Question 1

Key assertions relating to relevant disclosures for payables are _______.

Accepted Answer

A) going concern, completeness, classification and understandability, accuracy and valuation 
B) occurrence and rights and obligations, completeness, classification and understandability, accuracy and valuation 
C) occurrence and rights and obligations, completeness, classification and understandability, note disclosure 
D) credibility, completeness, classification and understandability, accuracy and valuation 
A) going concern, completeness, classification and understandability, accuracy and valuation 
B) occurrence and rights and obligations, completeness, classification and understandability, accuracy and valuation 
C) occurrence and rights and obligations, completeness, classification and understandability, note disclosure 
D) credibility, completeness, classification and understandability, accuracy and valuation B

Question 2

Accounting software starts with the population of payroll disbursements and develops a one-for-one match with underlying approved hours worked.A report is generated each pay period disclosing any payroll that is not supported by hours worked.The employee number is also compared with the approved master payroll file.A report is generated listing any transactions that are not supported by underlying documents or files.This is a description of a control over which of the following assertions for the payroll process?

Accepted Answer

A) Accuracy of payroll 
B) Completeness of payroll 
C) Occurrence of payroll 
D) Completeness of payroll payables 
A) Accuracy of payroll 
B) Completeness of payroll 
C) Occurrence of payroll 
D) Completeness of payroll payables C

Question 3

Which of the following tests or procedures are primarily focused on the completeness, existence, and valuation assertions?

Accepted Answer

A) Vouching payroll transactions to supporting documentation 
B) Recalculating accrued payroll liabilities at year-end to underlying payroll records 
C) Reviewing activity in payroll accounts and investigate entries that appear unusual 
D) None of the answer choices is correct. 
A) Vouching payroll transactions to supporting documentation 
B) Recalculating accrued payroll liabilities at year-end to underlying payroll records 
C) Reviewing activity in payroll accounts and investigate entries that appear unusual 
D) None of the answer choices is correct. B

Question 4

When testing informational technology (IT) application controls in payroll, the auditor may do any of the following, EXCEPT _______.

Accepted Answer

A) test important manual controls by reperforming the controls 
B) use test data and determine whether expected results appear in financial statements 
C) test the appropriateness of manual follow-up of exceptions 
D) All of the answer choices are correct. 
A) test important manual controls by reperforming the controls 
B) use test data and determine whether expected results appear in financial statements 
C) test the appropriateness of manual follow-up of exceptions 
D) All of the answer choices are correct.

Question 5

In the United States, many businesses _______.

Accepted Answer

A) continue to write checks to stockholders for payment of goods received 
B) continue to write checks to vendors 
C) continue to write checks to their customers 
D) continue to write checks to employees in order to account for cost of goods sold 
A) continue to write checks to stockholders for payment of goods received 
B) continue to write checks to vendors 
C) continue to write checks to their customers 
D) continue to write checks to employees in order to account for cost of goods sold

Question 6

If a company receives goods but waits to record the transaction until a vendor's invoice is received, _______.

Accepted Answer

A) purchases and accounts payable will be understated 
B) purchases and accounts payable will be overstated 
C) purchases will be overstated and accounts payable will be understated 
D) purchases will be understated and accounts payable will be overstated 
A) purchases and accounts payable will be understated 
B) purchases and accounts payable will be overstated 
C) purchases will be overstated and accounts payable will be understated 
D) purchases will be understated and accounts payable will be overstated

Question 7

Which of the following is one of the key controls that are often found in the purchaser's Evaluated Receipts Settlement (ERS) system for cash disbursements, categorized by relevant assertion?

Accepted Answer

A) Completeness of cash disbursements 
B) Cash payments 
C) Evaluation of Receipts Settlement 
D) Evaluation of Receipts Statement 
A) Completeness of cash disbursements 
B) Cash payments 
C) Evaluation of Receipts Settlement 
D) Evaluation of Receipts Statement

Question 8

A voucher is an external document indicating the vendor, the amount due, and payment terms for the purchases received.

Accepted Answer

A) True 
 B)False

Question 9

All of the following are true when an auditor uses audit data analytics, EXCEPT:

Accepted Answer

A) Knowledge of the audit client helps refine the auditor's ability to identify potential anomalies 
B) There may be legitimate business reasons for some anomalies 
C) Because of the analytics, it is not necessary for the auditor to investigate flagged items 
D) All of the answer choices are correct. 
A) Knowledge of the audit client helps refine the auditor's ability to identify potential anomalies 
B) There may be legitimate business reasons for some anomalies 
C) Because of the analytics, it is not necessary for the auditor to investigate flagged items 
D) All of the answer choices are correct.

Question 10

Which three of the following will the auditor usually do if the client relies on computer controls and the auditor plans to assess control risk as low for purchasing process assertions?

Accepted Answer

A) Test the effectiveness of general controls. 
B) Use computer-assisted audit techniques (CAATs) to evaluate the effectiveness of programmed application controls. 
C) Test the effectiveness of manual procedures to follow-up on exceptions identified by programmed application controls. 
D) Account transactions invoices. 
A) Test the effectiveness of general controls. 
B) Use computer-assisted audit techniques (CAATs) to evaluate the effectiveness of programmed application controls. 
C) Test the effectiveness of manual procedures to follow-up on exceptions identified by programmed application controls. 
D) Account transactions invoices.

Question 11

All of the following are risks associated with payroll, EXCEPT _______.

Accepted Answer

A) paying fictitious payroll 
B) inaccurate period-end cutoff 
C) "padded" labor costs in contract arrangements 
D) All of the answer choices are correct. 
A) paying fictitious payroll 
B) inaccurate period-end cutoff 
C) "padded" labor costs in contract arrangements 
D) All of the answer choices are correct.

Question 12

"Liabilities, payables, reserves, and accrual estimate failure" is one of the categories of _______ related to expense recording and liabilities.

Accepted Answer

The answer of "Liabilities, payables, reserves, and accrual estimate failure"...

Question 13

Which of the following is a reasonableness test of gross payroll for a group of employees?

Accepted Answer

A) Revenue per employee 
B) Total payroll costs as a percent of revenue 
C) Comparing payroll expenses with prior year balances or budgets 
D) Average payroll cost per employee classification 
A) Revenue per employee 
B) Total payroll costs as a percent of revenue 
C) Comparing payroll expenses with prior year balances or budgets 
D) Average payroll cost per employee classification

Question 14

A company should make all payments by _______.

Accepted Answer

A) cash 
B) check or electronic funds transfer 
C) cash or electronic funds transfer 
D) liquidating investments 
A) cash 
B) check or electronic funds transfer 
C) cash or electronic funds transfer 
D) liquidating investments

Question 15

For a manufacturer or retailer, the gross operating cycle is estimated by _______.

Accepted Answer

A) the average number of days it takes to turn over receivables and collect receivables 
B) the average number of days it takes to turn over inventory and collect receivables 
C) the average number of days it takes to turn over payables and collect receivables 
D) the length of time it takes to request and receive funds for a loan 
A) the average number of days it takes to turn over receivables and collect receivables 
B) the average number of days it takes to turn over inventory and collect receivables 
C) the average number of days it takes to turn over payables and collect receivables 
D) the length of time it takes to request and receive funds for a loan

Question 16

The net operating cycle represents _______.

Accepted Answer

A) the gross operating cycle reduced by accounts payable turnover days, the amount of time that an entity's customers will let it use trade credit before requiring payment for goods and services 
B) the gross operating cycle reduced by accounts receivable turnover days, the amount of time that an entity's suppliers will let it use trade credit before requiring payment for goods and services 
C) the gross operating cycle reduced by accounts payable turnover days, the amount of time that an entity's suppliers will let it use trade credit before requiring payment for goods and services 
D) the gross financing cycle reduced by accounts payable turnover days, the amount of time that an entity's suppliers will let it use trade credit before requiring payment for goods and services 
A) the gross operating cycle reduced by accounts payable turnover days, the amount of time that an entity's customers will let it use trade credit before requiring payment for goods and services 
B) the gross operating cycle reduced by accounts receivable turnover days, the amount of time that an entity's suppliers will let it use trade credit before requiring payment for goods and services 
C) the gross operating cycle reduced by accounts payable turnover days, the amount of time that an entity's suppliers will let it use trade credit before requiring payment for goods and services 
D) the gross financing cycle reduced by accounts payable turnover days, the amount of time that an entity's suppliers will let it use trade credit before requiring payment for goods and services

Question 17

In smaller, privately owned companies, not-for-profit organizations, or governments, Evaluated Receipts Settlement (ERS) transactions are _______.

Accepted Answer

A) rare 
B) commonplace 
C) increasing being used 
D) prohibited. 
A) rare 
B) commonplace 
C) increasing being used 
D) prohibited.

Question 18

Evaluated Receipts Settlement (ERS) is _______.

Accepted Answer

A) a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction. 
B) a highly-manual business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction. 
C) a highly-automated business process between suppliers and stockholders to exchange data electronically and electronically execute a purchase transaction. 
D) a highly-manual business process between creditors and purchasers to exchange data electronically and electronically execute a purchase transaction. 
A) a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction. 
B) a highly-manual business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction. 
C) a highly-automated business process between suppliers and stockholders to exchange data electronically and electronically execute a purchase transaction. 
D) a highly-manual business process between creditors and purchasers to exchange data electronically and electronically execute a purchase transaction.

Question 19

When management grants greater latitude to a department in initiating transactions, _______.

Accepted Answer

A) strong budget and accountability controls over a department's expenditures are usually established 
B) weak budget and accountability controls over a department's expenditures are usually established 
C) strong budget and accountability controls over a department's receipts are usually established 
D) weak budget and accountability controls over a department's receipts are usually established 
A) strong budget and accountability controls over a department's expenditures are usually established 
B) weak budget and accountability controls over a department's expenditures are usually established 
C) strong budget and accountability controls over a department's receipts are usually established 
D) weak budget and accountability controls over a department's receipts are usually established

Question 20

Which of the following is a control to address the risk that payroll may not be recorded?

Accepted Answer

A) Supervisory review of hours worked for hourly and salaried employees 
B) Accounting software prints a report of all hours employees have worked that have not yet been paid 
C) Accounting software matches hours with the time card information and wage rate with the master payroll file 
D) Accounting software matches employee number on the time card with the employee number on the master payroll file 
A) Supervisory review of hours worked for hourly and salaried employees 
B) Accounting software prints a report of all hours employees have worked that have not yet been paid 
C) Accounting software matches hours with the time card information and wage rate with the master payroll file 
D) Accounting software matches employee number on the time card with the employee number on the master payroll file

Key assertions relating to relevant disclosures for payables are _______.

Which of the following tests or procedures are primarily focused on the completeness, existence, and valuation assertions?

When testing informational technology (IT) application controls in payroll, the auditor may do any of the following, EXCEPT _______.

In the United States, many businesses _______.

If a company receives goods but waits to record the transaction until a vendor's invoice is received, _______.

Which of the following is one of the key controls that are often found in the purchaser's Evaluated Receipts Settlement (ERS) system for cash disbursements, categorized by relevant assertion?

A voucher is an external document indicating the vendor, the amount due, and payment terms for the purchases received.

All of the following are true when an auditor uses audit data analytics, EXCEPT:

Which three of the following will the auditor usually do if the client relies on computer controls and the auditor plans to assess control risk as low for purchasing process assertions?

All of the following are risks associated with payroll, EXCEPT _______.

"Liabilities, payables, reserves, and accrual estimate failure" is one of the categories of _______ related to expense recording and liabilities.

Which of the following is a reasonableness test of gross payroll for a group of employees?

A company should make all payments by _______.

For a manufacturer or retailer, the gross operating cycle is estimated by _______.

The net operating cycle represents _______.

In smaller, privately owned companies, not-for-profit organizations, or governments, Evaluated Receipts Settlement (ERS) transactions are _______.

Evaluated Receipts Settlement (ERS) is _______.

When management grants greater latitude to a department in initiating transactions, _______.

Which of the following is a control to address the risk that payroll may not be recorded?

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters

Exam 12: Auditing the Purchases Cycle and Payroll Cycle

Key assertions relating to relevant disclosures for payables are _______.

Which of the following tests or procedures are primarily focused on the completeness, existence, and valuation assertions?

When testing informational technology (IT) application controls in payroll, the auditor may do any of the following, EXCEPT _______.

In the United States, many businesses _______.

If a company receives goods but waits to record the transaction until a vendor's invoice is received, _______.

Which of the following is one of the key controls that are often found in the purchaser's Evaluated Receipts Settlement (ERS) system for cash disbursements, categorized by relevant assertion?

A voucher is an external document indicating the vendor, the amount due, and payment terms for the purchases received.

All of the following are true when an auditor uses audit data analytics, EXCEPT:

Which three of the following will the auditor usually do if the client relies on computer controls and the auditor plans to assess control risk as low for purchasing process assertions?

All of the following are risks associated with payroll, EXCEPT _______.

"Liabilities, payables, reserves, and accrual estimate failure" is one of the categories of _______ related to expense recording and liabilities.

Which of the following is a reasonableness test of gross payroll for a group of employees?

A company should make all payments by _______.

For a manufacturer or retailer, the gross operating cycle is estimated by _______.

The net operating cycle represents _______.

In smaller, privately owned companies, not-for-profit organizations, or governments, Evaluated Receipts Settlement (ERS) transactions are _______.

Evaluated Receipts Settlement (ERS) is _______.

When management grants greater latitude to a department in initiating transactions, _______.

Which of the following is a control to address the risk that payroll may not be recorded?

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters