Acct742 Ch13 Solutions

ACCT742 Quiz #4 Chapter 13 Student Name:______________________________________________Student #:__________________________________ Due: Friday, October 3, 2014 beginning of class

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Comparing bad debt expense as a percentage of gross sales with previous years will detect what kind of possible misstatement? A) understatement of allowance for uncollectible accounts B) cut-off errors in recording cash receipts C) understatement of sales and accounts receivable D) overstatement of sales and accounts receivable Answer: B

Diff: 3 Page Ref: 415

1)

2) At every audit engagement, the auditor is required to consider that there could be significant risks of misstatement for revenue recognition. At ABC Ltd., the auditor has concluded that, yes, there are material risks of misstatement associated with revenue recognition. How does this affect the extent of testing for accounts receivable? A) increased substantive testing is required B) audit risk will be increased C) decreased control testing is required D) inherent risks will be decreased Answer: A

Diff: 2 Page Ref: 415

2)

3) Comparison of individual customer balances with previous years will detect what type of possible misstatement? A) misstatement in gross profit and bad debt expense B) overstatement or understatement of allowance for uncollectible accounts C) overstatement or understatement of bad debt expense D) misstatements in accounts receivable and related income statement accounts Answer: D

Diff: 3 Page Ref: 417

3)

4) The most important test of details of balances to determine the existence of recorded accounts receivable is A) sending external confirmations of customers' balances. B) tracing sales entries to shipping documents. C) tracing sales returns entries to credit memos issued and receiving room reports. D) tracing the credits in accounts receivable to bank deposits. Answer: A

Diff: 2...