Question 1

Management and the auditor have to be alert to the risk of collusion with _______.

Accepted Answer

A) vendors and vendor kickbacks to employees 
B) customers and vendor kickbacks to employees 
C) customers and customer kickbacks to employees 
D) vendors and vendor kickbacks to stockholders 
A) vendors and vendor kickbacks to employees 
B) customers and vendor kickbacks to employees 
C) customers and customer kickbacks to employees 
D) vendors and vendor kickbacks to stockholders

Question 2

The master vendor file should be reviewed _______.

Accepted Answer

A) on a regular basis to remove old vendors or potential duplicate vendors 
B) every five years to remove old vendors or potential duplicate vendors 
C) on a regular basis to remove new vendors or potential duplicate vendors 
D) every five years to remove new vendors or potential duplicate vendors 
A) on a regular basis to remove old vendors or potential duplicate vendors 
B) every five years to remove old vendors or potential duplicate vendors 
C) on a regular basis to remove new vendors or potential duplicate vendors 
D) every five years to remove new vendors or potential duplicate vendors

Question 3

All of the following are tests of presentation and disclosure for auditing the payroll process, EXCEPT _______.

Accepted Answer

A) reviewing presentation and disclosure for payroll costs in drafts of financial statements 
B) evaluating the completeness of presentation and disclosure for receivables in drafts of financial statements 
C) reading disclosures and independently evaluate their understandability 
D) verifying accrued payroll was reported and in the drafts of the financial statements 
A) reviewing presentation and disclosure for payroll costs in drafts of financial statements 
B) evaluating the completeness of presentation and disclosure for receivables in drafts of financial statements 
C) reading disclosures and independently evaluate their understandability 
D) verifying accrued payroll was reported and in the drafts of the financial statements

Question 4

The purchases cutoff test involves determining that _______.

Accepted Answer

A) purchase transactions occurring near the balance sheet date are recorded in the proper period 
B) sales transactions occurring near the balance sheet date are recorded in the proper period 
C) purchase transactions occurring near the balance sheet date are recorded at the correct amounts 
D) sales and purchasing transactions occurring after the balance sheet date are recorded at the correct amounts 
A) purchase transactions occurring near the balance sheet date are recorded in the proper period 
B) sales transactions occurring near the balance sheet date are recorded in the proper period 
C) purchase transactions occurring near the balance sheet date are recorded at the correct amounts 
D) sales and purchasing transactions occurring after the balance sheet date are recorded at the correct amounts

Question 5

Procurement fraud risks include _______.

Accepted Answer

A) phantom vendors 
B) fictitious invoices 
C) kickbacks and bid rigging 
D) All of these answer choices are correct. 
A) phantom vendors 
B) fictitious invoices 
C) kickbacks and bid rigging 
D) All of these answer choices are correct.

Question 6

A risk related to what can go wrong with respect to authorizing purchases relates to _______.

Accepted Answer

A) purchases being made from unauthorized vendors 
B) purchases being made from authorized vendors 
C) goods received that were not ordered 
D) foods ordered that have not been received 
A) purchases being made from unauthorized vendors 
B) purchases being made from authorized vendors 
C) goods received that were not ordered 
D) foods ordered that have not been received

Question 7

When an auditor updates his or her understanding of the entity and its environment, _______.

Accepted Answer

A) each audit should be viewed identically to previous audits 
B) each audit should be viewed independently from previous audits 
C) each audit should be viewed with respect to the current audit of other clients 
D) the auditor should be sure that senior management agrees with the auditor's understanding, and modify appropriately if not 
A) each audit should be viewed identically to previous audits 
B) each audit should be viewed independently from previous audits 
C) each audit should be viewed with respect to the current audit of other clients 
D) the auditor should be sure that senior management agrees with the auditor's understanding, and modify appropriately if not

Question 8

Suppose an auditor is preparing for an audit of the payroll process of an entity and has identified that the entity is labor-intensive and depends largely on hourly compensation.The auditor still needs to understand all of the following about the entity, EXCEPT _______.

Accepted Answer

A) The capital intensiveness of the entity 
B) The importance of bonuses or other compensation arrangements 
C) The level of variability of pay throughout the period 
D) None of the answer choices are correct. 
A) The capital intensiveness of the entity 
B) The importance of bonuses or other compensation arrangements 
C) The level of variability of pay throughout the period 
D) None of the answer choices are correct.

Question 9

Many audit clients build in _______ controls so if one control does not find a misstatement, another control is designed to surface the problem.

Accepted Answer

Redundant

Question 10

Which of the following may be a risk when internal controls are poor over recording payables and cash disbursements?

Accepted Answer

A) Duplicate payments 
B) Financial payments 
C) Fictitious invoices 
D) Phantom vendors 
A) Duplicate payments 
B) Financial payments 
C) Fictitious invoices 
D) Phantom vendors

Question 11

The cash disbursements process involves which two following sub-processes?

Accepted Answer

A) approving cash disbursements and recording cash disbursements. 
B) approving cash receipts and recording cash disbursements. 
C) approving cash disbursements and recording cash receipts. 
D) approving cash receipts and recording cash receipts. 
A) approving cash disbursements and recording cash disbursements. 
B) approving cash receipts and recording cash disbursements. 
C) approving cash disbursements and recording cash receipts. 
D) approving cash receipts and recording cash receipts.

Question 12

The transaction flow in a typical purchasing process for a client purchasing goods includes _______.

Accepted Answer

A) approving purchases, shipping goods, and recording purchases and accounts payable 
B) approving purchases, receiving goods, and recording purchases and accounts payable 
C) approving purchases, receiving goods, and recording purchases and accounts receivable 
D) approving sales, receiving goods, and recording purchases and accounts receivable 
A) approving purchases, shipping goods, and recording purchases and accounts payable 
B) approving purchases, receiving goods, and recording purchases and accounts payable 
C) approving purchases, receiving goods, and recording purchases and accounts receivable 
D) approving sales, receiving goods, and recording purchases and accounts receivable

Question 13

The cash disbursements process involves the following sub-processes: _______.

Accepted Answer

A) approving cash receipts and recording cash disbursements. 
B) approving cash disbursements and recording cash disbursements. 
C) approving cash receipts and recording cash receipts. 
D) approving payables disbursements and recording cash disbursements. 
A) approving cash receipts and recording cash disbursements. 
B) approving cash disbursements and recording cash disbursements. 
C) approving cash receipts and recording cash receipts. 
D) approving payables disbursements and recording cash disbursements.

Question 14

Which of the following is a measure of productivity per employee?

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 15

The use of audit data analytics as a substantive test in auditing the payroll process depends on which of the following?

Accepted Answer

A) The substance of the client's data 
B) The quantity of the client's data 
C) The quality of the client's data 
D) The nature of the client's data 
A) The substance of the client's data 
B) The quantity of the client's data 
C) The quality of the client's data 
D) The nature of the client's data

Question 16

Purchase returns and allowances involve _______.

Accepted Answer

A) reducing payables and expenses, improving reported liquidity and earnings 
B) increasing payables and expenses, improving reported liquidity and earnings 
C) reducing payables and expenses, decreasing reported liquidity and earnings 
D) increasing payables and expenses, decreasing reported liquidity and earnings 
A) reducing payables and expenses, improving reported liquidity and earnings 
B) increasing payables and expenses, improving reported liquidity and earnings 
C) reducing payables and expenses, decreasing reported liquidity and earnings 
D) increasing payables and expenses, decreasing reported liquidity and earnings

Question 17

Goods shipped FOB (free on board) shipping point should be _______.

Accepted Answer

A) included in inventory by both the buyer and seller upon shipment 
B) included in the inventory and accounts payable of the selling entity upon shipment 
C) included in the inventory and accounts payable of the purchasing entity upon shipment 
D) excluded by both the buyer and seller upon shipment 
A) included in inventory by both the buyer and seller upon shipment 
B) included in the inventory and accounts payable of the selling entity upon shipment 
C) included in the inventory and accounts payable of the purchasing entity upon shipment 
D) excluded by both the buyer and seller upon shipment

Question 18

All of the following transactions would be considered part of the payroll process, EXCEPT _______.

Accepted Answer

A) payment of payroll taxes 
B) payment of commissions 
C) payment of incentives 
D) payment of hourly wages 
A) payment of payroll taxes 
B) payment of commissions 
C) payment of incentives 
D) payment of hourly wages

Question 19

For companies that purchase goods on account, the transaction should _______.

Accepted Answer

A) record purchases and accounts payable upon ordering of the goods 
B) record purchases and accounts payable upon the receipt of goods 
C) be input into the ledger by the auditor once it has been reviewed 
D) overstate equity until the goods are paid for 
A) record purchases and accounts payable upon ordering of the goods 
B) record purchases and accounts payable upon the receipt of goods 
C) be input into the ledger by the auditor once it has been reviewed 
D) overstate equity until the goods are paid for

Question 20

Key assertions related to cash disbursements are _______.

Accepted Answer

A) completeness, occurrence, accuracy, and cutoff 
B) verifiability, occurrence, accuracy, and cutoff 
C) going concern, occurrence, accuracy, and cutoff 
D) completeness, occurrence, accuracy, and comparability 
A) completeness, occurrence, accuracy, and cutoff 
B) verifiability, occurrence, accuracy, and cutoff 
C) going concern, occurrence, accuracy, and cutoff 
D) completeness, occurrence, accuracy, and comparability

Management and the auditor have to be alert to the risk of collusion with _______.

The master vendor file should be reviewed _______.

All of the following are tests of presentation and disclosure for auditing the payroll process, EXCEPT _______.

The purchases cutoff test involves determining that _______.

Procurement fraud risks include _______.

A risk related to what can go wrong with respect to authorizing purchases relates to _______.

When an auditor updates his or her understanding of the entity and its environment, _______.

Suppose an auditor is preparing for an audit of the payroll process of an entity and has identified that the entity is labor-intensive and depends largely on hourly compensation.The auditor still needs to understand all of the following about the entity, EXCEPT _______.

Many audit clients build in _______ controls so if one control does not find a misstatement, another control is designed to surface the problem.

Which of the following may be a risk when internal controls are poor over recording payables and cash disbursements?

The cash disbursements process involves which two following sub-processes?

The transaction flow in a typical purchasing process for a client purchasing goods includes _______.

The cash disbursements process involves the following sub-processes: _______.

Which of the following is a measure of productivity per employee?

The use of audit data analytics as a substantive test in auditing the payroll process depends on which of the following?

Purchase returns and allowances involve _______.

Goods shipped FOB (free on board) shipping point should be _______.

All of the following transactions would be considered part of the payroll process, EXCEPT _______.

For companies that purchase goods on account, the transaction should _______.

Key assertions related to cash disbursements are _______.

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

Management and the auditor have to be alert to the risk of collusion with _______.

The master vendor file should be reviewed _______.

All of the following are tests of presentation and disclosure for auditing the payroll process, EXCEPT _______.

The purchases cutoff test involves determining that _______.

Procurement fraud risks include _______.

A risk related to what can go wrong with respect to authorizing purchases relates to _______.

When an auditor updates his or her understanding of the entity and its environment, _______.

Suppose an auditor is preparing for an audit of the payroll process of an entity and has identified that the entity is labor-intensive and depends largely on hourly compensation.The auditor still needs to understand all of the following about the entity, EXCEPT _______.

Many audit clients build in _______ controls so if one control does not find a misstatement, another control is designed to surface the problem.

Which of the following may be a risk when internal controls are poor over recording payables and cash disbursements?

The cash disbursements process involves which two following sub-processes?

The transaction flow in a typical purchasing process for a client purchasing goods includes _______.

The cash disbursements process involves the following sub-processes: _______.

Which of the following is a measure of productivity per employee?

The use of audit data analytics as a substantive test in auditing the payroll process depends on which of the following?

Purchase returns and allowances involve _______.

Goods shipped FOB (free on board) shipping point should be _______.

All of the following transactions would be considered part of the payroll process, EXCEPT _______.

For companies that purchase goods on account, the transaction should _______.

Key assertions related to cash disbursements are _______.

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