1. For companies that sell goods or services on account, if revenue is recognized prematurely, what would be overstated: sales or accounts receivable (assume that sales are on account)?

	A.	Neither sales nor accounts receivable
	B.	Sales, not accounts receivable
	C.	Both sales and accounts receivable
	D.	Accounts receivable, but not sales

1

1. In a test of the existence assertion, the projected misstatement in a statistical sample is $165,000, the upper confidence limit is $300,000 and the tolerable misstatement is $265,000, what would an auditor likely conclude?

	A.	There are misstatements, but the total misstatement is less than the tolerable amount
	B.	There are misstatements, but the auditor cannot conclude that total misstatement is less than the tolerable amount
	C.	The account is materally misstated
	D.	There is no misstatement in the account

QUESTION 8

1. Which of the following is not a common procedure for assessing operating effectiveness of control activities?

	A.	Analytical procedures
	B.	Inquires of management
	C.	Observation of personnel
	D.	Inspection of documents

1. Which would an increased accounts receivable turnover rate [Revenue / Accounts Receivable] NOT indicate?

	A.	More rapid payments by customers
	B.	Large increase in credit sales near year-end
	C.	Write-off of older uncollected receivables
	D.	Material illegal bill and hold transactions

1. Other factors equal, which of the following ratios tends to be most stable and predictable?

	A.	Cost of sales over sales
	B.	Current assets over current liabilities
	C.	Sales over accounts receivable
	D.	Inventories over warehouse area