not support the auditor"s planned assessed level of control risk when the true operating effectiveness of internal control justifies such an assessment.

b. contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transactions classes.

c. contains proportionately fewer deviations from prescribed internal controls than exist in the balance or class as a whole.

d. does not support the tolerable misstatement for some or all of management"s assertions.


a. does not support the auditor"s planned assessed level of control risk when the true operating effectiveness of internal control justifies such an assessment.


For which of the following audit tests would an auditor most likely use attributes sampling?

a. Making an independent estimate of the amount of LIFO inventory.

b. Examining invoices in support of the valuation of fixed asset additions.

c. Selecting accounts receivable balances for confirmation.

d. Inspecting employee time cards for proper approval by supervisors.


d. Inspecting employee time cards for proper approval by supervisors.


Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?

a. It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data.

b. It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing.

c. It increases Jones" knowledge of the entity"s prescribed procedures and their limitations.

d. It is required by generally accepted auditing standards.


a. It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data.


In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to the implications of a deviation if it was:

a. the only deviation discovered in the sample.

b. identical to a deviation discovered during the prior year"s audit.

c. caused by an employee"s oversight.

d. initially concealed by a forged document.


d. initially concealed by a forged document.


An underlying feature of random-based selection of items is that each:

a. stratum of the accounting population be given equal representation in the sample.

b. item in the accounting population be randomly ordered.

c. item in the accounting population should have an opportunity to be selected.

d. item must be systematically selected using replacement.


c. item in the accounting population should have an opportunity to be selected.


An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity"s internal control procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and:

a. evaluate the results as if the sample size had been 19.

b. treat the missing check as a deviation for the purpose of evaluating the sample.

c. treat the missing check in the same manner as the majority of the other 19 checks (i.e., countersigned or not).

d. choose another check to replace the missing check in the sample.


b. treat the missing check as a deviation for the purpose of evaluating the sample.


Which of the following statements is correct concerning statistical sampling for tests of controls?

a. The population size has little or no effect on determining sample size except for very small populations.

b. The expected population deviation rate has little or no effect on determining sample size except for very small populations.

c. As the population size doubles, the sample size also should double.

d. For a given tolerable deviation rate, a larger sample size should be selected as the expected population deviation rate decreases.


a. The population size has little or no effect on determining sample size except for very small populations.


In determining the sample size for a test of controls, an auditor should consider the expected population deviation rate, desired confidence level, and the:

a. tolerable deviation rate

b. risk of incorrect acceptance

c. nature and cause of deviations

d. population size


a. tolerable deviation rate


In attributes sampling, a 10% change in which of the following factors normally will have the least effect on the size of a statistical sample?

a. population size

b. tolerable deviation rate

c. expected population deviation rate

d. desired confidence interval


a. population size


The computed upper deviation rate is:

a. the maximum rate of deviations that the auditor is willing to accept before deciding not to rely on the control.

b. the rate of deviations that the auditor expects to occur in the population.

c. a point estimate of the population deviation rate.

d. the sum of the sample deviation rate and an appropriate allowance for sampling risk.


d. the sum of the sample deviation rate and an appropriate allowance for sampling risk.


A control is deemed to be more important than thought at the time that attributes sampling parameters were set. The auditor is most likely to respond by:

a. decreasing the risk of assessing control risk too high.

b. increasing population size.

c. decreasing the tolerable deviation rate.

d. decreasing the expected deviation rate.


c. decreasing the tolerable deviation rate


If auditors conducting attributes sampling found that the entity deviated from a prescribed control in nine of the first 10 items examined, the auditor is most likely to:

a. increase sample size

b. increase the computed upper deviation rate

c. decrease the tolerable deviation rate

d. stop the test and increase control risk


d. stop the test and increase control risk


In which of the following cases would the auditor determine that statistical sampling should not be performed?

a. Tolerable deviation is large and expected population deviation is low.

b. Tolerable deviation is small and expected population deviation is high.

c. Tolerable deviation is large and expected population deviation is high.

d. Tolerable deviation is small and expected population deviation is low.


b. Tolerable deviation is small and expected population deviation is high.


Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

a. Number of items in the population.

b. Total dollar amount of the items to be sampled.

c. Desired confidence level.

d. Risk of assessing control risk too high.


c. Desired confidence level.


As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was:

a. more than the risk of assessing control risk too low based on the auditor"s sample.

b. more than the deviation rate in the auditor"s sample.

c. less than the risk of assessing control risk too low based on the auditor"s sample.

d. less than the deviation rate in the auditor"s sample.


b. more than the deviation rate in the auditor"s sample.


As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This overreliance occurred because the true deviation rate in the population was:

a. less than the risk of assessing control risk too low on the auditor"s sample.

b. less than the deviation rate in the auditor"s sample.

c. more than the risk of assessing control risk too low on the auditor"s sample.

d. more than the deviation rate in the auditor"s sample.


d. more than the deviation rate in the auditor"s sample.


If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to:

a. have a large sample size

b. set control risk at the maximum without sampling.

c. set control risk at the minimum without sampling.

d. pick a lower risk of assessing control risk too low to increase sample size.


b. set control risk at the maximum without sampling.


For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

a. 1.5%

b. 3%

c. 4%

d. 5%


c. 4%


For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

a. 1.5%

b. 3%

c. 4%

d. 5%


c. 4%


Based on a 5% risk of assessing control risk too low, how would an auditor interpret a computed upper deviation rate of 7%?

a. The auditor is willing to accept a deviation rate of 7% before deciding not to rely on the control.

b. There is a 5% chance that the deviation rate in the population is less than 7%.

c. There is a 5% chance that the deviation rate in the population exceeds 7%.

d. There is a 95% chance that the deviation rate in the population equals 7%.


c. There is a 5% chance that the deviation rate in the population exceeds 7%.


Which of the following best describes the distinguishing feature of statistical sampling?

a. It requires the examination of a smaller number of supporting documents.

b. It permits the auditor to use the most efficient sample size and to quantify the sampling risk to reach a statistical conclusion about the population.

c. It reduces the problems associated with the auditor"s judgment concerning materiality.

d. It is evaluated in terms of two parameters: statistical mean and random selection.


b. It permits the auditor to use the most efficient sample size and to quantify the sampling risk to reach a statistical conclusion about the population.


Statistical sampling provides a technique for:

a. exactly defining materiality.

b. greatly reducing the amount of substantive testing.

c. eliminating the additional cost of designing and conducting the sampling application.

d. measuring the sufficiency of evidential matter.


d. measuring the sufficiency of evidential matter.


Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor:

a. measure the sufficiency of the evidential matter obtained.

b. eliminate the cost of training auditors in the proper use of sampling techniques.

c. reduce the level of tolerable misstatement to a relatively low amount.

d. minimize the failure to detect a material misstatement due to nonsampling risk.


a. measure the sufficiency of the evidential matter obtained.


An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods:

a. afford greater assurance than a nonstatistical sample of equal size.

b. provide an objective basis for quantitatively evaluating sample risks.

c. can more easily convert the sample into a dual-purpose test useful for substantive testing.

d. eliminate the need to use judgment in determining appropriate sample sizes.


b. provide an objective basis for quantitatively evaluating sample risks.


An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the:

a. sample deviation rate plus the allowance for sampling risk equals the tolerable deviation rate.

b. sample deviation rate is less than the expected population deviation rate used in planning the sample.

c. tolerable deviation rate less the allowance for sampling risk exceeds the sample deviation rate.

d. sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.


d. sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.


For attributes sampling, of the three factors that enter into sample size determination, which two factors can the auditor adjust to reflect the importance of the control?

a. Tolerable deviation rate and confidence level.

b. Expected deviation rate and confidence level.

c. Population size and tolerable deviation rate.

d. Tolerable deviation rate and expected deviation rate.


a. Tolerable deviation rate and confidence level


Which of the following combinations guarantees a larger sample size?

a. Decrease the desired confidence level and decrease the tolerable deviation rate.

b. Increase the desired confidence level and decrease the tolerable deviation rate.

c. Decrease the desired confidence level and increase the expected deviation rate.

d. Increase the tolerable deviation rate and increase the expected deviation rate.


b. Increase the desired confidence level and decrease the tolerable deviation rate.


For a large population of cash disbursement transactions, Smith, CPA is testing controls by using attribute sampling techniques. Anticipating an expected deviation rate of 3 percent, Smith found from a table that the required sample size is 400 with a tolerable deviation rate of 5 percent and a desired confidence level of 95 percent. If Smith anticipated an expected deviation rate of only 2 percent but wanted to maintain the same tolerable deviation rate and confidence level, the sample size would be closest to

a. 200

b. 400

c. 533

d. 800


a. 200


In nonstatistical sampling for tests of controls, increasing the desired confidence level results in a:

a. higher tolerable deviation rate

b. lower expected deviation rate

c. larger sample size

d. smaller sample size


c. larger sample size


To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the desired confidence level, and the:

a. expected population deviation rate

b. computed upper precision limit.

c. risk of assessing control risk too high.

d. risk of incorrect rejection.


a. expected population deviation rate


Which of the following statements is correct concerning statistical sampling in tests of controls?

a. As the population size increases, the sample size should increase proportionately.

b. Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate.

c. There is an inverse relationship between the expected population deviation rate and the sample size.

d. In determining tolerable deviation rate, an auditor considers detection risk and the sample size.


b. Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate.


For an attributes sampling plan, the tolerable deviation rate is 4%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the risk of assessing control risk too low is 5%. Which of the following is true?

a. The auditor must increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate.

b. The auditor is likely to increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate.

c. The auditor must increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.

d. The auditor is likely to increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.


d. The auditor is likely to increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.


Which of the following risks is related to effectiveness of testing?

a. The risk of incorrect rejection

b. Inherent risk

c. The risk of incorrect acceptance

d. None of these


c. The risk of incorrect acceptance


The term precision relates to:

a. the difference between confidence level and estimated error.

b. the difference between confidence level and tolerable error.

c. the difference between expected and tolerable deviation rate.

d. the difference between expected and sample deviation rate.


c. the difference between expected and tolerable deviation rate.


Audit sampling is commonly used for which type of audit evidence?

a. Reperformance

b. Analytical procedures

c. Inquiry

d. Observation


a. Reperformance


Audit sampling is NOT used for which type of audit evidence?

a. Inquiry

b. Inspection of tangible assets

c. Reperformance

d. Confirmation


a. Inquiry


While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. It was, in fact, not materially misstated. Such a situation illustrates the risk of

a. incorrect rejection.

b. incorrect acceptance

c. assessing control risk too high

d. assessing control risk too low


a. incorrect rejection.


A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

a. Greater reliance on internal controls.

b. Greater reliance on analytical procedures.

c. Smaller expected frequency of misstatements.

d. Smaller measure of tolerable misstatements.


d. Smaller measure of tolerable misstatements.


Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?

a. Expected amount of misstatement but not the measure of tolerable misstatement.

b. Expected amount of misstatement and the measure of tolerable misstatement.

c. Measure of tolerable misstatement but not the expected amount of misstatement.

d. Neither the expected amount of misstatement nor the measure of tolerable misstatement.


b. Expected amount of misstatement and the measure of tolerable misstatement.


Using nonstatistical sampling, which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?

a. Set the tolerable deviation rate at a lower level than originally planned.

b. Identify the large and unusual disbursements as individually significant and test 100 percent.

c. Increase the sample size to reduce the effect of the unusually large disbursements.

d. Continue to draw new samples until all the unusually large disbursements appear in the sample.


b. Identify the large and unusual disbursements as individually significant and test 100 percent.


What is the primary objective of testing all individually significant items rather than sample testing?

a. To increase the audit risk at which a decision will be reached from the results of the sample selected.

b. To increase sample size

c. To accept no sampling risk for items greater than tolerable misstatement.

d. To increase the size of the confidence bound around the projected misstatement.


c. To accept no sampling risk for items greater than tolerable misstatement


The confidence factor for nonstatistical sampling is based on

a. the number of items in the account

b. auditor judgment

c. the risk of misstatement in the account and the level of desired confidence

d. variability in the population and the risk of misstatement in the account


c. the risk of misstatement in the account and the level of desired confidence


The formula for nonstatistical sampling sample sizes provided by the AICPA

a. must be used for nonstatistical sampling.

b. includes a provision for the risk of incorrect acceptance.

c. includes a measure for the expected misstatement in the population.

d. is largely based on the variation of items in the account.


c. includes a measure for the expected misstatement in the population.


The use of the ratio projection is most effective when

a. the dollar amount of the misstatement is expected to relate to the dollar amount of items tested.

b. a small number of differences exist in the population.

c. estimating populations whose records consist of quantities but not book values.

d. large understatement differences exist in the population.


a. the dollar amount of the misstatement is expected to relate to the dollar amount of items tested.


In general, revenue is recognized when:

a. goods are shipped

b. an entity satisfies a performance obligation

c. it is recorded in the sales journal

d. it is received in cash


b. an entity satisfies a performance obligation


What is channel stuffing?

a. A company records revenue before delivery terms can be arranged.

b. A company records revenue on goods that will be shipped overseas.

c. A company induces distributors to buy substantially more inventory than they can promptly resell.

d. A company alters the terms and conditions of recorded sales to entice customers to accept delivery of goods.


c. A company induces distributors to buy substantially more inventory than they can promptly resell.


Which of the following is not an inherent risk factor for the revenue process?

a. Complexity of revenue recognition issues.

b. Difficulty of auditing transactions.

c. Special industry practices.

d. The entity does not follow its stated policies for sales order approvals.


d. The entity does not follow its stated policies for sales order approvals.


In auditing accounts receivable, the negative form of confirmation request most likely would be used when:

a. recipients are likely to return positive confirmation requests without verifying the accuracy of the information.

b. the combined assessed level of inherent and control risk relative to accounts receivable is low.

c. a small number of accounts receivable are involved but a relatively large number of errors are expected.

d. the auditor performs a dual purpose test that assesses control risk and obtains substantive evidence.


b. the combined assessed level of inherent and control risk relative to accounts receivable is low.


Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Which of the following statements is true regarding the auditor"s use of confirmations?

a. The positive confirmation form must always be used to confirm all balances regardless of size.

b. A combination of the two confirmation types can be used, with the positive form used for large balances and the negative form used for small balances.

c. A combination of the two confirmation types can be used, with the positive form used for trade receivables and the negative form for other receivables.

d. The positive confirmation form should be used when controls related to receivables are satisfactory and the negative confirmation form should be used when controls related to receivables are unsatisfactory.


b. A combination of the two confirmation types can be used, with the positive form used for large balances and the negative form used for small balances.


In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon which of the following?

a. The credit manager"s opinion

b. An aging schedule of past due accounts.

c. Subsequent year collections of amounts in accounts receivable at the balance sheet date.

d. Ratios calculated showing the past relationship of the valuation allowance to net credit sales.


a. The credit manager"s opinion


Audit documents often include an aged trial balance of accounts receivable as of the balance sheet date. This aging is used by the auditor to:

a. evaluate internal control over credit sales.

b. test the accuracy of recorded credit sales

c. evaluate the allowance for doubtful accounts.

d. verify the existence of the recorded receivables.


c. evaluate the allowance for doubtful accounts.


Which of the following is the best argument against the use of negative accounts receivable confirmations?

a. The cost-per-response is excessively high.

b. There is no way of knowing if the intended recipients received them.

c. Recipients are likely to feel that, in reality, the confirmation is a subtle request for payment

d.The inference drawn from receiving no reply may not be correct.


d. The inference drawn from receiving no reply may not be correct.


An auditor"s purpose in reviewing credit ratings of customers with delinquent accounts receivable most likely is to obtain evidence concerning management"s assertions about:

a. accuracy, valuation, and allocation

b. completeness

c. existence

d. rights and obligations


a. accuracy, valuation, and allocation


An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to assess the assertion of:

a. authorization and accuracy

b. completeness

c. cutoff

d. occurrence


b. completeness


Which of the following misstatements is not related to the completeness assertion for revenue?

a. Goods are shipped, but revenue is not recorded

b. This year"s revenue is recorded next year

c. Next year"s revenue is recorded this year

d. Revenue is not recognized for services that have been performed


c. Next year"s revenue is recorded this year


Which of the following is a test of controls for the transaction assertion of completeness for revenue?

a. Test a sample of sales invoices for authorized customer orders

b. Review sales orders for proper credit approval.

c. Trace shipping documents to sales invoices and the sales journal.

d. Examine reconciliation of subsidiary ledger to general ledger control account.


c. Trace shipping documents to sales invoices and the sales journal.


Cooper, CPA is auditing the financial statements of a small rural municipality. The receivable balances represent residents" delinquent real estate taxes. Internal control at the municipality is weak. To determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely:

a. send positive confirmation requests

b. send negative confirmation requests

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


a. send positive confirmation requests


Auditors sometimes use ratios as audit evidence. For example, an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?

a. fictitious purchases

b. fictitious sales

c. Selling and general expenses erroneously being recorded as merchandise purchases.

d. Unrecorded sales


b. fictitious sales


Which of the following might be detected by an auditor"s review of the entity"s sales cutoff?

a. Excessive goods returned for credit.

b. Unrecorded sales discounts.

c. Lapping of year-end accounts receivable

d. Overstated sales for the year


d. Overstated sales for the year


An auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control account as of October 31. By this procedure, the auditor would be most likely to learn about which of the following?

a. An October invoice was improperly computed.

b. An October check from a customer was posted in error to the account of another customer with a similar name.

c. An opening balance in a subsidiary ledger account was improperly carried forward from the previous accounting period.

d. An account balance is past due and should be written-off.


c. An opening balance in a subsidiary ledger account was improperly carried forward from the previous accounting period.


Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment, the CPA would be likely to:

a. increase the balance in the allowance for bad debts account.

b. review the going concern ramifications.

c. require the entity to tighten its credit policy.

d. expand tests regarding the collectability of receivables.


d. expand tests regarding the collectability of receivables.


Which of the following is not an issue related to the valuation of accounts receivable?

a. The credit granting function

b. A proper allowance for doubtful accounts

c. The net realizable value of accounts receivable

d. Proper cutoff


d. Proper cutoff


In the confirmation of accounts receivable, the auditor would most likely:

a. send negative confirmations when the assessed risk of material misstatement is high.

b. seek to obtain positive confirmations for at least 50% of the total dollar amount of the receivables.

c. require confirmation of all receivables from agencies of the federal government.

d. require that confirmation requests be sent as soon as possible after fiscal year-end.


d. require that confirmation requests be sent as soon as possible after fiscal year-end.


Confirmation is least likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the receivables":

a. valuation

b. classification

c. existence

d. completeness


b. classification


To reduce the risks associated with accepting electronic responses to requests for confirmation of accounts receivable, an auditor most likely would:

a. validate the sender of electronic information

b. examine subsequent cash receipts for the accounts in question

c. consider the electronic responses to the confirmations to be exceptions

d. mail second requests to the electronic respondents


a. validate the sender of electronic information


The confirmation of customers" accounts receivable rarely provides reliable evidence about the completeness assertion because:

a. many customers merely sign and return the confirmation without verifying its details.

b. recipients usually respond only if they disagree with the information on the request.

c. customers may not be inclined to report understatement errors in their accounts.

d. auditors typically select many accounts with low recorded balances to be confirmed.


c. customers may not be inclined to report understatement errors in their accounts.


Which of the following most likely would be the result of ineffective internal control policies and procedures in the revenue process?

a. Final authorization of credit memos by personnel in the Sales Department could permit an employee defalcation scheme.

b. Fictitious transactions could be recorded, causing an understatement of revenues and an overstatement of receivables.

c. Irregularities in recording transactions in the subsidiary accounts could result in a delay in goods shipped.

d. Omission of shipping documents could go undetected, causing an understatement of inventory.


a. Final authorization of credit memos by personnel in the Sales Department could permit an employee defalcation scheme.


Smith is engaged in the audit of a cable TV firm that services a rural community. All receivable balances are small, customers are billed monthly, and internal control is effective. To determine the existence of the accounts receivable balances at the balance sheet date, Smith would most likely:

a. send positive confirmation requests

b. send negative confirmation requests

c. examine evidence of subsequent cash receipts instead of sending confirmation requests.

d. use statistical sampling instead of sending confirmation requests.


b. send negative confirmation requests


Which of the following most likely would give the most assurance concerning the valuation assertion for accounts receivable?

a. Tracing amounts in the subsidiary ledger to details on shipping documents.

b. Comparing receivable turnover ratios to industry statistics for reasonableness.

c. Inquiring about receivables pledged under loan agreements.

d. Assessing the allowance for uncollectible accounts for reasonableness.


d. Assessing the allowance for uncollectible accounts for reasonableness.


When a sample of sales transactions recorded in the sales journal is traced back to the customer orders and shipping documents, the auditor is testing the ____________ assertion.

a. cutoff

b. authorization and accuracy

c. completeness

d. occurrence


d. occurrence


When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers" accounts receivable subsidiary ledger, the auditor is testing the _____________ assertion.

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a. classification

b. cutoff

c. existence

d. completeness


d. completeness


When reviewing bank confirmations for any liens on receivables, the auditor is testing the ______________ assertion.

a. valuation and allocation

b. rights and obligations

c. existence

d. completeness


b. rights and obligations


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