Question 1: The SEC requires all of the following for revenue to be recognized except
A. Cash is collected.
B. Persuasive evidence of an arrangement exists.
C. Delivery has occurred or services have been rendered.
D. The seller's price to the buyer is fixed or determinable.
Question 2: Confirmations of accounts receivable provide the most evidence for which of the following assertions?
A. Existence.
B. Valuation or Allocation.
C. Rights and obligations.
D. Completeness.
Question 3: Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations?
A. The balance is immaterial.
B. Confirmations would be ineffective.
C. The client requests alternative procedures be performed instead.
D. Other procedures provide sufficient competent evidence.
Question 4: The most effective audit procedure for determining the collectability of an account receivable is the
A. Review of the subsequent cash collections.
B. Examination of the related sales invoice(s).
C. Confirmation of the account.
D. Review of authorization of credit sales to the customer and the previous history of collections.
Question 5: An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when
A. No reply to a positive confirmation request is received.
B. No reply to a negative confirmation request is received.
C. Collectability of the receivables is in doubt.
D. Pledging of the receivables is probable.