AEC211: ACCOUNTING INFORMATION SYSTEM

REVENUE ACCOUNTING SYSTEM/CYCLE

1. The auditor is concerned that a client is failing to bill

a)​ select a sample of duplicate sales invoices and a)​ sales approval
trace each to related shipping documents b)​ credit approval
b)​ trace a sample of shipping documents to c)​ cash collection
related duplicate sales invoices. d)​ shipment of goods.
c)​ trace a sample of Sales Journal entries to the
Accounts Receivable subsidiary ledger 4. The total of the individual account balances in the
d)​ compare the total of the Schedule of Accounts accounts receivable subsidiary ledger should equal
Receivable with the balance of the Accounts the:
Receivable account in the general ledger
a)​ total sales for the period
2. What critical event must take place before goods b)​ balance of the sales account in the general
can be shipped in order to assure payment can be ledger
reasonably expected? c)​ total sales less the total cash received for the
period
a)​ determination of correct delivery address d)​ balance of the accounts receivable account
b)​ credit approval. in the general ledger.
c)​ matching of shipping documents with sales
invoice
d)​ receipt of sales order from the customer

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AEC211: ACCOUNTING INFORMATION SYSTEM
REVENUE ACCOUNTING SYSTEM/CYCLE
5. A document sent to each customer showing his or
her beginning accounts receivable balance and the
amount and date of each sale, cash payment 9. When designing audit procedures, tracing of source
received, any debit or credit memo issued, and the documents to the customers subsidiary ledger and
ending balance is the: subsequently to the general ledger is done to satisfy
what assertion?
a)​ accounts receivable subsidiary ledger
b)​ monthly statement. a)​ valuation
c)​ remittance advice b)​ cutoff
d)​ sales invoice c)​ Completeness.
d)​ classification
6. For a firm that practices good internal controls in the
sales and collections cycle, the function of indicating 10. Which one of the following procedures performed
credit approval should be recorded on which of the for the billing function provides evidence for the
following documents? completeness assertion?

a)​ sales order. a)​ Making sure that all shipments have been
b)​ sales invoice billed.
c)​ customer order b)​ Making sure that no shipment has been billed
d)​ remittance advice more than twice
c)​ Making sure that each shipment is billed at the
7. One key internal control to prevent fictitious correct amount
transactions in the sales and collection cycle is: d)​ Making sure that each shipment is billed to the
proper customer
a)​ assign a specific customer number for each
customer in the computer files. 11. Which of the following procedures performed for
b)​ to account for the integrity of the numerical the billing function may provide evidence that the
sequence of sales orders accounts receivable subsidiary ledger is in agreement
c)​ to include the sales price list of all products in with the accounts receivable control account?
the computer files
d)​ having bank reconciliations prepared by one a)​ Making sure that all shipments have been billed
who is independent of the treasury function b)​ Making sure that no shipment has been billed
more than twice
8. Which of the following is the appropriate point at c)​ Making sure that each shipment is billed at the
which the auditor deems authorization to be critical? correct amount.
d)​ Making sure that each shipment is billed to the
proper customer
Credit Price Shipment of
Granting Authorization Goods
12. The document that the accounting staff will use as
the primary basis for recording sales transactions and
a) Yes Yes Yes updating the customers accounts receivable subsidiary
ledger is the:
b) Yes No Yes
a)​ sales order
c) No Yes No
b)​ bill of lading
d) Yes No No c)​ sales journal
d)​ sales invoice.

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AEC211: ACCOUNTING INFORMATION SYSTEM
REVENUE ACCOUNTING SYSTEM/CYCLE
13. In determining the level of audit efficiency, once 17. To determine that sales are accurately recorded,
the auditor has identified the key internal controls and the unit prices on the duplicate sales invoices are
normally compared with:
identified any deficiencies in order to determine the
level of control risk appropriate for a private company a)​ the original invoices
client, it is appropriate to decide whether: b)​ an approved master price list.
c)​ the amounts recorded in the sales journal for
a)​ substantive tests can be reduced sufficiently to that transaction
d)​ the amounts posted to the customer's account
justify costs of performing tests of controls.
in the accounts receivable master file
b)​ substantive tests can be increased sufficiently
to justify costs of performing tests of controls 18. Prenumbered documents will only be useful for
c)​ tests of controls can be increased sufficiently to control purposes if:
justify costs of performing substantive tests
a)​ a different numerical sequence is used for
d)​ tests of controls can be reduced sufficiently to
each company
justify costs of performing substantive tests b)​ the sequence is accounted for periodically.
c)​ employees are allowed to use documents out
14. To test for recorded sales for which there were no of numerical sequence
actual shipments, the auditor vouches from the: d)​ the same numerical sequence is used each
accounting period

a)​ bill of lading to the sales journal 19. Which one of the following best describes the
b)​ sales journal to the shipping documents. auditor’s responsibilities regarding appropriate
c)​ sales journal to the accounts receivable authorizations in the sales/collections cycle?
subsidiary ledger
a)​ b, c, and d should all be of concern to the
d)​ bill of lading to the supporting customer order
auditor.
and sales order b)​ Credit must be authorized before the sale.
c)​ Goods must be shipped after the authorization
15. An effective procedure to test for unbilled shipments d)​ Prices must be authorized
is to trace from the:
20. Which one of the following would the auditor
consider to be an incompatible operation if the cashier
a)​ sales journal to the shipping documents receives remittances from the mailroom?
b)​ shipping documents to the sales journal.
c)​ sales journal to the accounts receivable ledger a)​ The cashier prepares the daily deposit
d)​ sales journal to the general ledger sales b)​ The cashier makes the daily deposit at a local
bank
account
c)​ The cashier posts the receipts to the accounts
receivable subsidiary ledger cards.
16. The auditor traces items from the source documents d)​ The cashier endorses the checks
to the journals in order to accumulate audit evidence
that will satisfy the: 21. Which of the following audit procedures would
normally be best expected to test the completeness
objective (assertion) for sales?
a)​ existence objective
b)​ completeness objective.
a)​ Compare shipping documents with sales
c)​ ownership objective
records.
d)​ valuation objective
b)​ Apply gross profit rates to inventory disposed of
during the period
c)​ Trace payments received subsequent to the
balance sheet date
d)​ Send accounts receivable confirmation
requests