Question 1

Generally Accepted Auditing Standards require the auditor to supervise the taking of the client's physical inventory.

Accepted Answer

A) True 
 B)False

Question 2

Auditors are often concerned about the completeness assertion in the payroll cycle.

Accepted Answer

A) True 
 B)False

Question 3

A company has a policy that all terminated employees must have an "exit interview" with a member of the personnel department, who documents the discussion. This control relates to the:

Accepted Answer

A)  valuation or allocation assertion. 
B)  completeness assertion. 
C)  rights and obligations assertion. 
D)  presentation or disclosure assertion. 
E)  existence or occurrence assertion. 
A)  valuation or allocation assertion. 
B)  completeness assertion. 
C)  rights and obligations assertion. 
D)  presentation or disclosure assertion. 
E)  existence or occurrence assertion.

Question 4

Testing the inventory pricing relates primarily to the:

Accepted Answer

A)  existence or occurrence assertion. 
B)  completeness assertion. 
C)  rights and obligations assertion. 
D)  presentation or disclosure assertion. 
E)  valuation or allocation assertion. 
A)  existence or occurrence assertion. 
B)  completeness assertion. 
C)  rights and obligations assertion. 
D)  presentation or disclosure assertion. 
E)  valuation or allocation assertion.

Question 5

The production cycle relates to:

Accepted Answer

A)  the conversion of inventory into receivables or cash. 
B)  activities involving the acquisition of and payment for goods and services. 
C)  exchanges of goods and services with customers. 
D)  events and activities that pertain to executive and employee compensation. 
E)  the conversion of raw materials into finished goods. 
A)  the conversion of inventory into receivables or cash. 
B)  activities involving the acquisition of and payment for goods and services. 
C)  exchanges of goods and services with customers. 
D)  events and activities that pertain to executive and employee compensation. 
E)  the conversion of raw materials into finished goods.

Question 6

The computer file that contains each employee's gross earnings, payroll deductions, and net pay for the year-to-date by pay periods is the employee personnel file.

Accepted Answer

A) True 
 B)False

Question 7

Which if the following is not a component of determining and recording manufacturing costs?

Accepted Answer

A)  Charging direct materials and direct labor to work in process. 
B)  Transferring costs between production departments. 
C)  Assigning manufacturing overhead to work in process. 
D)  Maintaining correctness of inventory balances. 
E)  Transferring the cost of completed production to finished goods. 
A)  Charging direct materials and direct labor to work in process. 
B)  Transferring costs between production departments. 
C)  Assigning manufacturing overhead to work in process. 
D)  Maintaining correctness of inventory balances. 
E)  Transferring the cost of completed production to finished goods.

Question 8

A programmed routine in the edit run for payroll lists all employees who worked more than 50 hours during the week for review. This is an example of a:

Accepted Answer

A)  validity check. 
B)  reasonableness check. 
C)  sequence check. 
D)  self-checking check. 
E)  independent check. 
A)  validity check. 
B)  reasonableness check. 
C)  sequence check. 
D)  self-checking check. 
E)  independent check.

Question 9

Reviewing data pertaining to inventory quality relates primarily to the:

Accepted Answer

A)  existence or occurrence assertion. 
B)  completeness assertion. 
C)  valuation or allocation assertion. 
D)  rights and obligations assertion. 
E)  presentation or disclosure assertion. 
A)  existence or occurrence assertion. 
B)  completeness assertion. 
C)  valuation or allocation assertion. 
D)  rights and obligations assertion. 
E)  presentation or disclosure assertion.

Question 10

Inherent risk for the valuation or allocation assertion will be high in the personnel services cycle when:

Accepted Answer

A)  employee turnover is low. 
B)  factory workers are paid based on production. 
C)  payroll checks are drawn from a separate imprest bank account. 
D)  pay periods are weekly. 
E)  employee absenteeism is minimal. 
A)  employee turnover is low. 
B)  factory workers are paid based on production. 
C)  payroll checks are drawn from a separate imprest bank account. 
D)  pay periods are weekly. 
E)  employee absenteeism is minimal.

Question 11

The observation of inventory relates primarily to the:

Accepted Answer

A)  existence or occurrence assertion. 
B)  completeness assertion. 
C)  rights and obligations assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion. 
A)  existence or occurrence assertion. 
B)  completeness assertion. 
C)  rights and obligations assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion.

Question 12

The checks that are generated by an automated system are normally sent directly from computer processing to the:

Accepted Answer

A)  data control department, which forwards them to the treasurer. 
B)  data control department, which forwards them to the payroll department. 
C)  personnel department. 
D)  payroll department. 
E)  treasurer. 
A)  data control department, which forwards them to the treasurer. 
B)  data control department, which forwards them to the payroll department. 
C)  personnel department. 
D)  payroll department. 
E)  treasurer.

Question 13

In companies where inventories are at multiple locations, the auditor's observations ordinarily should include:

Accepted Answer

A)  all inventory locations. 
B)  a random sample of locations. 
C)  several inventory locations picked by the auditor. 
D)  a representative sample of locations. 
E)  all significant inventory locations. 
A)  all inventory locations. 
B)  a random sample of locations. 
C)  several inventory locations picked by the auditor. 
D)  a representative sample of locations. 
E)  all significant inventory locations.

Question 14

The taking of a physical inventory by a client is normally done according to a plan or a list of instructions. The client's instructions should include the following matters except:

Accepted Answer

A)  date of the counts. 
B)  names of employees responsible for observing the inventory taking. 
C)  locations to be counted. 
D)  segregation or identification of goods not owned. 
E)  detailed instructions on how the counts are to be made. 
A)  date of the counts. 
B)  names of employees responsible for observing the inventory taking. 
C)  locations to be counted. 
D)  segregation or identification of goods not owned. 
E)  detailed instructions on how the counts are to be made.

Question 15

Which of the following is a form used by employees to record the hours worked daily during a pay period?

Accepted Answer

A)  Clock card. 
B)  Time ticket. 
C)  Labor cost distribution summary. 
D)  Move ticket. 
E)  Daily production report. 
A)  Clock card. 
B)  Time ticket. 
C)  Labor cost distribution summary. 
D)  Move ticket. 
E)  Daily production report.

Question 16

A record of the disciplinary actions brought against a particular employee would most likely be found in the:

Accepted Answer

A)  employee personnel file. 
B)  personnel data master file. 
C)  employee earnings master file. 
D)  payroll register. 
E)  employee earnings transaction file. 
A)  employee personnel file. 
B)  personnel data master file. 
C)  employee earnings master file. 
D)  payroll register. 
E)  employee earnings transaction file.

Question 17

The hiring of employees should be done in the payroll department.

Accepted Answer

A) True 
 B)False

Question 18

Following are a number of potential misstatements that might occur in the personnel services cycle. Also listed are a number of necessary controls for this cycle.
REQUIRED: For each potential misstatement, indicate, using the assigned letter, the necessary control that would most likely prevent or detect the misstatement.

Accepted Answer

1. H 6. E

Question 19

During the observation of the inventory, the auditor has no responsibility to:

Accepted Answer

A)  observe the taking of the inventory by client personnel. 
B)  make some test counts of inventory quantities. 
C)  supervise the taking of the inventory. 
D)  make inquiries of the client concerning the inventories. 
E)  watch for damaged and obsolete inventory items. 
A)  observe the taking of the inventory by client personnel. 
B)  make some test counts of inventory quantities. 
C)  supervise the taking of the inventory. 
D)  make inquiries of the client concerning the inventories. 
E)  watch for damaged and obsolete inventory items.

Question 20

The personnel services cycle is included in the expenditure cycle.

Accepted Answer

A) True 
 B)False

Generally Accepted Auditing Standards require the auditor to supervise the taking of the client's physical inventory.

Auditors are often concerned about the completeness assertion in the payroll cycle.

A company has a policy that all terminated employees must have an "exit interview" with a member of the personnel department, who documents the discussion. This control relates to the:

Testing the inventory pricing relates primarily to the:

The production cycle relates to:

The computer file that contains each employee's gross earnings, payroll deductions, and net pay for the year-to-date by pay periods is the employee personnel file.

Which if the following is not a component of determining and recording manufacturing costs?

A programmed routine in the edit run for payroll lists all employees who worked more than 50 hours during the week for review. This is an example of a:

Reviewing data pertaining to inventory quality relates primarily to the:

Inherent risk for the valuation or allocation assertion will be high in the personnel services cycle when:

The observation of inventory relates primarily to the:

The checks that are generated by an automated system are normally sent directly from computer processing to the:

In companies where inventories are at multiple locations, the auditor's observations ordinarily should include:

The taking of a physical inventory by a client is normally done according to a plan or a list of instructions. The client's instructions should include the following matters except:

Which of the following is a form used by employees to record the hours worked daily during a pay period?

A record of the disciplinary actions brought against a particular employee would most likely be found in the:

The hiring of employees should be done in the payroll department.

During the observation of the inventory, the auditor has no responsibility to:

The personnel services cycle is included in the expenditure cycle.

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

Generally Accepted Auditing Standards require the auditor to supervise the taking of the client's physical inventory.

Auditors are often concerned about the completeness assertion in the payroll cycle.

A company has a policy that all terminated employees must have an "exit interview" with a member of the personnel department, who documents the discussion. This control relates to the:

Testing the inventory pricing relates primarily to the:

The production cycle relates to:

The computer file that contains each employee's gross earnings, payroll deductions, and net pay for the year-to-date by pay periods is the employee personnel file.

Which if the following is not a component of determining and recording manufacturing costs?

A programmed routine in the edit run for payroll lists all employees who worked more than 50 hours during the week for review. This is an example of a:

Reviewing data pertaining to inventory quality relates primarily to the:

Inherent risk for the valuation or allocation assertion will be high in the personnel services cycle when:

The observation of inventory relates primarily to the:

The checks that are generated by an automated system are normally sent directly from computer processing to the:

In companies where inventories are at multiple locations, the auditor's observations ordinarily should include:

The taking of a physical inventory by a client is normally done according to a plan or a list of instructions. The client's instructions should include the following matters except:

Which of the following is a form used by employees to record the hours worked daily during a pay period?

A record of the disciplinary actions brought against a particular employee would most likely be found in the:

The hiring of employees should be done in the payroll department.

During the observation of the inventory, the auditor has no responsibility to:

The personnel services cycle is included in the expenditure cycle.

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