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An example of an internal control procedure regarding the sale of an item on credit.
In this scenario, management would review the terms of sale. The other choices are controls over the procurement cycle.
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Management would ensure proper segregation of duties by:
Items b, c, and d would be appropriate job duties for specific employees. Combining the preparation of adjusting entries with financial statements would be a departure from internal control.
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To ensure all transactions were included in financial statements
A subsequent test of accounts receivable is necessary to determine that all accounts receivable were included in the financial statements. The auditors will test subsequent receipts to determine if the revenue transaction was included in the appropriate period.
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Tests designed to detect credit sales made before the end of the year that has been recorded in the subsequent year provide assurance about management's assertion regarding:
Cutoff tests are designed to determine whether transactions have been recorded in the proper period. Tests to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about both cutoff and completeness.
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An auditor is required to confirm A/R if the A/R balances are:
The use of audit confirmations for an entity;'s A/R is a required GAAP procedure if the A/R balances are deemed material to the balance sheet.
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Kiting and lapping are methods of potential fraud that would be discovered in which business cycle?
These types of fraud would be cash related frauds as they require the movement of cash.
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