Question 1

Which three of the following are steps involved in controlling activities in an Evaluated Receipts Settlement (ERS) system?

Accepted Answer

A) Initiating an ERS transaction 
B) Receiving goods 
C) Recording payables 
D) Processing cash payments 
A) Initiating an ERS transaction 
B) Receiving goods 
C) Recording payables 
D) Processing cash payments

Question 2

In which of the following shipment arrangements does title pass from seller to buyer when goods arrive at the purchasing entity's warehouse?

Accepted Answer

A) FOB destination 
B) FOB shipping point 
C) FOB shipping stop 
D) FOB port 
A) FOB destination 
B) FOB shipping point 
C) FOB shipping stop 
D) FOB port

Question 3

All of the following are true about payroll accrual entries, EXCEPT:

Accepted Answer

A) Payroll tax expense is debited. 
B) They may be charged to manufactured inventory. 
C) Overtime is not included. 
D) All of the answer choices are correct. 
A) Payroll tax expense is debited. 
B) They may be charged to manufactured inventory. 
C) Overtime is not included. 
D) All of the answer choices are correct.

Question 4

Many analytical procedures focus on _______.

Accepted Answer

A) the relationship between purchases and accounts payable 
B) the relationship between purchases and accounts receivable 
C) the relationship between sales and accounts payable 
D) the relationship between sales and purchases 
A) the relationship between purchases and accounts payable 
B) the relationship between purchases and accounts receivable 
C) the relationship between sales and accounts payable 
D) the relationship between sales and purchases

Question 5

As inherent risk factors vary from industry to industry, from client to client, and from year to year, each audit should be identical to address unique risks.

Accepted Answer

A) True 
 B)False

Question 6

If factory workers are paid based on time and/or productivity, there is likely high inherent risk for which of the following key assertions?

Accepted Answer

A) Accuracy 
B) Cutoff 
C) Completeness 
D) None of the answer choices is correct. 
A) Accuracy 
B) Cutoff 
C) Completeness 
D) None of the answer choices is correct.

Question 7

The first category of misstatements that is relevant to the purchasing and payroll cycles is "expense (payroll, selling, general, administration, other) recording issues."

Accepted Answer

A) True 
 B)False

Question 8

Internal controls in an Evaluated Receipts Settlement (ERS) system _______.

Accepted Answer

A) are generally not required 
B) are dissimilar to internal controls in a traditional computerized system 
C) are similar to internal controls in a traditional computerized system 
D) should be audited by the internal audit function, due to their increased familiarity with this function 
A) are generally not required 
B) are dissimilar to internal controls in a traditional computerized system 
C) are similar to internal controls in a traditional computerized system 
D) should be audited by the internal audit function, due to their increased familiarity with this function

Question 9

Which three of the following are involved in the purchasing cycle?

Accepted Answer

A) Establishing payment terms 
B) Selecting vendors 
C) Purchasing goods 
D) Selling goods 
A) Establishing payment terms 
B) Selecting vendors 
C) Purchasing goods 
D) Selling goods

Question 10

A treasury or cash management function is responsible for determining that _______.

Accepted Answer

A) unpaid payables are processed for payment on their due dates 
B) paid payables are processed for payment on their due dates 
C) unpaid receivables are processed for payment on their due dates 
D) unpaid dividends are processed for payment on their due dates 
A) unpaid payables are processed for payment on their due dates 
B) paid payables are processed for payment on their due dates 
C) unpaid receivables are processed for payment on their due dates 
D) unpaid dividends are processed for payment on their due dates

Question 11

If the pay period does not coincide with the end of the accounting period, which of the following is true?

Accepted Answer

A) Payroll entries are not made until payroll is paid. 
B) Payroll payable must be accrued. 
C) Overtime must be recalculated. 
D) None of the answer choices is correct. 
A) Payroll entries are not made until payroll is paid. 
B) Payroll payable must be accrued. 
C) Overtime must be recalculated. 
D) None of the answer choices is correct.

Question 12

Provide two examples of transactions that result in reducing payables and expenses in the form of purchase returns and allowances.

Accepted Answer

Student answers will vary.
On occasion g

Question 13

Upon the receipt of goods, _______.

Accepted Answer

A) the purchaser should match the goods shipped per the receiving report, to the purchase order, and advanced shipping notice (ASN) 
B) the purchaser should match the goods received per the receiving report, to the purchase order, and advanced shipping notice (ASN) 
C) the client should immediately debit the payable account and credit the cash account 
D) the client should accrue a related receivable 
A) the purchaser should match the goods shipped per the receiving report, to the purchase order, and advanced shipping notice (ASN) 
B) the purchaser should match the goods received per the receiving report, to the purchase order, and advanced shipping notice (ASN) 
C) the client should immediately debit the payable account and credit the cash account 
D) the client should accrue a related receivable

Question 14

After evaluating inherent risk and control risk, the auditor is in a position to evaluate which of the following types of risk?

Accepted Answer

A) Transaction risk 
B) Loss risk 
C) Fraud risk 
D) None of the answer choices is correct. 
A) Transaction risk 
B) Loss risk 
C) Fraud risk 
D) None of the answer choices is correct.

Question 15

All of the following are tests of details of balances for auditing the payroll process, EXCEPT _______.

Accepted Answer

A) verifying totals of payroll registers 
B) recalculating accrued payroll liabilities at year-end 
C) determining that accrued payroll payables are the obligations of the entity 
D) recalculating accrued payroll tax liabilities at year-end 
A) verifying totals of payroll registers 
B) recalculating accrued payroll liabilities at year-end 
C) determining that accrued payroll payables are the obligations of the entity 
D) recalculating accrued payroll tax liabilities at year-end

Question 16

A cash disbursements journal is a daily report showing checks written or electronic funds transferred to vendors and amounts paid.

Accepted Answer

A) True 
 B)False

Question 17

If pay periods do not align well with month-end, quarter-end, or year-end, which of the following key assertions is most at risk of misstatement?

Accepted Answer

A) Accuracy 
B) Cutoff 
C) Completeness 
D) None of the answer choices is correct. 
A) Accuracy 
B) Cutoff 
C) Completeness 
D) None of the answer choices is correct.

Question 18

A strong tone at the top about the importance of accurate financial reporting encourages the understatement of expenses and liabilities.

Accepted Answer

A) True 
 B)False

Question 19

In assessing inherent risk for purchasing process assertions, the auditor should _______.

Accepted Answer

A) rely on the opinions formed by the internal audit function 
B) consider pervasive factors influencing the understatement or overstatement of payables and expenses. 
C) consider pervasive factors influencing the understatement or overstatement of receivables and expenses. 
D) consider pervasive factors influencing the correct statement of payables and expenses. 
A) rely on the opinions formed by the internal audit function 
B) consider pervasive factors influencing the understatement or overstatement of payables and expenses. 
C) consider pervasive factors influencing the understatement or overstatement of receivables and expenses. 
D) consider pervasive factors influencing the correct statement of payables and expenses.

Question 20

Important documents and records used in processing purchase adjustments in traditional or Evaluated Receipts Settlement (ERS) systems include which of the following?

Accepted Answer

A) Purchase Return Authorization 
B) Shipping Report 
C) Debit Memo 
D) All of these answer choices are correct. 
A) Purchase Return Authorization 
B) Shipping Report 
C) Debit Memo 
D) All of these answer choices are correct.

Which three of the following are steps involved in controlling activities in an Evaluated Receipts Settlement (ERS) system?

In which of the following shipment arrangements does title pass from seller to buyer when goods arrive at the purchasing entity's warehouse?

All of the following are true about payroll accrual entries, EXCEPT:

Many analytical procedures focus on _______.

As inherent risk factors vary from industry to industry, from client to client, and from year to year, each audit should be identical to address unique risks.

If factory workers are paid based on time and/or productivity, there is likely high inherent risk for which of the following key assertions?

The first category of misstatements that is relevant to the purchasing and payroll cycles is "expense (payroll, selling, general, administration, other) recording issues."

Internal controls in an Evaluated Receipts Settlement (ERS) system _______.

Which three of the following are involved in the purchasing cycle?

A treasury or cash management function is responsible for determining that _______.

If the pay period does not coincide with the end of the accounting period, which of the following is true?

Provide two examples of transactions that result in reducing payables and expenses in the form of purchase returns and allowances.

Upon the receipt of goods, _______.

After evaluating inherent risk and control risk, the auditor is in a position to evaluate which of the following types of risk?

All of the following are tests of details of balances for auditing the payroll process, EXCEPT _______.

A cash disbursements journal is a daily report showing checks written or electronic funds transferred to vendors and amounts paid.

If pay periods do not align well with month-end, quarter-end, or year-end, which of the following key assertions is most at risk of misstatement?

A strong tone at the top about the importance of accurate financial reporting encourages the understatement of expenses and liabilities.

In assessing inherent risk for purchasing process assertions, the auditor should _______.

Important documents and records used in processing purchase adjustments in traditional or Evaluated Receipts Settlement (ERS) systems include which of the following?

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

Which three of the following are steps involved in controlling activities in an Evaluated Receipts Settlement (ERS) system?

In which of the following shipment arrangements does title pass from seller to buyer when goods arrive at the purchasing entity's warehouse?

All of the following are true about payroll accrual entries, EXCEPT:

Many analytical procedures focus on _______.

As inherent risk factors vary from industry to industry, from client to client, and from year to year, each audit should be identical to address unique risks.

If factory workers are paid based on time and/or productivity, there is likely high inherent risk for which of the following key assertions?

The first category of misstatements that is relevant to the purchasing and payroll cycles is "expense (payroll, selling, general, administration, other) recording issues."

Internal controls in an Evaluated Receipts Settlement (ERS) system _______.

Which three of the following are involved in the purchasing cycle?

A treasury or cash management function is responsible for determining that _______.

If the pay period does not coincide with the end of the accounting period, which of the following is true?

Provide two examples of transactions that result in reducing payables and expenses in the form of purchase returns and allowances.

Upon the receipt of goods, _______.

After evaluating inherent risk and control risk, the auditor is in a position to evaluate which of the following types of risk?

All of the following are tests of details of balances for auditing the payroll process, EXCEPT _______.

A cash disbursements journal is a daily report showing checks written or electronic funds transferred to vendors and amounts paid.

If pay periods do not align well with month-end, quarter-end, or year-end, which of the following key assertions is most at risk of misstatement?

A strong tone at the top about the importance of accurate financial reporting encourages the understatement of expenses and liabilities.

In assessing inherent risk for purchasing process assertions, the auditor should _______.

Important documents and records used in processing purchase adjustments in traditional or Evaluated Receipts Settlement (ERS) systems include which of the following?

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