Question 1

The usual source of journal entries to record the purchase of inventory in the general ledger is

Accepted Answer

A) Sales invoices updated with cost data from the inventory records department. 
B) Purchase invoices updated with cost data from the inventory records department. 
C) Bid quotes updated with cost data from the inventory records department. 
D) Receiving reports updated with cost data from the accounts payable department. 
A) Sales invoices updated with cost data from the inventory records department. 
B) Purchase invoices updated with cost data from the inventory records department. 
C) Bid quotes updated with cost data from the inventory records department. 
D) Receiving reports updated with cost data from the accounts payable department.

Question 2

When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items in the inventory warehouse, the auditor is collecting evidence to support which assertion?

Accepted Answer

A) Presentation. 
B) Valuation. 
C) Completeness. 
D) Existence. 
A) Presentation. 
B) Valuation. 
C) Completeness. 
D) Existence.

Question 3

Which control objective is associated with observing the inventory record keeping personnel as they perform their work?

Accepted Answer

A) Authorization 
B) Completeness 
C) Environment 
D) Accuracy 
A) Authorization 
B) Completeness 
C) Environment 
D) Accuracy

Question 4

Limiting access to blank documents, such as purchase orders, is part of the custody duty in the acquisition and expenditure cycle.

Accepted Answer

A) True 
 B)False

Question 5

The accounts payable trial balance is a list of payable amounts by vendor.This total should equal the control account total in the general ledger.

Accepted Answer

A) True 
 B)False

Question 6

If a client uses the cycle method of counting inventory and never takes "wall to wall" inventory on a single date, what must the auditor do in order to avoid requesting the client to take a full inventory count?

Accepted Answer

The auditor must understand the cycle co

Question 7

Rather than counting the entire inventory at year-end, a company may make periodic, or cycle counts, of selected inventory items at various times during the year.Which of the following is necessary if the auditor plans to observe inventories at interim dates?

Accepted Answer

A) Complete recounts by independent teams are performed. 
B) Perpetual inventory records are maintained. 
C) Unit cost records are integrated with production accounting records. 
D) Inventory balances are rarely at low levels. 
A) Complete recounts by independent teams are performed. 
B) Perpetual inventory records are maintained. 
C) Unit cost records are integrated with production accounting records. 
D) Inventory balances are rarely at low levels.

Question 8

Auditors can perform detail tests of control audit procedures to determine whether the client throughout the period of intended reliance is actually performing controls that are said to be in place and operating.What two characteristics must a detail test of controls audit procedure have in order to be successful?

Accepted Answer

The auditor must identify the population

Question 9

Martinez CA was auditing his client, Marvelous Retail Limited.He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports.This procedure was intended to satisfy which control objective?

Accepted Answer

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

Question 10

Jack PA is the auditor of Jill Corporation.Jack followed last year's working papers in selecting accounts payable to confirm.Jack mailed confirmations to 50 of Jill's 200 suppliers.The sample was designed to select accounts with the largest balances.Jack and Jill spent a lot of time reconciling minor differences between the confirmation amounts and the accounts payable trial balance.
Required:
Do you believe that Jack should have used the same sample design for accounts payable confirmations this year? If not, what suggestions can you give to improve the design?

Accepted Answer

Because of concern about the possible un

Question 11

Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?

Accepted Answer

A) Perpetual inventory records are periodically compared with the current cost of individual inventory items. 
B) A just-in-time inventory ordering system keeps inventory levels at a desired minimum. 
C) Requisitions, receiving reports, and purchase orders are independently matched before payment is approved. 
D) Periodic inventory counts are used to adjust the perpetual inventory records. 
A) Perpetual inventory records are periodically compared with the current cost of individual inventory items. 
B) A just-in-time inventory ordering system keeps inventory levels at a desired minimum. 
C) Requisitions, receiving reports, and purchase orders are independently matched before payment is approved. 
D) Periodic inventory counts are used to adjust the perpetual inventory records.

Question 12

A good environmental control over purchases and payables would be to have:

Accepted Answer

A) The accounting department independent of the sales department. 
B) The purchasing department independent of the receiving department. 
C) The information systems department independent of the accounting department. 
D) The sales department independent of the shipping department. 
A) The accounting department independent of the sales department. 
B) The purchasing department independent of the receiving department. 
C) The information systems department independent of the accounting department. 
D) The sales department independent of the shipping department.

Question 13

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Accepted Answer

To test for completeness, the auditor's

Question 14

Information gathering about the control structure often begins with an internal control questionnaire.

Accepted Answer

A) True 
 B)False

Question 15

Purchase cut off procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company

Accepted Answer

A) Has been paid for. 
B) Is physically present in the warehouse. 
C) Is owned by the company (legal title has been transferred). 
D) Relates to the shipping documents for the merchandise issued in the company's name. 
A) Has been paid for. 
B) Is physically present in the warehouse. 
C) Is owned by the company (legal title has been transferred). 
D) Relates to the shipping documents for the merchandise issued in the company's name.

Question 16

If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of validity.

Accepted Answer

A) True 
 B)False

Question 17

Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.

Accepted Answer

A) True 
 B)False

The usual source of journal entries to record the purchase of inventory in the general ledger is

When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items in the inventory warehouse, the auditor is collecting evidence to support which assertion?

Which control objective is associated with observing the inventory record keeping personnel as they perform their work?

Limiting access to blank documents, such as purchase orders, is part of the custody duty in the acquisition and expenditure cycle.

The accounts payable trial balance is a list of payable amounts by vendor.This total should equal the control account total in the general ledger.

If a client uses the cycle method of counting inventory and never takes "wall to wall" inventory on a single date, what must the auditor do in order to avoid requesting the client to take a full inventory count?

Rather than counting the entire inventory at year-end, a company may make periodic, or cycle counts, of selected inventory items at various times during the year.Which of the following is necessary if the auditor plans to observe inventories at interim dates?

Martinez CA was auditing his client, Marvelous Retail Limited.He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports.This procedure was intended to satisfy which control objective?

Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?

A good environmental control over purchases and payables would be to have:

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Information gathering about the control structure often begins with an internal control questionnaire.

Purchase cut off procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company

If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of validity.

Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.

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

The usual source of journal entries to record the purchase of inventory in the general ledger is

When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items in the inventory warehouse, the auditor is collecting evidence to support which assertion?

Which control objective is associated with observing the inventory record keeping personnel as they perform their work?

Limiting access to blank documents, such as purchase orders, is part of the custody duty in the acquisition and expenditure cycle.

The accounts payable trial balance is a list of payable amounts by vendor.This total should equal the control account total in the general ledger.

If a client uses the cycle method of counting inventory and never takes "wall to wall" inventory on a single date, what must the auditor do in order to avoid requesting the client to take a full inventory count?

Rather than counting the entire inventory at year-end, a company may make periodic, or cycle counts, of selected inventory items at various times during the year.Which of the following is necessary if the auditor plans to observe inventories at interim dates?

Martinez CA was auditing his client, Marvelous Retail Limited.He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports.This procedure was intended to satisfy which control objective?

Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?

A good environmental control over purchases and payables would be to have:

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Information gathering about the control structure often begins with an internal control questionnaire.

Purchase cut off procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company

If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of validity.

Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.

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