Question

1.Which of the following controls would provide the most assurance to management that recorded sales actually occurred?

A) Statements are sent to customers at the end of each month, and customer complaints are investigated B) Responsibilities for recording a customer order and shipping the products are segregated
C) A credit sale is recorded only after a credit check is performed
D) Shipping documents are prepared for every shipment made and filed in the shipping department

44. Which of the following controls would be considered an internal verification control?

A) The accounts receivable manager is not authorized to handle cash receipts.
B) Duplicate shipping documents are kept on file in the shipping department.
C) Sales orders for customized products are reviewed for accuracy by an assistant controller. D) Credit is properly authorized before a shipment is made to a customer.

2. The auditor performed a test of controls on a random sample of sales transactions, and had set a tolerable exception rate of 1.0%. The results of the test showed a sample exception rate of 1.1%. In response to this result, which of the following actions by the auditor would be appropriate?

A) Conclude that the control tested did, in fact, operate effectively.
B) Consider whether it may be appropriate to decrease the sample exception rate. C) Consider whether it may be appropriate to increase the tolerable exception rate. D) Any one of the above actions is appropriate.

3.Tests of details of balances is a type of audit procedure used primarily to:

A) test for misstatement of financial statement account balances
B) test the completeness and fairness of the notes to the financial statements C) test whether the general ledger trial balance is in balance
D) determine whether each account balance agrees to the general ledger

Answer 1

1). Responsibilities for recording a customer order and shipping the products are segregated :- this will help the company in avoiding falsifying sales orders to non existing customers and illegally transfer valuable inventory out of company.

when authority is delegated to more than one department, chances of misleading the picture of a company is quite less.

44).Credit is properly authorized before a shipment is made to a customer :- weak practices in credit approval would result in huge bad debts and will lead to reduction in receivables.

3)test for misstatement of financial statement account balances