Current Attempt in ProgressAn auditor is testing accounts receivable for a client that has 1,000 customers with customer balances that range from $150 to$185,000. The auditor subdivided the receivables into three groups: group 1 has all customers with receivable balances between$185,000 and $100,000, group 2 has all customers with receivable balances between $100,000 and $25,000, and group 3 has allcustomers with receivable balances less than $25,000. The auditor then randomly selects customers out of each group. This is knownas:O random selection.O haphazard selection.O block selection.O stratified sampling.

It is stratified sampling because it shows the auditor dividing the receivables into groups that are…

Answered: Current Attempt in Progress An auditor…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 20CYBK

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Similar questions

A client has a separate sales group for its largest “preferred” customers, a select group of customers who normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?a. Prepare a schedule of purchases and payments for these customers.b. Send out negative confirmations on a large sample of these customers.c. Inquire of the sales manager regarding the accounts receivable terms.d. Send out positive confirmations on a large sample of these customers.
The following are 11 audit procedures taken from an auditprogram:1. Foot the accounts payable trial balance and compare the total with the general ledger.2. Confirm accounts payable balances directly with vendors.3. Account for a sequence of checks in the cash disbursements journal to determinewhether any have been omitted.4. Examine vendors’ invoices to verify the ending balance in accounts payable.5. Compare the balance in payroll tax expense with previous years. The comparisontakes the increase in payroll tax rates into account.6. Examine the internal auditor’s initials on monthly bank reconciliations as anindication of whether they have been reviewed.7. Examine vendors’ invoices and other documentation in support of recorded transactions in the acquisitions journal.8. Multiply the commission rate by total sales and compare the result with commissionexpense.9. Examine vendors’ invoices and other supporting documents to determine whetherlarge amounts in the repair and maintenance…
Sharon, an audit manager assigned to the audit of Newsome Corporation is observing the client's revenue-receivables cycle. Sharon observes that the IT system responsible for processing and posting receivable transactions produces a daily exceptions report which is emailed to an accounts receivable clerk responsible for investigating the exceptions. Which of the following most accurately describes the type of control that is responsible for determining possible exceptions and forwarding them on to the accounts receivable clerk? • This type of control is typically referred to as a detective control. These types of controls usually assist the client in detecting items that need further investigation. These controls help to minimize misstatements in the financial statements. • This type of control is typically known as a manual IT control. This name is derived from the fact that although the control allows initial processing by the client's IT system, it is flagged for manual follow up. •…
When a sample of customer accounts receivable is selected for vouching debits, auditors will vouch them toa. Sales invoices with shipping documents and customer sales invoices.b. Records of accounts receivable write-offs.c. Cash remittance lists and bank deposit slips.d. Credit files and reports.
Assume that a continuing audit client has recorded Accounts Receivable and Equipment both in the amount of $1,000,000. In a typical audit, which account would take more time to audit?
V4. Hayden Corporation uses an enterprise resource planning (ERP) system. In their audit of receivables and revenues, the auditors have identified the following data elements in the corporation’s database that may be used for data analytics applications: Customer balance Customer credit limit and credit rating Customer total annual sales Customer purchases by date Customer returns by date Customer name Customer shipping address Required: a. Describe two data analytic applications that might be used to audit the existence of receivables and occurrence of sales. b. Describe one data analytic application that might be used to audit the valuation of receivables.
Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? *A. Scan the cash disbursements entries recorded just before year end for indications of unusual transactions.B. Compare a sample of purchase orders issued just after year end with the year-end accounts payable trial balance.C. Obtain a copy of the receiving report until year end and its related sales invoice and trace them to the purchases journal.D. Compare the entries recorded in the purchases journal and the cash disbursements journal just before year end.
The auditor has gathered the following information to test the accuracy of the one prepared by the controller. In particular, the auditor is testing the accuracy of the outstanding cheques. Use the following information to prepare the bank reconciliation and calculate what the total of the outstanding cheques should be. 1. Cash balance - March 31 $39,500 2. Outstanding Deposits $13,810 3. NSF cheque from a customer $750 4. Bank Statement Balance - March 31 $127,100 5. The bank recorded a deposit as $10,000 when the deposit was actually $1,000 6. The bank credited the company's bank account with $3,900 of interest earned 7. The bank statement showed an EFT from a customer for $16,300 8. The bank charged a service charge of $45 9. The company posted cheque #1730 as $890 when the actual amount was properly debited by the bank for $980 a) Outstanding Cheques= $73,095 b) Outstanding Cheques= $76,995 c) Outstanding Cheques=$82,095 d) Outstanding Cheques= $56,795
The following are audit procedures in the sales and collectioncycle:1. Add the columns on the aged trial balance and compare the total with the generalledger.2. Examine a sample of shipping documents to determine whether each has a salesinvoice number included on it.3. Examine a sample of customer orders and see if each has a credit authorization.4. Compare the date on a sample of shipping documents a few days before and afterthe balance sheet date with related sales journal transactions.5. Discuss with the sales manager whether any sales allowances have been grantedafter the balance sheet date that may apply to the current period.6. Observe whether the controller makes an independent comparison of the total inthe general ledger with the trial balance of accounts receivable.7. Compare the date on a sample of shipping documents throughout the year withrelated duplicate sales invoices and the accounts receivable master file.8. Compute the ratio of allowance for uncollectible accounts…
The auditor of Ferguson’s, Inc., identified two internal controlsin the sales and collection cycle for testing. In the first control, the computer verifiesthat a planned sale on account will not exceed the customer’s credit limit entered inthe accounts receivable master file. In the second control, the accounts receivable clerkmatches bills of lading, sales invoices, and customer orders before recording in thesales journal. Describe how the presence of general controls over software programsand master file changes affects the extent of audit testing of each of these two internalcontrols.
You are an audit supervisor in Misso & Co, an audit firm. Your audit team has been assigned to perform the audit on sales and other income for a client, Dimmy Sdn. Bhd. (Dimmy). You are given four audit trainees to assist you in completing the audit on cash and bank. In addition, you are also required to audit on the receivables account of Dimmy.(a) Explain ANY FIVE (5) types of procedures that an auditor can perform to obtain audit evidence and provide an example for each type of procedure.
You are tasked to perform cut-off procedures for expenses and its related payable. In testing the completeness/cut-off assertion, what document would you most likely inspect? A. Vendor invoice register 15 days before and 15 days after report date. B. Cash disbursement journal 15 days before and 15 days after report date. C. Accounts payabie subsidiary ledger. D. Purchase journal 15 days before and 15 days after report date.

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