How Does an Organization Best Control the Realization of Receivables?

1. How does an organization best control the realization of receivables?

1. Matching sales orders, shipping documents and invoices.
2. Establishing policies and procedures for the credit manager.
3. Reconciling the aged receivable total to the general ledger.
4. Periodically lapping receivables.

1. An auditor may examine large sales contracts for large customers and discuss the transactions with management in order to:
2. Determine collectability of an account.
3. Ensure that product was shipped or services were delivered.
4. Test for defalcation.
5. Evaluate the proper revenue recognition in accordance with GAAP criteria.

1. Which of the following may be used as a sampling unit in the audit of customer accounts receivable?
2. Specific invoice numbers or amounts.
3. Customer accounts.
4. Accounts receivable balance due.
5. All of these choices

1. Which of the following evidences delivery of product to customers sufficient for company recording as revenues?
2. A check received from the customer.
3. An agreement to purchase product signed by the customer.
4. A pick ticket in the warehouse.
5. A bill of lading and tracking number with the shipper.

1. If management has the incentive to cover up current poor financial performance using inventory, it might intentionally:
2. omit the disclosures relating to the cost flow assumptions used.
3. increase the allowance for LCM beyond what is reasonable.
4. use perpetual inventory instead of periodic.
5. add items to the inventory system after the auditors have observed the count.

1. When should a manufacturing company record raw materials inventory if the terms are FOB destination?

1. Upon release of the purchase order.
2. When the invoice is received from the supplier.
3. When the product is received and verified at the warehouse.
4. Upon authorization by the purchasing manager.

1. An auditor may best test commissions expense for salespeople when control risk is low by performing:
2. Analytical procedures.
3. Tagging and tracing.
4. Alternative procedures.
5. Subsequent proof of cash.

1. Auditing the valuation assertion for inventory of a client will require the auditor to perform:
2. price testing.
3. observation of inventory levels.
4. analysis of disclosures in financial statements.
5. confirmation to parties holding inventory on consignment.

1. Auditors test management's estimates of an asset's impaired value through reference to all of the following except:
2. Inquiry of fixed asset personnel.
3. evidence of fair market value.
4. estimated cash flow.
5. financial plans.

1. The auditor may determine that fixed assets that should have been capitalized as assets have been included in period expenses by testing:
2. assets for impairment.
3. repairs and maintenance expenses.
4. depreciation expense.
5. useful lives of assets.

1. Auditors test the impairment of long-lived assets to substantiate which of management’s assertions?
2. Obligations.
3. Regulation.
4. Valuation.
5. Existence.

1. Which of the following defines the appropriate expense treatment of goodwill balances from a subsidiary acquired in 2005?
2. Expense when impairment is evidenced.
3. Expense over a period not exceeding 15 years.
4. Do not expense, but hold as a current asset indefinitely.
5. Expense immediately following the purchase of the subsidiary.

1. Which one of the following subsequent events will most likely result in an adjustment to the financial statements?
2. Material change in the amount of settlement of a lawsuit which had been estimated at year end.
3. Entry into a significant new line of products and business.

Proceeds received from a related party note payable.

1. Signing of a letter-of-intent by the client to acquire 55% of another entity for stock.

1. The review of an audit by a professional who has not had active involvement in the engagement, but understands the client, is required by regulation for audits of:
2. public companies.
3. private companies.
4. manufacturing companies.
5. high technology companies.

1. Which one of the following is a key condition indicating doubt regarding an entity's ability to continue as a going-concern?
2. Improvement in key financial ratios.
3. Litigation in the normal course of business.
4. The company's auditors were voted out in the most previous shareholder's meeting.
5. Inability to make principal and interest payments as they become due.

1. A management representation letter is prepared on each engagement for which of the following primary reasons?
2. It clearly documents the audit procedures that were performed by the auditors.
3. It further acknowledges that management is responsibility for fraud contained in the financial statements.
4. It provides the auditor with comfort that the client has integrity and is not misleading the engagement team.
5. It clarifies certain matters included in the letter and documents them for the auditor as further evidence from the client.

1. Which one of the following is an example of the contents of an opinion paragraph found in disclaimer of opinion?
2. "except for..."
3. "nothing came to our attention..."
4. "the financial statements do not present fairly..."
5. None of these represents a disclaimer of opinion.

1. The scope paragraph of an unqualified opinion mostly gives information relating to:
2. division of responsibilities.
3. the final assessment of a company's standings with the audit firm.
4. the statements and dates under audit.
5. audit planning and procedure.

1. Which of the following services are not required to be conducted in accordance with standards of the Public Company Accounting Oversight Board?
2. Audits of the financial statements of public registrants.
3. Audits of the internal controls of public companies.
4. Reviews of private companies issuing financial statements to banks.

Reviews of interim financial statements filed as form 10Q or 10QSB.

1. Which of the following represents a situation in which the auditors may disclose client information to outside parties?
2. Bringing working papers to a professional CPA workshop as an example of quality work.
3. Complying with a validly issued and enforceable subpoena or summons.
4. Showing the client's bank statement to a neighbor who is a shareholder to emphasize its cash position.
5. Explaining to the local television news station why the client is likely to miss payroll in the forthcoming periods.

1. A CPA firm may place a newspaper ad which identifies the services the firm performs and makes positive claims about the firm, provided that the statements are:
2. truthful and verifiable.
3. descriptive and informative.
4. relevant and conservative.
5. timely and consistent.

1. A prospective CPA takes the Uniform CPA Examination and secretly takes digital pictures of the exam with his combination cell phone/camera. He becomes a CPA and sells the photos on his website for $300. The above is an example of:
2. impaired Independence.
3. acts Discreditable.
4. improper Advertising
5. disclosure of Confidential Client Information.

1. Speckled Frog, CPAs do not finish the audit of Stovemasters, Inc. because the senior auditor was terminated and a new audit lead was not assigned to the engagement. Litigation against Speckled Frog will most likely result from which claim?
2. Fraud.
3. Negligence.
4. Breach of Contract.
5. Misappropriation of assets.

1. Audited financial statements are usually included with which form(s) filed with regulatory bodies under the Securities Act of 1933?
2. 10 K
3. 10 Q
4. 8 K
5. S-1

1. Which of the following is an example of Joint and Several Liability?
2. Ann Wheat, CPA will not be liable because of due diligence.
3. Randy Allen, CPA will be required to pay 100%, even though he is only 40% responsible.
4. Megan Brookstone, CPA does not have privity of contract with the client's bank.
5. Meadow Elkins states that the client contributed to the loss of the users.