Exam 15: Audit of Transaction Cycles and Financial Statement Balances I

In connection with the client's physical count of inventory, adequate controls include:

A zero balance confirmation:

Which one of the following statements is NOT correct?

The overall objective in the audit of accounts payable is to determine whether accounts payable:

State each of the six specific transaction- related audit objectives for cash payments and, for each objective, describe one common substantive test of transactions.

Discuss each of the primary documents and records used in the personnel and employment function in the payroll and personnel cycle.

Identify three analytical procedures commonly used when auditing accounts in the inventory and warehousing cycle.

The major balance sheet account in the acquisition and payment cycle is:

When processing and recording cash payments, it is important to have a method of cancelling the supporting documents to prevent their reuse as support for another cheque at a later time. A common method is to:

A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms and date of billing is called the voucher.

'Recorded payroll transactions are for the amount of time actually worked and at the proper pay rate; withholdings are properly calculated' relates to which transaction- related audit objective for payroll?

In the audit of inventory, the client is responsible for actually making and recording the count of physical inventory; the auditor's responsibility is to evaluate and observe the client's procedures and draw conclusions about the adequacy of the physical inventory.

When testing inventory items for pricing, the auditor should select items that:

The overall objective of the audit of the inventory and warehousing cycle is:

From an audit point of view, which one of the following would NOT be an important internal control in the personnel cycle?

Inherent risk is often assessed as relatively high for inventory, because of the characteristic/s:

For good internal control, the payroll function should be independent of the personnel department.

Commission expense is calculated as a percentage of sales and compared with previous years.

A substantive test of transactions commonly used to test the accuracy objective for acquisitions is 'compare paid cheques with the acquisitions journal and cash payments journal'.

The use of statistical sampling is less common for the audit of accounts payable than for accounts receivable because it is more difficult to define the population and determine the population size in accounts payable.