Question 1

A request by an authorised employee for goods or services is made on the:

Accepted Answer

A)  debit note. 
B)  acquisition transaction file. 
C)  purchase requisition. 
D)  purchase order. 
A)  debit note. 
B)  acquisition transaction file. 
C)  purchase requisition. 
D)  purchase order.

Question 2

The audit procedure 'Observe whether inventory movement takes place during the inventory count' provides assurance mainly for the completeness objective for physical inventory observation.

Accepted Answer

A) True 
 B)False

Question 3

The test of transactions, which requires 'compare paid cheques with the related acquisitions journal and cash payments journal', satisfies the transaction- related audit objective for cash payments of:

Accepted Answer

A)  accuracy. 
B)  completeness. 
C)  posting and summarisation. 
D)  existence. 
A)  accuracy. 
B)  completeness. 
C)  posting and summarisation. 
D)  existence.

Question 4

Statistical sampling is less commonly used for the audit of accounts payable than for accounts receivable because it is more difficult to:

Accepted Answer

A)  define the population. 
B)  determine the tolerable exception rate. 
C)  decide on attributes or variables sampling. 
D)  mathematically calculate and interpret the results. 
A)  define the population. 
B)  determine the tolerable exception rate. 
C)  decide on attributes or variables sampling. 
D)  mathematically calculate and interpret the results.

Question 5

Examining inventory descriptions on tags and comparing to actual inventory relates to which audit objective?

Accepted Answer

A)  Inventory is counted accurately (accuracy) 
B)  Inventory as recorded on tags exists (existence) 
C)  Inventory is classified correctly (classification) 
D)  Existing inventory is counted and tagged (completeness) 
A)  Inventory is counted accurately (accuracy) 
B)  Inventory as recorded on tags exists (existence) 
C)  Inventory is classified correctly (classification) 
D)  Existing inventory is counted and tagged (completeness)

Question 6

A formal review and reporting of obsolete, slow- moving, damaged and overstated inventory items:

Accepted Answer

A)  involves reviewing perpetual inventory master files for inventory turnover and holding discussions with engineering or production personnel. 
B)  is an internal control designed to prevent the overstatement of inventory through the inclusion of obsolete inventory. 
C)  should be done by a competent employee. 
D)  All of the above are correct. 
A)  involves reviewing perpetual inventory master files for inventory turnover and holding discussions with engineering or production personnel. 
B)  is an internal control designed to prevent the overstatement of inventory through the inclusion of obsolete inventory. 
C)  should be done by a competent employee. 
D)  All of the above are correct.

Question 7

When auditing accounts payable, auditors typically set tolerable error relatively high.

Accepted Answer

A) True 
 B)False

Question 8

In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can:

Accepted Answer

A)  increase asset valuations. 
B)  decrease asset valuations. 
C)  either A or B 
D)  not affect asset valuations. 
A)  increase asset valuations. 
B)  decrease asset valuations. 
C)  either A or B 
D)  not affect asset valuations.

Question 9

As operating effectiveness of internal controls improve and are supported by additional tests of controls, substantive testing can be reduced.

Accepted Answer

A) True 
 B)False

Question 10

The classes of transactions in the acquisition and payment cycle include:

Accepted Answer

A)  acquisition of goods. 
B)  acquisition of goods and services. 
C)  acquisition of goods and services, cash payments, and purchase returns and discounts. 
D)  acquisition of goods and services, and cash payments. 
A)  acquisition of goods. 
B)  acquisition of goods and services. 
C)  acquisition of goods and services, cash payments, and purchase returns and discounts. 
D)  acquisition of goods and services, and cash payments.

Question 11

Necessary controls in the accounts payable and information technology departments include:

Accepted Answer

A)  adequate documents and records, and proper procedures for record keeping. 
B)  independent checks on performance. 
C)  that personnel who record transactions do not have access to cash, marketable securities or other assets. 
D)  all of the above 
A)  adequate documents and records, and proper procedures for record keeping. 
B)  independent checks on performance. 
C)  that personnel who record transactions do not have access to cash, marketable securities or other assets. 
D)  all of the above

Question 12

Which one of the following would NOT justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

Accepted Answer

A)  Employees will detect any underpayments. 
B)  The new payroll bookkeeper has a much better educational background than the former one. 
C)  Payroll transactions are extensively audited by government agencies. 
D)  Payroll transactions are uniform and uncomplicated. 
A)  Employees will detect any underpayments. 
B)  The new payroll bookkeeper has a much better educational background than the former one. 
C)  Payroll transactions are extensively audited by government agencies. 
D)  Payroll transactions are uniform and uncomplicated.

Question 13

State the six specific transactions- related audit objectives as related to payroll, and for each objective, state one common substantive test of transactions that can be used to test the objective.

Accepted Answer

The six specific transactions- related a

Question 14

The auditor's transaction- related audit objective for acquisitions, to determine that 'recorded acquisitions are for goods and services received', relates to:

Accepted Answer

A)  completeness. 
B)  authorisation. 
C)  accuracy. 
D)  existence. 
A)  completeness. 
B)  authorisation. 
C)  accuracy. 
D)  existence.

Question 15

No individual with authority to sign payroll cheques or approve direct bank transfers should be permitted access to:

Accepted Answer

A)  timekeeping. 
B)  the computer. 
C)  the preparation of payroll. 
D)  both A and B. 
A)  timekeeping. 
B)  the computer. 
C)  the preparation of payroll. 
D)  both A and B.

Question 16

State each of the eight specific balance- related audit objectives for accounts payable and, for each objective, describe one common test of details of balances.

Accepted Answer

The eight specific balance- related audi

Question 17

Which one of the following would NOT be a test used when auditing accrued sales commissions?

Accepted Answer

A)  Test the detail tie- in in the commissions expense account at interim dates. 
B)  Confirm the commissions directly with the employees. 
C)  Compare the method of accruing commissions with the previous years. 
D)  Test the calculation (recalculate) based on the agreement between client and employees. 
A)  Test the detail tie- in in the commissions expense account at interim dates. 
B)  Confirm the commissions directly with the employees. 
C)  Compare the method of accruing commissions with the previous years. 
D)  Test the calculation (recalculate) based on the agreement between client and employees.

Question 18

Which one of the following internal accounting control procedures is effective in preventing duplicate payment of vendors' invoices?

Accepted Answer

A)  Cancelled cheques should be sent to persons other than the cashier or accounting department personnel. 
B)  The invoices should be stamped, perforated or otherwise effectively cancelled before submission for approval of the voucher. 
C)  Properly authorised and approved vouchers with appropriate documentation should be the basis for cheque preparation. 
D)  Unused voucher forms should be prenumbered and accounted for. 
A)  Cancelled cheques should be sent to persons other than the cashier or accounting department personnel. 
B)  The invoices should be stamped, perforated or otherwise effectively cancelled before submission for approval of the voucher. 
C)  Properly authorised and approved vouchers with appropriate documentation should be the basis for cheque preparation. 
D)  Unused voucher forms should be prenumbered and accounted for.

Question 19

State the primary determinants of the amount of time needed to perform the physical observation of inventory.

Accepted Answer

The primary determinants of the amount o

Question 20

Discuss the two most common ways in which employees can defraud a company in the payroll area.

Accepted Answer

The two most common ways in which employ

A request by an authorised employee for goods or services is made on the:

The audit procedure 'Observe whether inventory movement takes place during the inventory count' provides assurance mainly for the completeness objective for physical inventory observation.

The test of transactions, which requires 'compare paid cheques with the related acquisitions journal and cash payments journal', satisfies the transaction- related audit objective for cash payments of:

Statistical sampling is less commonly used for the audit of accounts payable than for accounts receivable because it is more difficult to:

Examining inventory descriptions on tags and comparing to actual inventory relates to which audit objective?

A formal review and reporting of obsolete, slow- moving, damaged and overstated inventory items:

When auditing accounts payable, auditors typically set tolerable error relatively high.

In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can:

As operating effectiveness of internal controls improve and are supported by additional tests of controls, substantive testing can be reduced.

The classes of transactions in the acquisition and payment cycle include:

Necessary controls in the accounts payable and information technology departments include:

Which one of the following would NOT justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

State the six specific transactions- related audit objectives as related to payroll, and for each objective, state one common substantive test of transactions that can be used to test the objective.

The auditor's transaction- related audit objective for acquisitions, to determine that 'recorded acquisitions are for goods and services received', relates to:

No individual with authority to sign payroll cheques or approve direct bank transfers should be permitted access to:

State each of the eight specific balance- related audit objectives for accounts payable and, for each objective, describe one common test of details of balances.

Which one of the following would NOT be a test used when auditing accrued sales commissions?

Which one of the following internal accounting control procedures is effective in preventing duplicate payment of vendors' invoices?

State the primary determinants of the amount of time needed to perform the physical observation of inventory.

Discuss the two most common ways in which employees can defraud a company in the payroll area.

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 II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters

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

A request by an authorised employee for goods or services is made on the:

The audit procedure 'Observe whether inventory movement takes place during the inventory count' provides assurance mainly for the completeness objective for physical inventory observation.

The test of transactions, which requires 'compare paid cheques with the related acquisitions journal and cash payments journal', satisfies the transaction- related audit objective for cash payments of:

Statistical sampling is less commonly used for the audit of accounts payable than for accounts receivable because it is more difficult to:

Examining inventory descriptions on tags and comparing to actual inventory relates to which audit objective?

A formal review and reporting of obsolete, slow- moving, damaged and overstated inventory items:

When auditing accounts payable, auditors typically set tolerable error relatively high.

In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can:

As operating effectiveness of internal controls improve and are supported by additional tests of controls, substantive testing can be reduced.

The classes of transactions in the acquisition and payment cycle include:

Necessary controls in the accounts payable and information technology departments include:

Which one of the following would NOT justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

State the six specific transactions- related audit objectives as related to payroll, and for each objective, state one common substantive test of transactions that can be used to test the objective.

The auditor's transaction- related audit objective for acquisitions, to determine that 'recorded acquisitions are for goods and services received', relates to:

No individual with authority to sign payroll cheques or approve direct bank transfers should be permitted access to:

State each of the eight specific balance- related audit objectives for accounts payable and, for each objective, describe one common test of details of balances.

Which one of the following would NOT be a test used when auditing accrued sales commissions?

Which one of the following internal accounting control procedures is effective in preventing duplicate payment of vendors' invoices?

State the primary determinants of the amount of time needed to perform the physical observation of inventory.

Discuss the two most common ways in which employees can defraud a company in the payroll area.

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 II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters