SOLVED

21) Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom? A) The cashier prepares the daily deposit. B) The cashier makes the daily deposit at a local bank. C) The cashier posts the receipts to the accounts receivable subsidiary ledger cards. D) The cashier endorses the checks. 22) In designing substantive audit procedures for tests of transactions for sales the auditor needs to test for evidence of misstatements due to errors or fraud. Describe at least 2 potential errors (unintentional) and at least 1 intentional (fraud). 23) For each of the following potential misstatements, provide one potential audit test that could be used to detect the misstatement. •Sales included in the journals for which there was no shipment •Sale recorded more than once •Shipments made to nonexistent customers and recorded as sales 24) Separation of duties in the sales/collection cycle should mandate that the credit-granting function be separate from the sales function. A) True B) False 25) Tracing from source documents to the journal is useful for testing the existence objective. A) True B) False 26) Tests of controls should never be performed using the client’s computer system; that is, all tests of control should be performed either using the auditor’s computers or performed manually by the auditor. A) True B) False 27) Management’s assertions for sales and collection activities remain the same whether sales are generated through traditional or e-commerce activities. A) True B) False 28) Misstatements involving the completeness objective for sales lead to overstatements of assets and income. A) True B) False 29) Violations of the existence objective for sales are of greater concern to the auditor than violations of the completeness objective. A) True B) False 30) An effective procedure to test the existence objective for sales is to vouch sales journal entries to copies of sales orders, shipping documents, and sales invoices. A) True B) False 31) For each significant internal control deficiency identified by the auditor, he or she should design one or more tests of controls to assess the extent of the deficiency and its effect on the financial statements. A) True B) False 32) For effective internal control, it is important that sales be recorded as soon after the customer order is received as possible to prevent the unintentional omission of transactions from the records and to make sure that sales are recorded in the proper period. A) True B) False 33) Footing the sales journal and tracing the totals to the general ledger are tests relating to the accuracy objective for sales. A) True B) False