AUD4

Question 1

Remittance

Answer 1

a sum of money sent, especially by mail, in payment for goods or services or as a gift

Question 2

Confirmations provide evidence of what?

Answer 2

Existence (not valuation)

Question 3

Existence vs Occurrence

Answer 3

Existence - making sure assets/revenue are not overstated

Occurrence - making sure liabilities/expenses are not understated

Question 4

The 2 documents most likely to be generated by the revenue cycle application?

Answer 4

Credit Memos & Sales Invoices

Question 5

Examination of AR & Cash Receipts provides auditor w/ evidence of which assurances?

Answer 5

Completeness & Occurrence of Sales transactions

Question 6

What should an employee do upon receipt of cash?

Answer 6

Prepare a duplicate listing of checks received aka a remittance listing

Question 7

Most appropriate audit procedure to test existence assertion for AR?

Answer 7

Send confirmations to customers

Question 8

2 assertions for which confirmation of AR balances provide primary evidence are…

Answer 8

• Rights & obligations (does the client have a right to the receivable?)
• Existence (does the receivable really exist?)

Question 9

what assertions are typically addressed in the expenditure cycle

Answer 9

Completeness & Accuracy

Question 10

Voucher

Answer 10

a written document that supports accounting transactions & ensures the accuracy of financial records. It serves as proof of payment or receipt in accounting. (Ex. bills, invoices, receipts)

Question 11

Which dept is responsible for
1. preparing the PO
2. matching the receiving report & invoice w/PO
3. paying for the related purchase?

Answer 11

1. Purchasing Dept
2. AP
3. Treasurer

Question 12

3 items verified in a 3 way match?

Answer 12

Purchase Order, Receiving Report, & vendor invoice

Question 13

How do you search for unrecorded liabilities?

Answer 13

compare cash payments made after the B.S. date with AP trial balance

Question 14

What IC procedure addresses the completeness assertion for inventory?

Answer 14

Receiving reports are prenumbered & periodically reconciled

Question 15

Assertions from auditor’s observation of physical inventory counts?

Answer 15

Existence & Completeness

Question 16

3 primary purposes of Mgmt Representation Letter

Answer 16

1. to confirm representations given to the auditor
2. to document the continuing appropriateness of such representations
3. to reduce the possibility of misunderstanding

Question 17

What is the date of the management representation letter?

Answer 17

Same as date of auditor’s report