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1. Before goods are shipped on account, a properly authorized person must

• A) prepare the sales invoice.
• B) approve the journal entry.
• C) approve the customer's credit.
• D) verify that the unit price is accurate.

2. Most companies recognize sales revenue when

• A) sales are invoiced.
• B) payment is received from the customer.
• C) goods are shipped.
• D) the customer's order is received.

3. A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the

• A) accounts receivable subsidiary ledger.
• B) monthly statement.
• C) remittance advice.
• D) sales invoice.

4. When dealing with the processing and recording of cash receipts,

• A) the most important concern is the theft of cash.
• B) theft can only occur before the receipts are entered into the records.
• C) cash receipts should be deposited at least monthly.
• D) the monthly statement is used to prepare the cash receipts journal.

6. Which accounts are involved in the sales class of transactions?

• A) accounts receivable and sales returns and allowances
• B) cash and allowance for uncollectible accounts
• C) sales allowances and accounts receivable
• D) accounts receivable and sales

7. In many audits, no substantive tests of transactions are made for the grounds that understatement of sales is not a concern.

• A) accuracy
• B) existence
• C) completeness
• D) none of the above

8. Which of the following is not a key control for sales and cash receipts?

• A) active board of directors
• B) adequate separation of duties
• C) internal verification procedures
• D) adequate documents and records

9. The auditor traces items from the source documents to the journals in order to accumulate audit evidence that will satisfy the

• ) existence objective
• B) completeness objective.
• C) ownership objective.
• D) valuation objective.

10. Prenumbered documents will only be useful for control purposes if

• A) a different numerical sequence is used for each company.
• B) the sequence is accounted for periodically.
• C) employees are allowed to use documents out of numerical sequence.
• D) the same numerical sequence is used each accounting period.

11. An auditor needs to determine whether all customers of an electric utility company are being billed. The auditor should test from the

• A) sales register to the accounts receivable ledger.
• B) sales register to the meter department records.
• C) accounts receivable ledger to the sales register.
• D) meter department records to the sales register.