Question 1

Discuss the internal controls related to loan liabilities that are of concern to the auditor.

Accepted Answer

There are four important controls over i

Question 2

The general cash account is considered insignificant in the audit when the ending balance is immaterial.

Accepted Answer

A) True 
 B)False

Question 3

A major consideration in verifying the ending balance in permanent assets is the possibility of existing legal encumbrances. Tests to identify possible legal encumbrances would satisfy the audit objective for:

Accepted Answer

A)  existence. 
B)  classification. 
C)  detail tie- in. 
D)  disclosure. 
A)  existence. 
B)  classification. 
C)  detail tie- in. 
D)  disclosure.

Question 4

Proof of cash is prepared in the audit when the client has a significant deficiency in internal control in cash.

Accepted Answer

A) True 
 B)False

Question 5

Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as:

Accepted Answer

A)  miscellaneous assets. 
B)  accrued liabilities. 
C)  accounts payable. 
D)  deferred charges. 
A)  miscellaneous assets. 
B)  accrued liabilities. 
C)  accounts payable. 
D)  deferred charges.

Question 6

The most important audit objective for depreciation expense is completeness.

Accepted Answer

A) True 
 B)False

Question 7

The amount of time spent verifying owners' equity is frequently minimal for private companies because:

Accepted Answer

A)  the few owners all have access to the books so the auditor spends more time on accounts like liabilities, which affect outsiders. 
B)  there are few if any transactions during the year for the owners' equity accounts, except for earnings and dividends. 
C)  these companies are so small that it is not necessary to audit the capital section. 
D)  there is no public interest in these companies. 
A)  the few owners all have access to the books so the auditor spends more time on accounts like liabilities, which affect outsiders. 
B)  there are few if any transactions during the year for the owners' equity accounts, except for earnings and dividends. 
C)  these companies are so small that it is not necessary to audit the capital section. 
D)  there is no public interest in these companies.

Question 8

The starting point for verifying current year disposals of property, plant and equipment is the client's schedule of recorded disposals. Discuss the types of information that should be included in this schedule.

Accepted Answer

The schedule typically includes the date

Question 9

Cash account is primarily affected by which transactions in the acquisition and payment cycle?

Accepted Answer

A)  Payment of dividends 
B)  Issue of shares 
C)  Both A and B 
D)  None of the above 
A)  Payment of dividends 
B)  Issue of shares 
C)  Both A and B 
D)  None of the above

Question 10

Which one of the following ratio and trend analysis procedures might identify a possible misstatement of expensing amounts that should be capital items?

Accepted Answer

A)  Compare 'monthly or annual repairs and maintenance, supplies expense, small tools expense and similar accounts' with previous years'. 
B)  Compare 'gross property, plant and cost divided by some method of production' with previous years'. 
C)  Compare 'depreciation expense divided by gross property, plant and equipment cost' with previous years'. 
D)  Compare 'accumulated depreciation divided by gross property, plant and equipment cost' with previous years'. 
A)  Compare 'monthly or annual repairs and maintenance, supplies expense, small tools expense and similar accounts' with previous years'. 
B)  Compare 'gross property, plant and cost divided by some method of production' with previous years'. 
C)  Compare 'depreciation expense divided by gross property, plant and equipment cost' with previous years'. 
D)  Compare 'accumulated depreciation divided by gross property, plant and equipment cost' with previous years'.

Question 11

Which of the following procedures can test the audit objective of determining that cash in bank, as stated on the reconciliation, foots correctly and agrees with the general ledger?

Accepted Answer

A)  Examining the minutes of the board of directors for restrictions on the use of cash 
B)  Performing tests for kiting 
C)  Adding the unpresented cheques list and the list of deposits in transit 
D)  Receiving and testing a cutoff bank statement 
A)  Examining the minutes of the board of directors for restrictions on the use of cash 
B)  Performing tests for kiting 
C)  Adding the unpresented cheques list and the list of deposits in transit 
D)  Receiving and testing a cutoff bank statement

Question 12

A shareholders' master file is a record of the issuance and redemption of shares over the life of the corporation.

Accepted Answer

A) True 
 B)False

Question 13

Deposits recorded as cash receipts near the end of the year, deposited in the bank in the same month and included in the bank reconciliation as a deposit in transit is a type of misstatement in cash that will not normally be discovered as part of the audit of tests of a bank reconciliation.

Accepted Answer

A) True 
 B)False

Question 14

Cash account is primarily affected by which transactions in the acquisitions and payment cycle?

Accepted Answer

A)  Expenses 
B)  Accounts payable 
C)  Both A and B 
D)  None of the above 
A)  Expenses 
B)  Accounts payable 
C)  Both A and B 
D)  None of the above

Question 15

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for:

Accepted Answer

A)  kiting. 
B)  unintentional errors in recording bank transfers. 
C)  both A and B. 
D)  kiting and lapping. 
A)  kiting. 
B)  unintentional errors in recording bank transfers. 
C)  both A and B. 
D)  kiting and lapping.

Question 16

The starting point for the verification of current- year acquisitions (that is, details of the balances) is normally a fixed asset schedule obtained from the client. Discuss the types of information that should be included in this schedule.

Accepted Answer

The fixed asset schedule is a schedule s

Question 17

When auditing the balance of the general cash account, which of the following is NOT one of the most important objectives?

Accepted Answer

A)  Completeness 
B)  Accuracy 
C)  Classification 
D)  Existence 
A)  Completeness 
B)  Accuracy 
C)  Classification 
D)  Existence

Question 18

The auditor's starting point for verifying disposals of property, plant and equipment is the:

Accepted Answer

A)  equipment subsidiary ledger. 
B)  equipment account in the general ledger. 
C)  client's schedule of recorded disposals. 
D)  file of shipping documents. 
A)  equipment subsidiary ledger. 
B)  equipment account in the general ledger. 
C)  client's schedule of recorded disposals. 
D)  file of shipping documents.

Question 19

The starting point for the verification of the balance in the general bank account is to obtain:

Accepted Answer

A)  client's cash account from the general ledger. 
B)  a bank reconciliation from the client. 
C)  the client's June bank statement and reconcile it. 
D)  a cutoff bank statement directly from the bank. 
A)  client's cash account from the general ledger. 
B)  a bank reconciliation from the client. 
C)  the client's June bank statement and reconcile it. 
D)  a cutoff bank statement directly from the bank.

Question 20

In verifying accumulated depreciation, the credits to accumulated depreciation are verified as part of the audit of depreciation expense, whereas the debits are normally tested as a part of the audit of:

Accepted Answer

A)  disposal of assets. 
B)  capital acquisitions. 
C)  accumulated depreciation. 
D)  asset acquisitions. 
A)  disposal of assets. 
B)  capital acquisitions. 
C)  accumulated depreciation. 
D)  asset acquisitions.

Discuss the internal controls related to loan liabilities that are of concern to the auditor.

The general cash account is considered insignificant in the audit when the ending balance is immaterial.

A major consideration in verifying the ending balance in permanent assets is the possibility of existing legal encumbrances. Tests to identify possible legal encumbrances would satisfy the audit objective for:

Proof of cash is prepared in the audit when the client has a significant deficiency in internal control in cash.

Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as:

The most important audit objective for depreciation expense is completeness.

The amount of time spent verifying owners' equity is frequently minimal for private companies because:

The starting point for verifying current year disposals of property, plant and equipment is the client's schedule of recorded disposals. Discuss the types of information that should be included in this schedule.

Cash account is primarily affected by which transactions in the acquisition and payment cycle?

Which one of the following ratio and trend analysis procedures might identify a possible misstatement of expensing amounts that should be capital items?

Which of the following procedures can test the audit objective of determining that cash in bank, as stated on the reconciliation, foots correctly and agrees with the general ledger?

A shareholders' master file is a record of the issuance and redemption of shares over the life of the corporation.

Deposits recorded as cash receipts near the end of the year, deposited in the bank in the same month and included in the bank reconciliation as a deposit in transit is a type of misstatement in cash that will not normally be discovered as part of the audit of tests of a bank reconciliation.

Cash account is primarily affected by which transactions in the acquisitions and payment cycle?

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for:

The starting point for the verification of current- year acquisitions (that is, details of the balances) is normally a fixed asset schedule obtained from the client. Discuss the types of information that should be included in this schedule.

When auditing the balance of the general cash account, which of the following is NOT one of the most important objectives?

The auditor's starting point for verifying disposals of property, plant and equipment is the:

The starting point for the verification of the balance in the general bank account is to obtain:

In verifying accumulated depreciation, the credits to accumulated depreciation are verified as part of the audit of depreciation expense, whereas the debits are normally tested as a part of the audit of:

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Documentation

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters

Exam 16: Audit of Transaction Cycles and Financial Statement Balances II

Discuss the internal controls related to loan liabilities that are of concern to the auditor.

The general cash account is considered insignificant in the audit when the ending balance is immaterial.

A major consideration in verifying the ending balance in permanent assets is the possibility of existing legal encumbrances. Tests to identify possible legal encumbrances would satisfy the audit objective for:

Proof of cash is prepared in the audit when the client has a significant deficiency in internal control in cash.

Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as:

The most important audit objective for depreciation expense is completeness.

The amount of time spent verifying owners' equity is frequently minimal for private companies because:

The starting point for verifying current year disposals of property, plant and equipment is the client's schedule of recorded disposals. Discuss the types of information that should be included in this schedule.

Cash account is primarily affected by which transactions in the acquisition and payment cycle?

Which one of the following ratio and trend analysis procedures might identify a possible misstatement of expensing amounts that should be capital items?

Which of the following procedures can test the audit objective of determining that cash in bank, as stated on the reconciliation, foots correctly and agrees with the general ledger?

A shareholders' master file is a record of the issuance and redemption of shares over the life of the corporation.

Deposits recorded as cash receipts near the end of the year, deposited in the bank in the same month and included in the bank reconciliation as a deposit in transit is a type of misstatement in cash that will not normally be discovered as part of the audit of tests of a bank reconciliation.

Cash account is primarily affected by which transactions in the acquisitions and payment cycle?

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for:

The starting point for the verification of current- year acquisitions (that is, details of the balances) is normally a fixed asset schedule obtained from the client. Discuss the types of information that should be included in this schedule.

When auditing the balance of the general cash account, which of the following is NOT one of the most important objectives?

The auditor's starting point for verifying disposals of property, plant and equipment is the:

The starting point for the verification of the balance in the general bank account is to obtain:

In verifying accumulated depreciation, the credits to accumulated depreciation are verified as part of the audit of depreciation expense, whereas the debits are normally tested as a part of the audit of:

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Documentation

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters