Question 1

A credit balance in a client's inventory records would suggest failure to record purchases.

Accepted Answer

A) True 
 B)False  True

Question 2

"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test which control objective?

Accepted Answer

A) Environment. 
B) Accuracy. 
C) Accounting and posting. 
D) Proper period recording. 
A) Environment. 
B) Accuracy. 
C) Accounting and posting. 
D) Proper period recording. A

Question 3

The accounts payable trial balance should not include vendors with nonzero balances.

Accepted Answer

A) True 
 B)False  False

Question 4

Comparing the results of a physical inventory count to the perpetual inventory records is considered a part of the recording function.

Accepted Answer

A) True 
 B)False

Question 5

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

Accepted Answer

In general, the auditors are not require

Question 6

In Cassette 12.3 (Retread Tires), J.Lock stole money by selling the company's new tires and replacing them with retread tires.The key weakness in the control system failed to prevent or detect this scheme to continue was that

Accepted Answer

A) Lock often prepared purchase orders. 
B) Lock was the chief accountant. 
C) The president of the company signed cheques without reviewing any supporting documentation. 
D) No one noticed the invoices for the retread tires. 
A) Lock often prepared purchase orders. 
B) Lock was the chief accountant. 
C) The president of the company signed cheques without reviewing any supporting documentation. 
D) No one noticed the invoices for the retread tires.

Question 7

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

Accepted Answer

A) True 
 B)False

Question 8

When auditors trace the test counts they took at the physical inventory count to the final inventory summary, they are gathering evidence on the completeness assertion.

Accepted Answer

A) True 
 B)False

Question 9

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is:

Accepted Answer

A) Accuracy 
B) Completeness 
C) Validity 
D) Classification 
A) Accuracy 
B) Completeness 
C) Validity 
D) Classification

Question 10

A client maintains perpetual inventory records in both quantities and dollars.If the assessed level of control risk is high, an auditor would probably

Accepted Answer

A) Insist that the client perform physical counts of inventory items several times during the year. 
B) Apply gross profit tests to ascertain the reasonableness of the physical counts. 
C) Increase the extent of tests of controls of the inventory cycle. 
D) Ask the client to schedule the physical inventory count at the end of the year. 
A) Insist that the client perform physical counts of inventory items several times during the year. 
B) Apply gross profit tests to ascertain the reasonableness of the physical counts. 
C) Increase the extent of tests of controls of the inventory cycle. 
D) Ask the client to schedule the physical inventory count at the end of the year.

Question 11

Which of the following situations indicates a potential material weakness in internal control over acquisitions and expenditures?

Accepted Answer

A) Purchase orders are not prepared for services that are acquired directly under authorization of department heads. 
B) The person who approves purchases also signs the cheques. 
C) Unacceptable goods are not recorded on receiving reports. 
D) The person who signs the cheques also stamps "paid" on the vouchers. 
A) Purchase orders are not prepared for services that are acquired directly under authorization of department heads. 
B) The person who approves purchases also signs the cheques. 
C) Unacceptable goods are not recorded on receiving reports. 
D) The person who signs the cheques also stamps "paid" on the vouchers.

Question 12

An auditor should not be concerned if a cross-reference of vendor addresses with employee addresses reveals that there are matches.

Accepted Answer

A) True 
 B)False

Question 13

The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.

Accepted Answer

A) True 
 B)False

Question 14

The statement that "all purchase orders must be supported by properly approved purchase requisitions" is a specific example of which general objective?

Accepted Answer

A) Validity. 
B) Completeness. 
C) Authorization. 
D) Classification. 
A) Validity. 
B) Completeness. 
C) Authorization. 
D) Classification.

Question 15

Mary Monitor CA noted that ABC Co.Ltd.received goods prior to year-end and included them in the physical inventory but did not been record them in the accounting records.In this case which of the following adjustments should be made?

Accepted Answer

A) Debit Purchases/credit Cost of Goods Sold. 
B) No adjustment is necessary. 
C) Debit Inventory /credit Accounts Payable. 
D) Debit Cost of Goods Sold/credit Accounts Payable. 
A) Debit Purchases/credit Cost of Goods Sold. 
B) No adjustment is necessary. 
C) Debit Inventory /credit Accounts Payable. 
D) Debit Cost of Goods Sold/credit Accounts Payable.

Question 16

When performing procedures to search for unrecorded liabilities, the auditor can obtain several sources of audit evidence; for example, documents, files, and enquiries of management and clerical personnel.
Required:
List at least five, but no more than eight, sources of audit evidence that could be accumulated in the search for unrecorded liabilities.(Do not write procedures or reasons for using the sources.)

Accepted Answer

i.Open purchase order file.
ii.Unmatched

Question 17

When confirming accounts payable, emphasis should be put on what kind of accounts?

Accepted Answer

A) Accounts with small or zero balances. 
B) All accounts should be equally emphasized. 
C) Accounts with large balances. 
D) Accounts listed in the accounts payable subsidiary ledger. 
A) Accounts with small or zero balances. 
B) All accounts should be equally emphasized. 
C) Accounts with large balances. 
D) Accounts listed in the accounts payable subsidiary ledger.

Question 18

Physical observation procedures for inventory are designed to audit for existence, completeness and valuation.

Accepted Answer

A) True 
 B)False

Question 19

Brown CA was auditing her client Red Manufacturing Company.She selected a sample of inventory item recorded as issues in the perpetual records and vouched them to production requisitions.Brown's audit procedure was intended to satisfy which control objective?

Accepted Answer

A) Validity. 
B) Completeness. 
C) Authorization. 
D) Accuracy. 
A) Validity. 
B) Completeness. 
C) Authorization. 
D) Accuracy.

Question 20

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Accepted Answer

The auditor must determine where the inv

A credit balance in a client's inventory records would suggest failure to record purchases.

"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test which control objective?

The accounts payable trial balance should not include vendors with nonzero balances.

Comparing the results of a physical inventory count to the perpetual inventory records is considered a part of the recording function.

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

In Cassette 12.3 (Retread Tires), J.Lock stole money by selling the company's new tires and replacing them with retread tires.The key weakness in the control system failed to prevent or detect this scheme to continue was that

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

When auditors trace the test counts they took at the physical inventory count to the final inventory summary, they are gathering evidence on the completeness assertion.

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is:

A client maintains perpetual inventory records in both quantities and dollars.If the assessed level of control risk is high, an auditor would probably

Which of the following situations indicates a potential material weakness in internal control over acquisitions and expenditures?

An auditor should not be concerned if a cross-reference of vendor addresses with employee addresses reveals that there are matches.

The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.

The statement that "all purchase orders must be supported by properly approved purchase requisitions" is a specific example of which general objective?

Mary Monitor CA noted that ABC Co.Ltd.received goods prior to year-end and included them in the physical inventory but did not been record them in the accounting records.In this case which of the following adjustments should be made?

When confirming accounts payable, emphasis should be put on what kind of accounts?

Physical observation procedures for inventory are designed to audit for existence, completeness and valuation.

Brown CA was auditing her client Red Manufacturing Company.She selected a sample of inventory item recorded as issues in the perpetual records and vouched them to production requisitions.Brown's audit procedure was intended to satisfy which control objective?

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters

Exam 12: Purchases, Payables, and Payments Processtrue

A credit balance in a client's inventory records would suggest failure to record purchases.

"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test which control objective?

The accounts payable trial balance should not include vendors with nonzero balances.

Comparing the results of a physical inventory count to the perpetual inventory records is considered a part of the recording function.

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

In Cassette 12.3 (Retread Tires), J.Lock stole money by selling the company's new tires and replacing them with retread tires.The key weakness in the control system failed to prevent or detect this scheme to continue was that

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

When auditors trace the test counts they took at the physical inventory count to the final inventory summary, they are gathering evidence on the completeness assertion.

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is:

A client maintains perpetual inventory records in both quantities and dollars.If the assessed level of control risk is high, an auditor would probably

Which of the following situations indicates a potential material weakness in internal control over acquisitions and expenditures?

An auditor should not be concerned if a cross-reference of vendor addresses with employee addresses reveals that there are matches.

The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.

The statement that "all purchase orders must be supported by properly approved purchase requisitions" is a specific example of which general objective?

Mary Monitor CA noted that ABC Co.Ltd.received goods prior to year-end and included them in the physical inventory but did not been record them in the accounting records.In this case which of the following adjustments should be made?

When confirming accounts payable, emphasis should be put on what kind of accounts?

Physical observation procedures for inventory are designed to audit for existence, completeness and valuation.

Brown CA was auditing her client Red Manufacturing Company.She selected a sample of inventory item recorded as issues in the perpetual records and vouched them to production requisitions.Brown's audit procedure was intended to satisfy which control objective?

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters