Question 1

To express an unqualified opinion on the balance sheet, the auditor must observe the beginning and ending inventories.

Accepted Answer

A) True 
 B)False  False

Question 2

Listed below are five assertion categories coded by the letters A through E.
-Inventories include all materials, products, and supplies on hand at the balance sheet date.

Accepted Answer

A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure 
A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure A

Question 3

With a manufacturer, wholesaler, or retailer, however, inherent risk for inventory may be assessed at or near the maximum level for all of the following reasons except:

Accepted Answer

A)  inventories are often stored at multiple sites, adding to the difficulties associated with maintaining physical controls over theft and damages, and properly accounting for goods in transit between sites. 
B)  the wide diversity of inventory items may present special problems in determining their quality and market value. 
C)  inventories are vulnerable to spoilage, obsolescence, and other factors such as general economic conditions that may affect demand and salability, and thus the proper valuation of the inventories. 
D)  inventory may be sold subject to right of return and repurchase agreements. 
E)  the volume of purchases, manufacturing, and sales transactions that affects these accounts is generally high, decreasing the opportunities for misstatements to occur. 
A)  inventories are often stored at multiple sites, adding to the difficulties associated with maintaining physical controls over theft and damages, and properly accounting for goods in transit between sites. 
B)  the wide diversity of inventory items may present special problems in determining their quality and market value. 
C)  inventories are vulnerable to spoilage, obsolescence, and other factors such as general economic conditions that may affect demand and salability, and thus the proper valuation of the inventories. 
D)  inventory may be sold subject to right of return and repurchase agreements. 
E)  the volume of purchases, manufacturing, and sales transactions that affects these accounts is generally high, decreasing the opportunities for misstatements to occur. E

Question 4

Match between columns
                        Premises:  Payroll may be recorded for   services not received.
 Payroll tax returns may not be filed  on a timely basis.
 Payroll checks may be distributed  to unauthorized recipients.
 Employees may not be paid for  hours not worked.
 Employees may receive  unauthorized rate increases.
 Payroll transactions may include  incorrectly keyed or invalid data.
 Fictitious employees may be added  to payroll.
 Payroll data may be lost during  submission to IT.
 Terminated employees may remain   on the payroll.

Accepted Answer

The Answer of Use of time clock procedures and  is...

Question 5

Defined benefit pension plans are normally subject to requirements of the Employee Retirement Income Security Act (ERISA) of 1974, which usually requires a separate audit of the pension plan.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following manufacturing functions is not an integral part of inventory production?

Accepted Answer

A)  Issuing raw materials. 
B)  Maintaining correctness of inventory balances. 
C)  Processing goods in production. 
D)  Protecting inventories. 
E)  Transferring completed work to finished goods. 
A)  Issuing raw materials. 
B)  Maintaining correctness of inventory balances. 
C)  Processing goods in production. 
D)  Protecting inventories. 
E)  Transferring completed work to finished goods.

Question 7

Shown below is a partial system flowchart of payroll transactions.
REQUIRED: Label the symbols in the partial system flowchart.

Accepted Answer

The answer of Shown below is a partial system flowchart...

Question 8

In making test counts of inventory items, the auditor should record the count and give a complete and accurate description of the item in the working papers.

Accepted Answer

A) True 
 B)False

Question 9

Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?

Accepted Answer

A)  inventory turnover 
B)  finished goods produced to raw material used 
C)  inventory growth to cost of sales growth 
D)  finished goods produced to direct labor 
E)  product defects per million 
A)  inventory turnover 
B)  finished goods produced to raw material used 
C)  inventory growth to cost of sales growth 
D)  finished goods produced to direct labor 
E)  product defects per million

Question 10

Payroll checks should be signed by authorized personnel in the payroll department.

Accepted Answer

A) True 
 B)False

Question 11

The auditor's strategy in performing test counts during the inventory observation is to:

Accepted Answer

A)  concentrate tests on high dollar items and take a representative sample of other items. 
B)  test all high dollar items. 
C)  randomly select all test items. 
D)  concentrate tests in areas where employees seem to be disregarding the inventory instructions. 
E)  sequentially select all test items. 
A)  concentrate tests on high dollar items and take a representative sample of other items. 
B)  test all high dollar items. 
C)  randomly select all test items. 
D)  concentrate tests in areas where employees seem to be disregarding the inventory instructions. 
E)  sequentially select all test items.

Question 12

When statistical sampling methods are used by the client in determining inventories, professional standards require that the auditor ascertain the following except that the:

Accepted Answer

A)  sampling plan has statistical validity. 
B)  sampling plan has been properly applied. 
C)  results in terms of reliability are reasonable. 
D)  appropriate tests of transactions have been applied. 
E)  results in terms of precision are reasonable. 
A)  sampling plan has statistical validity. 
B)  sampling plan has been properly applied. 
C)  results in terms of reliability are reasonable. 
D)  appropriate tests of transactions have been applied. 
E)  results in terms of precision are reasonable.

Question 13

Listed below are five assertion categories coded by the letters A through E.
-Inventories included in the balance sheet physically exist.

Accepted Answer

A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure 
A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure

Question 14

The auditor need not inquire of management as to any goods held on consignment.

Accepted Answer

A) True 
 B)False

Question 15

When the lower of cost or market rule is used to value inventory, only the lower value need be verified.

Accepted Answer

A) True 
 B)False

Question 16

For proper control, unclaimed checks should be stored by the:

Accepted Answer

A)  treasurer's department. 
B)  payroll department. 
C)  personnel department. 
D)  data control department. 
E)  timekeeping department. 
A)  treasurer's department. 
B)  payroll department. 
C)  personnel department. 
D)  data control department. 
E)  timekeeping department.

Question 17

Responsibility for updating of the personnel data master file should rest with authorized employees in the:

Accepted Answer

A)  payroll department. 
B)  employee's operating department. 
C)  controller's department. 
D)  personnel department. 
E)  data control department. 
A)  payroll department. 
B)  employee's operating department. 
C)  controller's department. 
D)  personnel department. 
E)  data control department.

Question 18

When standard costs are used for manufactured inventories, the auditor's tests should include comparison of the standards with engineering specifications.

Accepted Answer

A) True 
 B)False

Question 19

Listed below are five assertion categories coded by the letters A through E.
-The reporting entity has legal title to the inventories at the balance sheet date.

Accepted Answer

A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure 
A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure

Question 20

Observation of inventories is a required audit procedure whenever inventories are material.

Accepted Answer

A) True 
 B)False

To express an unqualified opinion on the balance sheet, the auditor must observe the beginning and ending inventories.

Listed below are five assertion categories coded by the letters A through E. -Inventories include all materials, products, and supplies on hand at the balance sheet date.

With a manufacturer, wholesaler, or retailer, however, inherent risk for inventory may be assessed at or near the maximum level for all of the following reasons except:

Defined benefit pension plans are normally subject to requirements of the Employee Retirement Income Security Act (ERISA) of 1974, which usually requires a separate audit of the pension plan.

Which of the following manufacturing functions is not an integral part of inventory production?

Shown below is a partial system flowchart of payroll transactions. REQUIRED: Label the symbols in the partial system flowchart.

In making test counts of inventory items, the auditor should record the count and give a complete and accurate description of the item in the working papers.

Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?

Payroll checks should be signed by authorized personnel in the payroll department.

The auditor's strategy in performing test counts during the inventory observation is to:

When statistical sampling methods are used by the client in determining inventories, professional standards require that the auditor ascertain the following except that the:

Listed below are five assertion categories coded by the letters A through E. -Inventories included in the balance sheet physically exist.

The auditor need not inquire of management as to any goods held on consignment.

When the lower of cost or market rule is used to value inventory, only the lower value need be verified.

For proper control, unclaimed checks should be stored by the:

Responsibility for updating of the personnel data master file should rest with authorized employees in the:

When standard costs are used for manufactured inventories, the auditor's tests should include comparison of the standards with engineering specifications.

Listed below are five assertion categories coded by the letters A through E. -The reporting entity has legal title to the inventories at the balance sheet date.

Observation of inventories is a required audit procedure whenever inventories are material.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 16: Auditing the Production and

To express an unqualified opinion on the balance sheet, the auditor must observe the beginning and ending inventories.

Listed below are five assertion categories coded by the letters A through E. -Inventories include all materials, products, and supplies on hand at the balance sheet date.

With a manufacturer, wholesaler, or retailer, however, inherent risk for inventory may be assessed at or near the maximum level for all of the following reasons except:

Defined benefit pension plans are normally subject to requirements of the Employee Retirement Income Security Act (ERISA) of 1974, which usually requires a separate audit of the pension plan.

Which of the following manufacturing functions is not an integral part of inventory production?

Shown below is a partial system flowchart of payroll transactions. REQUIRED: Label the symbols in the partial system flowchart.

In making test counts of inventory items, the auditor should record the count and give a complete and accurate description of the item in the working papers.

Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?

Payroll checks should be signed by authorized personnel in the payroll department.

The auditor's strategy in performing test counts during the inventory observation is to:

When statistical sampling methods are used by the client in determining inventories, professional standards require that the auditor ascertain the following except that the:

Listed below are five assertion categories coded by the letters A through E. -Inventories included in the balance sheet physically exist.

The auditor need not inquire of management as to any goods held on consignment.

When the lower of cost or market rule is used to value inventory, only the lower value need be verified.

For proper control, unclaimed checks should be stored by the:

Responsibility for updating of the personnel data master file should rest with authorized employees in the:

When standard costs are used for manufactured inventories, the auditor's tests should include comparison of the standards with engineering specifications.

Listed below are five assertion categories coded by the letters A through E. -The reporting entity has legal title to the inventories at the balance sheet date.

Observation of inventories is a required audit procedure whenever inventories are material.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters