1. Explain two common inherent risks in the revenue process and explain how each risk is likely to affect the financial statements (e.g., identify the accounts that are likely to be overstated or understated and explain why).
2. Explain a sound control over revenue recognition in the process of making credit sales for a manufacturing company.
3. Identify a risk of misappropriation of assets in the revenue process. Describe a sound internal control that would detect and correct the misstatement on a timely basis.
4. Explain a sound control over a public company's process for controlling the appropriateness of the allowance for doubtful accounts.
5. Assume you are auditing a public company with sound IT controls over the occurrence of revenue. Describe the IT control over the occurrence of revenue and how you would test the control.
6. Your client is a regional motel chain. It owns 27 properties in your region and manages another 40 properties for absentee owners. All the motels are located on interstate highways and achieve at least 60% of capacity on a regular basis. In the past, many motels have been fully booked during the summer travel season; however, the economy has taken a turn for the worse and people are traveling less. Explain how your knowledge of the business and industry would impact your audit of total revenues and accounts receivable for the client.
7. The following situations were not discovered by an inexperienced staff auditor in the audit of the Parson Company.

1.		Several accounts were incorrectly aged in the client's aging schedule.
2.		The accounts receivable turnover ratio was far below expected results.
3.		Goods billed were not shipped.
4.		Some year-end sales were recorded in the wrong accounting period.
5.		Several sales were posted for the correct amount but to the wrong customers in the accounts receivable ledger.
6.		The allowance for uncollectible accounts was understated.
7.		Several sales were entered and posted at incorrect amounts.
8.		Mathematical errors were made in totaling the accounts receivable ledger.
9.		An unrecorded sale at the balance sheet date was collected in the next month.
10.		Several fictitious sales were recorded.
11.		The pledging of some customer accounts as security for a loan was not reported in the balance sheet.
12.		Some year-end cash receipts were recorded in the wrong accounting period.

Answer the following questions.

a. Identify the substantive test that should have detected each error.

b. For each substantive test identified in a., indicate the account balance assertion to which it pertains.