Question 1

State three examples of errors or irregularities that would normally be uncovered during the audit of the bank reconciliation.

Accepted Answer

· Failure to include a cheque that has n

Question 2

A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation and accumulated depreciation is:

Accepted Answer

A)  the depreciation schedule. 
B)  the acquisitions journal. 
C)  the fixed asset master file. 
D)  the file of purchase requisitions. 
A)  the depreciation schedule. 
B)  the acquisitions journal. 
C)  the fixed asset master file. 
D)  the file of purchase requisitions.

Question 3

The test of details of balance procedure which requires the auditor to foot the loans payable list for loans payable and accrued interest satisfies the objective of:

Accepted Answer

A)  accuracy. 
B)  existence. 
C)  completeness. 
D)  detail tie- in. 
A)  accuracy. 
B)  existence. 
C)  completeness. 
D)  detail tie- in.

Question 4

The failure to capitalise a permanent asset, or the recording of an asset acquisition at the improper amount, affects the balance sheet:

Accepted Answer

A)  for the current period. 
B)  forever. 
C)  for the depreciable life of the asset. 
D)  until the firm disposes of the asset. 
A)  for the current period. 
B)  forever. 
C)  for the depreciable life of the asset. 
D)  until the firm disposes of the asset.

Question 5

The emphasis in the audit of dividends is on the transactions rather than the ending balance.

Accepted Answer

A) True 
 B)False

Question 6

The bank reconciliation should be prepared by:

Accepted Answer

A)  someone independent of handling cash receipts and cash payments. 
B)  someone independent of handling or recording cash receipts. 
C)  someone independent of the finance manager. 
D)  the finance manager. 
A)  someone independent of handling cash receipts and cash payments. 
B)  someone independent of handling or recording cash receipts. 
C)  someone independent of the finance manager. 
D)  the finance manager.

Question 7

It should ordinarily be unnecessary to examine supporting documentation for each addition to property, plant and equipment, but it is normal to verify:

Accepted Answer

A)  a representative sample of typical additions. 
B)  all large transactions. 
C)  all unusual transactions. 
D)  all of the above 
A)  a representative sample of typical additions. 
B)  all large transactions. 
C)  all unusual transactions. 
D)  all of the above

Question 8

Usually dividends are audited:

Accepted Answer

A)  on a 100% basis. 
B)  using block sampling. 
C)  using variables sampling. 
D)  using attributes sampling. 
A)  on a 100% basis. 
B)  using block sampling. 
C)  using variables sampling. 
D)  using attributes sampling.

Question 9

Which of the following cycles does NOT affect cash in bank?

Accepted Answer

A)  Capital acquisitions cycle 
B)  Inventory and warehousing 
C)  Payroll and personnel cycle 
D)  Acquisitions and disbursements 
A)  Capital acquisitions cycle 
B)  Inventory and warehousing 
C)  Payroll and personnel cycle 
D)  Acquisitions and disbursements

Question 10

Because cash is the most desirable asset for people to steal, it has a higher:

Accepted Answer

A)  control risk. 
B)  detection risk. 
C)  inherent risk. 
D)  all of the above 
A)  control risk. 
B)  detection risk. 
C)  inherent risk. 
D)  all of the above

Question 11

Analytical procedures are essential for borrowings because:

Accepted Answer

A)  there are few internal controls in this area which the auditor can rely upon to reduce substantive testing. 
B)  of the paucity of documentation in this area. 
C)  the large quantity of transactions would make this an expensive area to audit if some other means of reducing tests were not available. 
D)  tests of details for interest expense and accrued interest can frequently be eliminated when results are favourable. 
A)  there are few internal controls in this area which the auditor can rely upon to reduce substantive testing. 
B)  of the paucity of documentation in this area. 
C)  the large quantity of transactions would make this an expensive area to audit if some other means of reducing tests were not available. 
D)  tests of details for interest expense and accrued interest can frequently be eliminated when results are favourable.

Question 12

The audit objective which requires the auditor to determine that loans payable on the loans payable schedule are properly classified can be tested with the following procedure:

Accepted Answer

A)  Confirm loans payable. 
B)  Examine notes, minutes and bank confirmations for restrictions. 
C)  Review the notes to determine whether any are with related parties. 
D)  Examine corporate minutes for loan approval. 
A)  Confirm loans payable. 
B)  Examine notes, minutes and bank confirmations for restrictions. 
C)  Review the notes to determine whether any are with related parties. 
D)  Examine corporate minutes for loan approval.

Question 13

The audit of the bank reconciliation will normally lead to the discovery of theft of cash by interception of cash receipts from customers before they are recorded, with the account written off as a bad debt.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following transaction- related objectives is NOT important when auditing dividends?

Accepted Answer

A)  Existence 
B)  Accuracy 
C)  Completeness 
D)  Posting and summarisation 
A)  Existence 
B)  Accuracy 
C)  Completeness 
D)  Posting and summarisation

Question 15

Depreciation expense is normally verified using tests of controls and substantive tests of transactions.

Accepted Answer

A) True 
 B)False

Question 16

Depreciation expense is one of the few expense accounts that is NOT verified as a part of:

Accepted Answer

A)  substantive tests of transactions. 
B)  tests of controls. 
C)  A and B. 
D)  analytical procedures. 
A)  substantive tests of transactions. 
B)  tests of controls. 
C)  A and B. 
D)  analytical procedures.

Question 17

In auditing the retained earnings balance for the year, the auditor traces the entry in retained earnings to the net earnings shown in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following misstatements will NOT normally be discovered as part of the audit of the bank reconciliation?

Accepted Answer

A)  Payment for raw materials that were not received 
B)  Improper payments of officers' personal expenditures 
C)  Payment to an employee for more hours than he or she worked 
D)  All of the above 
A)  Payment for raw materials that were not received 
B)  Improper payments of officers' personal expenditures 
C)  Payment to an employee for more hours than he or she worked 
D)  All of the above

Question 19

In the audit of property, plant and equipment, it is helpful to separate the tests into all of the following categories EXCEPT:

Accepted Answer

A)  verification of the beginning balance. 
B)  verification of the ending balance. 
C)  verification of current year disposals. 
D)  verification of current year acquisitions. 
A)  verification of the beginning balance. 
B)  verification of the ending balance. 
C)  verification of current year disposals. 
D)  verification of current year acquisitions.

Question 20

To prevent the payment of a larger amount of dividends than was authorised, the corporation should use:

Accepted Answer

A)  an outside independent disbursing agency. 
B)  cheques which cannot be written for an amount in excess of a stated maximum amount. 
C)  a separate imprest dividend account. 
D)  all of the above 
A)  an outside independent disbursing agency. 
B)  cheques which cannot be written for an amount in excess of a stated maximum amount. 
C)  a separate imprest dividend account. 
D)  all of the above

State three examples of errors or irregularities that would normally be uncovered during the audit of the bank reconciliation.

A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation and accumulated depreciation is:

The test of details of balance procedure which requires the auditor to foot the loans payable list for loans payable and accrued interest satisfies the objective of:

The failure to capitalise a permanent asset, or the recording of an asset acquisition at the improper amount, affects the balance sheet:

The emphasis in the audit of dividends is on the transactions rather than the ending balance.

The bank reconciliation should be prepared by:

It should ordinarily be unnecessary to examine supporting documentation for each addition to property, plant and equipment, but it is normal to verify:

Usually dividends are audited:

Which of the following cycles does NOT affect cash in bank?

Because cash is the most desirable asset for people to steal, it has a higher:

Analytical procedures are essential for borrowings because:

The audit objective which requires the auditor to determine that loans payable on the loans payable schedule are properly classified can be tested with the following procedure:

The audit of the bank reconciliation will normally lead to the discovery of theft of cash by interception of cash receipts from customers before they are recorded, with the account written off as a bad debt.

Which of the following transaction- related objectives is NOT important when auditing dividends?

Depreciation expense is normally verified using tests of controls and substantive tests of transactions.

Depreciation expense is one of the few expense accounts that is NOT verified as a part of:

In auditing the retained earnings balance for the year, the auditor traces the entry in retained earnings to the net earnings shown in the balance sheet.

Which of the following misstatements will NOT normally be discovered as part of the audit of the bank reconciliation?

In the audit of property, plant and equipment, it is helpful to separate the tests into all of the following categories EXCEPT:

To prevent the payment of a larger amount of dividends than was authorised, the corporation should use:

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

State three examples of errors or irregularities that would normally be uncovered during the audit of the bank reconciliation.

A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation and accumulated depreciation is:

The test of details of balance procedure which requires the auditor to foot the loans payable list for loans payable and accrued interest satisfies the objective of:

The failure to capitalise a permanent asset, or the recording of an asset acquisition at the improper amount, affects the balance sheet:

The emphasis in the audit of dividends is on the transactions rather than the ending balance.

The bank reconciliation should be prepared by:

It should ordinarily be unnecessary to examine supporting documentation for each addition to property, plant and equipment, but it is normal to verify:

Usually dividends are audited:

Which of the following cycles does NOT affect cash in bank?

Because cash is the most desirable asset for people to steal, it has a higher:

Analytical procedures are essential for borrowings because:

The audit objective which requires the auditor to determine that loans payable on the loans payable schedule are properly classified can be tested with the following procedure:

The audit of the bank reconciliation will normally lead to the discovery of theft of cash by interception of cash receipts from customers before they are recorded, with the account written off as a bad debt.

Which of the following transaction- related objectives is NOT important when auditing dividends?

Depreciation expense is normally verified using tests of controls and substantive tests of transactions.

Depreciation expense is one of the few expense accounts that is NOT verified as a part of:

In auditing the retained earnings balance for the year, the auditor traces the entry in retained earnings to the net earnings shown in the balance sheet.

Which of the following misstatements will NOT normally be discovered as part of the audit of the bank reconciliation?

In the audit of property, plant and equipment, it is helpful to separate the tests into all of the following categories EXCEPT:

To prevent the payment of a larger amount of dividends than was authorised, the corporation should use:

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