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Auditing, 12e (Arens)
Chapter 2 The Public Accounting Profession
2.1 Describe the various organizational structures of public accounting firms
1) One of the main advantages of a big public accounting firm is the
Answer: C
Diff: 2 Type: MC Page Ref: 27
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
2) National accounting firms in 2012 are those with
Answer: A
Diff: 3 Type: MC Page Ref: 27
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
3) Most international and national accounting firms in Canada are comprised of professional accountants with the designations
Answer: C
Diff: 2 Type: MC Page Ref: 27
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
4) How many public accounting firms are there in Canada that have more than 50 professional staff?
Answer: B
Diff: 3 Type: MC Page Ref: 28
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
5) What is the size of most public accounting firms in Canada?
Answer: A
Diff: 3 Type: MC Page Ref: 28
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
6) The most common organizational form used by public accounting firms is
Answer: A
Diff: 1 Type: MC Page Ref: 28
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
7) What are the three main factors that influence the organizational structure of all Public Accounting firms?
Answer:
Diff: 2 Type: ES Page Ref: 28
Learning Obj.: 2-1 Describe the various organizational structures of public accounting firms
2.2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
1) What is one of the ways that high-profile business failures such as Enron, WorldCom and Nortel have affected the auditing profession?
Answer: D
Diff: 1 Type: MC Page Ref: 29
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
2) How has the Canada Business Corporation Act given authority to Canadian accounting and auditing standard setters? By stating that financial statements
Answer: B
Diff: 2 Type: MC Page Ref: 30
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
3) When the criteria to be used in the financial statement audit is established, the auditors responsibility is to
Answer: A
Diff: 2 Type: MC Page Ref: 30
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
4) The reason for adopting the CASs is to
Answer: C
Diff: 2 Type: MC Page Ref: 31
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
5) Independence is assessed in the eyes of external users and regulators. Which of the following is a tool that helps the auditor identify whether the auditor is independent for a particular audit engagement?
Answer: B
Diff: 2 Type: MC Page Ref: 30-31
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
6) The implementation of the Sarbanes-Oxley requirements in the US resulted in the creation of the PCAOB to oversee listed companies auditors and develop audit standards. The impact of this requirement in Canada was the
Answer: D
Diff: 3 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
7) The implementation of the Sarbanes-Oxley requirements in the US resulted in increased independence requirements for the auditors. The impact of this requirement in Canada was
Answer: B
Diff: 3 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
8) What is the auditor required to do with respect to the financial reporting framework at a client?
Answer: A
Diff: 2 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
9) Sarbanes-Oxley in the U.S. and regulatory reporting requirements in Canada provide the clout to make management directly responsible for the financial statements. What is one of the ways that this is implemented in the CASs (Canadian Auditing Standards)?
Answer: B
Diff: 3 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
10) Sarbanes-Oxley in the U.S. and regulatory reporting requirements in Canada provide the clout to make management directly responsible for the financial statements. What is one of the ways that this is implemented in the CASs (Canadian Auditing Standards)?
Answer: C
Diff: 2 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
11) Canadian auditing standards (CASs) require that the audit be conducted using
Answer: B
Diff: 3 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
12) The first step in the financial statement audit using a risk assessment approach is to
Answer: A
Diff: 3 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
13) The risk response phases of conducting the financial statement audit using a risk assessment approach includes
Answer: D
Diff: 2 Type: MC Page Ref: 32
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
14) During which phases of the financial statement audit does the auditor evaluate evidence when conducting the financial statement audit using a risk assessment approach? During
Answer: D
Diff: 3 Type: MC Page Ref: 33
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
15) The codes of professional conduct of the various accounting bodies are meant to
Answer: A
Diff: 2 Type: MC Page Ref: 33
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
16) General qualifications and conduct standards indicate that performance of all aspects of auditing should be performed with due care. This means that the auditor must fulfill his/her duties
Answer: D
Diff: 2 Type: MC Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
17) Adequate technical training and proficiency in auditing is a requirement of which category of generally accepted auditing standards?
Answer: A
Diff: 2 Type: MC Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
18) Adequate planning and execution to reduce risk to an acceptable level is a requirement of which category of generally accepted auditing standard?
Answer: B
Diff: 2 Type: MC Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
19) Communicating the findings of the audit in accordance with the CASs is a requirement of which category of generally accepted auditing standard?
Answer: C
Diff: 2 Type: MC Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
20) Canadian GAAS (Generally Accepted Auditing Standards) are best described as
Answer: A
Diff: 1 Type: MC Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
21) CAS 200 provides overall objectives of the Independent Auditor during the conduct of an audit in three categories: qualifications and conduct, performance of the audit, and reporting of results. How do these standards provide guidance to auditors? They
Answer: B
Diff: 2 Type: MC Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
22) CAS 200 explains that as part of general qualifications and conduct the auditor should be professionally competent. Which of the following help the auditor achieve competence?
Answer: C
Diff: 3 Type: MC Page Ref: 34-35
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
23) CAS 200 explains that as part of general qualifications and conduct the auditor should exercise due care in the performance of all aspects of auditing. Which of the following is an illustration of due care?
Answer: D
Diff: 3 Type: MC Page Ref: 35
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
24) Larger audits may have established procedures that utilize an audit committee whenever there is a dispute between management and the auditors. What is the purpose of such procedures?
Answer: C
Diff: 2 Type: MC Page Ref: 35
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
25) Who do the external auditors and the internal auditors usually report to?
Answer: B
Diff: 1 Type: MC Page Ref: 35
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
26) A strategic and risk-based audit approach means that the client must be assessed in the context of the business environment, including which of the following?
Answer: C
Diff: 2 Type: MC Page Ref: 35
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
27) Which of the following rights is in the CBCA (Canada Business Corporations Act) and is necessary for the completion of the audit? The right to
Answer: D
Diff: 3 Type: MC Page Ref: 35
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
28) When the CICA Handbook is silent on an auditing issue, which of the following is the best of other authoritative sources that the auditor could use?
Answer: A
Diff: 2 Type: MC Page Ref: 35-36
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
29) What is the purpose of exposure drafts issued by the AASB (Auditing and Assurance Standards Board) in Canada? To
Answer: D
Diff: 2 Type: MC Page Ref: 37
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
30) The most authoritative requirements for public accountants performing financial statement audits in Canada are the
Answer: C
Diff: 2 Type: MC Page Ref: 37
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
31) When conducting an audit, the auditor should look at Canadian GAAS as
Answer: A
Diff: 2 Type: MC Page Ref: 37
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
32) A PA firm is conducting the audit of a company that has operations in both Canada and Finland. There is a conflict between ISAs (International Statements on Auditing) and CASs (Canadian Auditing Standards) for the foreign operations that will be consolidated with the Canadian operations. Which reporting standards should the PA firm follow?
Answer: C
Diff: 3 Type: MC Page Ref: 37
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
33) The CICA is the professional accounting organization for Chartered Accountants (CAs). Describe the role and responsibilities of the organization in serving its members.
Answer:
Research and Publication: The CICA publishes the CA Magazine along with accounting and auditing research studies. The CICA also coordinates the UFE exam.
Continuing Education: The CICA provides courses, seminars and on-line material to update their members on a variety of topics relating to accounting and auditing. It also has six specific specializations for its members.
Establishing standards and rules: The AASB sets accounting and auditing standards that are published by the CICA and that must be followed by public accountants.
Diff: 2 Type: ES Page Ref: 29-30
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
34) For each of the following situations, state which element of the profession or society encourages the public accountant to conduct himself at a high level.
Answer:
Diff: 2 Type: ES Page Ref: 33
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
35) The generally accepted auditing standards can be divided into three categories of standards. List the three categories and provide an example of each.
Answer: Note: Two examples are provided. Others are possible.
Diff: 2 Type: ES Page Ref: 34
Learning Obj.: 2-2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality
2.3 Examine the characteristics of quality control for financial statement audits
1) A PA firm has an organizational structure that assures the technical review of every engagement by a partner who has expertise in the clients industry. This is an example of good
Answer: D
Diff: 3 Type: MC Page Ref: 38
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
2) CPABs purpose is to
Answer: D
Diff: 2 Type: MC Page Ref: 38
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
3) A key difference between the PCAOB in the U.S. and CPAB in Canada is that
Answer: B
Diff: 2 Type: MC Page Ref: 38
Learning Obj.: 3-3 Examine the threats to independence and explain how the threats can be mitigated
4) There are many elements of quality control at the firm level. Which element does an organizational culture that provides quality should be present for audit and review engagements belong to?
Answer: A
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 3-3 Examine the threats to independence and explain how the threats can be mitigated
5) There are many elements of quality control at the firm level. Which element does quality control procedures should be developed, documented, implemented and communicated belong to?
Answer: A
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 3-3 Examine the threats to independence and explain how the threats can be mitigated
6) There are many elements of quality control at the firm level. Which element does management within a firm should ensure that qualified personnel monitor and address non-compliance with quality control procedures belong to?
Answer: A
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 3-3 Examine the threats to independence and explain how the threats can be mitigated
7) There are many elements of quality control at the firm level. Which element does a firm should establish a formal code of conduct that includes procedures for individuals to disclose differences of opinion and any inappropriate conduct belong to?
Answer: A
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 3-3 Examine the threats to independence and explain how the threats can be mitigated
8) Farah is currently auditing Software Synx, a public company. After a long day of work, Farah goes for a drink with her friend John who mentions that he owns shares of Software Synx. Farah indicates that John should hold on to his shares as they will go up next week when the financial statements are released and show an increase of 12% for revenues. Which element of quality control is compromised by Farah?
Answer: A
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
9) Gary West is a sole practitioner. He has conducted the audit of Reggies Farm for the past 12 years. In the current year, Reggies Farm expanded by acquiring two other farms, installed a new accounting system and also started to export to the United States. Gary accepted the audit of Reggies Farm for the upcoming year even though he has no experience with exports to the US or companies of the size of Reggies Farm. Which element of quality control is compromised for Garys firm?
Answer: B
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
10) Dimitri works at a large public accounting firm. Dimitri referred one of his friends for a junior auditor position. Dimitris friend was hired despite the fact that he had a criminal record dating from 3 years ago. The partner did not perform a background check on Dimitris friend since he was recommended by an employee. Which element of quality control is compromised?
Answer: C
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
11) There are many elements of quality control at the firm level. Which element does adequate hiring policies (and documentation of their implementation) that ensure competence and integrity of personnel should be in place belong to?
Answer: C
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
12) There are many elements of quality control at the firm level. Which element does ongoing professional development of personnel should exist, with assignment to work that matches employee competence, and performance evaluations related to audit quality belong to?
Answer: C
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
13) There are many elements of quality control at the firm level. Which element does employees should be adequately trained in the skills needed to conduct audits and reviews belong to?
Answer: D
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
14) Jessica is a summer junior at Branes & Castle, a PA firm. Jessica has only completed 3 accounting courses in university and has not yet taken her auditing class. A team of auditors from Branes & Castle are starting the audit and Jessica was sent to help them. Jessica
Answer: A
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
15) There are many elements of quality control at the firm level. Which element does adequate processes and procedures should be in place to ensure that the audit or review is conducted in accordance with GAAS, that quality control procedures are followed for each engagement, and that the audit is appropriately documented belong to?
Answer: D
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
16) There are many elements of quality control at the firm level. Which element does policies in place should include use of second or independent partner review, technical review, documentation, and compliance with quality control processes belong to?
Answer: B
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
17) There are many elements of quality control at the firm level. Which element does processes should exist for following up internal and external complaints belong to?
Answer: B
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
18) During which phases of the financial statement audit does the auditor conduct quality control when conducting the financial statement audit using a risk assessment approach? During
Answer: D
Diff: 2 Type: MC Page Ref: 39
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
19) For a CA or CGA working as a sole practitioner or working in a small public accounting office, the provincial practice inspectors will likely come to review audit files
Answer: A
Diff: 1 Type: MC Page Ref: 40
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
20) How do practice inspections affect the ability of a PA firm to have articling students work at the firm? Practice inspectors
Answer: B
Diff: 3 Type: MC Page Ref: 40
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
21) Which of the following is a typical consequence to a PA or PA firm if practice inspectors find any files or quality control procedures to be unsatisfactory? The PA
Answer: C
Diff: 2 Type: MC Page Ref: 40
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
22) Stafford & Sandiford is a Public Accounting firm with 30 clients who are reporting issuers. Stafford & Sandiford can expect to be inspected by the CPAB
Answer: B
Diff: 1 Type: MC Page Ref: 40
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
23) Securities regulations in Canada are the responsibility of
Answer: B
Diff: 1 Type: MC Page Ref: 41
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
24) Canadian GAAS (including the CICA Handbook) are the authoritative standards for the conduct of financial statement audits in Canada. How would this affect the audit of a Canadian company that is owned by a Swedish company that must also report using Swedish (International) auditing standards?
Answer:
Diff: 3 Type: ES Page Ref: 37-38
Learning Obj.: 2-3 Examine the characteristics of quality control for financial statement audits
Auditing, 12e (Arens)
Chapter 12 Audit of the Sales and Collection Cycle; Tests of Controls
12.1 Identify and describe typical records and transactions in the sales cycle
1) The overall objective in the audit of the sales and collection cycle is to evaluate whether
Answer: D
Diff: 1 Type: MC Page Ref: 362
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
2) Which of the following actions is more likely to be a result of error rather than fraud?
Answer: B
Diff: 2 Type: MC Page Ref: 363
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
3) There are three main types of revenue manipulations. Which of the following revenue manipulations affects the occurrence objective?
Answer: D
Diff: 3 Type: MC Page Ref: 363
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
4) There are three main types of revenue manipulations. Which of the following revenue manipulations affects the cutoff objective?
Answer: B
Diff: 3 Type: MC Page Ref: 363
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
5) There are three main types of revenue manipulations. Which of the following revenue manipulations affects the valuation objective?
Answer: C
Diff: 3 Type: MC Page Ref: 363
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
6) Which of the following controls pertains to audit trails in the batch processing of sales transactions?
Answer: A
Diff: 3 Type: MC Page Ref: 365
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
7) What is the primary focus with respect to error detection and correction for the online processing of sales transactions?
Answer: D
Diff: 3 Type: MC Page Ref: 365
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
8) What information would be considered semi-permanent as well as transaction information?
Answer: A
Diff: 2 Type: MC Page Ref: 366
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
9) Which of the following data elements would be included in the customer master file as semi-permanent information?
Answer: B
Diff: 3 Type: MC Page Ref: 366
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
10) Which of the following is an example of a data entry input edit that could be used to improve the accuracy of online data entry of sales orders?
Answer: A
Diff: 3 Type: MC Page Ref: 366
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
11) Before goods are shipped on account to a new customer, a properly authorized person must
Answer: C
Diff: 1 Type: MC Page Ref: 366, 368
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
12) Which of the following documents and records is used to record the packages, weights and sizes shipped using an external trucking company?
Answer: D
Diff: 1 Type: MC Page Ref: 367
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
13) A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, credit memo issued, and the ending balance is the
Answer: B
Diff: 1 Type: MC Page Ref: 367
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
14) A document that describes which accounts receivable accounts are to be written off and why is called a(n)
Answer: A
Diff: 2 Type: MC Page Ref: 367
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
15) A document that is used to describe and authorize additions, changes or deletion of sales prices or customer data is called a(n)
Answer: C
Diff: 2 Type: MC Page Ref: 367
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
16) Poor controls over credit limit approval or in changing the credit limit in the master file may result in
Answer: D
Diff: 2 Type: MC Page Ref: 368
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
17) Which of the following control weaknesses could result in problems with collectability of accounts receivable?
Answer: A
Diff: 3 Type: MC Page Ref: 368
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
18) A document prepared for shipment of the goods sold using a trucking company is called the
Answer: B
Diff: 1 Type: MC Page Ref: 368
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
19) Most companies recognize sales when
Answer: B
Diff: 2 Type: MC Page Ref: 368
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
20) Some companies use a lockbox system, whereby customers mail payments to a post office box address. The lockbox contents could be handled by a bank, another external organization, or the owner of the company. One of the advantages of using a lockbox is that
Answer: A
Diff: 1 Type: MC Page Ref: 369
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
21) The document that is used to prepare and reconcile the deposit of cash and improve the control over the custody of assets (cash) is the
Answer: C
Diff: 2 Type: MC Page Ref: 369
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
22) Zhang Corporation returned $6,000 of defective goods to Meli Inc. Meli has a strict policy of no cash refund. Meli should
Answer: B
Diff: 2 Type: MC Page Ref: 370
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
23) Proper accounting requires that an account receivable must be written off by the client when
Answer: A
Diff: 2 Type: MC Page Ref: 370
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
24) A) Describe the four business functions that result in sales transactions in a typical sales and collection cycle and, for each function, state the key documents and records involved.
Answer:
Processing and recording cash receipts: remittance advice, cash prelisting, bank deposit slips, bank deposit listing, cash receipts journal
Processing and recording sales returns and allowances: returns receiving report, credit memo, sales returns and allowances journal
Writing of uncollectible accounts receivable: uncollectible account authorization form
Providing for bad debts: journal entry authorization
Maintaining semi-permanent data: master file change form, master file change report
Diff: 3 Type: ES Page Ref: 364-365, 367
Learning Obj.: 12-1 Identify and describe typical records and transactions in the sales cycle
25) During your lunch, your audit team went to a local mall, in the food court, since they needed to be quick today. You dropped off a photofinishing film at a film developer, saying that you would pick it up after work that day. After telling you that she preferred using her digital camera to using regular film, your supervisor said,
Next week, you are going to be working at a client that just happens to be a group of photography stores. Tell me, what controls do you think should be programmed into the cash register to help ensure
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