Question 1

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be

Accepted Answer

A) vendors with whom the entity has previously done business. 
B) amounts recorded in the accounts payable subsidiary ledger. 
C) payees of checks drawn in the month after the year-end. 
D) invoices filed in the entity's open invoice file. 
A) vendors with whom the entity has previously done business. 
B) amounts recorded in the accounts payable subsidiary ledger. 
C) payees of checks drawn in the month after the year-end. 
D) invoices filed in the entity's open invoice file.

Question 2

The usual source for journal entries posted to the general ledger to record the purchase of inventory 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) receiving reports updated with cost data from the accounts payable department. 
D) vouchers payable journal 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) receiving reports updated with cost data from the accounts payable department. 
D) vouchers payable journal from the accounts payable department.

Question 3

The typical functions of the personnel and payroll cycle would not include

Accepted Answer

A) labor relations. 
B) report of attendance and work performed. 
C) allocation to cost of goods sold. 
D) payroll accounting. 
A) labor relations. 
B) report of attendance and work performed. 
C) allocation to cost of goods sold. 
D) payroll accounting.

Question 4

Improperly capitalizing an expense item results in.

Accepted Answer

A) understatement of profit in the current year and overstatement in future years. 
B) understatement of profit in the current year and in future years. 
C) overstatement of profit in the current year and understatement in future years. 
D) overstatement of profit in the current year and in future years. 
A) understatement of profit in the current year and overstatement in future years. 
B) understatement of profit in the current year and in future years. 
C) overstatement of profit in the current year and understatement in future years. 
D) overstatement of profit in the current year and in future years.

Question 5

A CPA learns that his client has paid a vendor twice for the same shipment; once based upon the original invoice and once based upon the monthly statement sent from the vendor. A control procedure that should have prevented this duplicate payment is

Accepted Answer

A) prenumbering of disbursement vouchers. 
B) attachment of the receiving report to the disbursement report. 
C) use of a limit or reasonableness test. 
D) prenumbering of receiving reports. 
A) prenumbering of disbursement vouchers. 
B) attachment of the receiving report to the disbursement report. 
C) use of a limit or reasonableness test. 
D) prenumbering of receiving reports.

Question 6

To test the transaction assertion of occurrence in the area of payroll, the auditor most likely would

Accepted Answer

A) select a sample of personnel files and trace the pay rate to union contracts or other rate rights and obligations. 
B) select a sample of personnel files and trace the pay rate to payroll department files used in payroll preparation. 
C) select a sample of payroll register entries and recalculate gross pay, deductions, and net pay. 
D) select a sample of payroll register entries and vouch hours worked to clock time cards. 
A) select a sample of personnel files and trace the pay rate to union contracts or other rate rights and obligations. 
B) select a sample of personnel files and trace the pay rate to payroll department files used in payroll preparation. 
C) select a sample of payroll register entries and recalculate gross pay, deductions, and net pay. 
D) select a sample of payroll register entries and vouch hours worked to clock time cards.

Question 7

Which of the following controls should prevent an invoice for the purchase of merchandise from being paid twice?

Accepted Answer

A) The check signer accounts for the numerical sequence of receiving reports used in support of each payment. 
B) An individual independent of cash operations prepares a bank reconciliation. 
C) The check signer reviews and cancels the voucher packets. 
D) Two check signers are required for all checks over a specified amount. 
A) The check signer accounts for the numerical sequence of receiving reports used in support of each payment. 
B) An individual independent of cash operations prepares a bank reconciliation. 
C) The check signer reviews and cancels the voucher packets. 
D) Two check signers are required for all checks over a specified amount.

Question 8

This question requires knowledge of specific account balance assertions, general audit procedures, and trade accounts payable.
You are assigned to audit the accounts payable of Green Corporation whose business is wholesale and retail trade. The company purchases products from 1,002,000 manufacturers ("vendors") and sells the products to its retail and wholesale customers. The general ledger shows the Accounts Payable control balance as of the balance-sheet date in the amount of $42 million (which is 70 percent of current liabilities, 50 percent of total liabilities, and 35 percent of total liabilities and owners' equity). Green's management accountants post the summary entries from the purchases journal and from the cash disbursements journal each month to the Accounts Payable control account. The accounts payable manager gave you a detailed trial balance that lists all recorded unpaid invoices (recording date, vendor name, vendor invoice number, invoice date, and amount) subtotaled by vendor.
Other members of the audit team have already decided to assess control risk at the maximum for the accounts payable work. The engagement manager gave you last year's audit working papers but said the audit plan was missing (!). Thus, the first part of your assignment is to write the audit plan for audit of the Green Corporation trade accounts payable.Required:For each of the balance assertions (existence, completeness, and valuation or and allocation), write two or more specific audit procedures designed to produce evidence related to the accounts payable balance of $42 million.
(Hints: [1] For each of the three balance assertions, think about a specific assertion before you write a procedure to gather evidence. [2] Write specific procedures as adaptations of the general audit procedures: recalculation, observation, confirmation, document examination, inquiry, scanning, analytical procedures. [3] Most procedures are two-part statements: "Select a sample of... [identify the population]...and "do something"... [specify an action].)

Accepted Answer

There may be other correct answers to th

Question 9

Which of the following procedures is least likely to be performed before the balance-sheet date?

Accepted Answer

A) Observation of inventory 
B) Review of internal control over cash disbursements 
C) Search for unrecorded liabilities. 
D) Confirmation of receivables 
A) Observation of inventory 
B) Review of internal control over cash disbursements 
C) Search for unrecorded liabilities. 
D) Confirmation of receivables

Question 10

An auditor is planning the testing of the accounts payable balance. The auditor's main concerns should be

Accepted Answer

A) existence and accuracy. 
B) completeness and cutoff. 
C) occurrence and cutoff. 
D) valuation and accuracy. 
A) existence and accuracy. 
B) completeness and cutoff. 
C) occurrence and cutoff. 
D) valuation and accuracy.

Question 11

Which of the following would not be included in the supporting documents for a voucher?

Accepted Answer

A) Purchase order 
B) Vendor invoice 
C) Receiving report 
D) Blank check 
A) Purchase order 
B) Vendor invoice 
C) Receiving report 
D) Blank check

Question 12

For which of the following accounts would the matching concept be the most appropriate?

Accepted Answer

A) Cost of Goods Sold. 
B) Research and Development 
C) Depreciation Expense 
D) Sales 
A) Cost of Goods Sold. 
B) Research and Development 
C) Depreciation Expense 
D) Sales

Question 13

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to

Accepted Answer

A) ensure that employees who were absent on a payroll distribution day are not paid for that day. 
B) prevent the paymaster from cashing checks that are unclaimed for several weeks. 
C) prevent a bona fide employee's check from being claimed by another employee. 
D) detect any fictitious employee who may have been placed on the payroll. 
A) ensure that employees who were absent on a payroll distribution day are not paid for that day. 
B) prevent the paymaster from cashing checks that are unclaimed for several weeks. 
C) prevent a bona fide employee's check from being claimed by another employee. 
D) detect any fictitious employee who may have been placed on the payroll.

Question 14

Purchase cutoff procedures should be designed to produce evidence of whether merchandise is included in the inventory of the client company if the company

Accepted Answer

A) has paid for the merchandise. 
B) has physical possession of the merchandise. 
C) holds legal title to the merchandise. 
D) holds the shipping documents for the merchandise issued in the company's name. 
A) has paid for the merchandise. 
B) has physical possession of the merchandise. 
C) holds legal title to the merchandise. 
D) holds the shipping documents for the merchandise issued in the company's name.

Question 15

The auditor traces items from the receiving reports to the accounts payable journal in order to satisfy the

Accepted Answer

A) existence assertion. 
B) rights and obligations assertion. 
C) completeness assertion. 
D) valuation assertion. 
A) existence assertion. 
B) rights and obligations assertion. 
C) completeness assertion. 
D) valuation assertion.

Question 16

When goods are received, the receiving clerk should match the goods with the

Accepted Answer

A) purchase order and the requisition form. 
B) vendor's invoice and the receiving report. 
C) vendor's shipping document and the purchase order. 
D) receiving report and the vendor's shipping document. 
A) purchase order and the requisition form. 
B) vendor's invoice and the receiving report. 
C) vendor's shipping document and the purchase order. 
D) receiving report and the vendor's shipping document.

Question 17

R. Budd, the purchasing agent of Lake Hardware Wholesalers, has a relative who owns a retail hardware store. Budd arranged for hardware to be delivered by manufacturers to the retail store on a cash-on-delivery (COD) basis, thereby enabling his relative to buy at Lake's wholesale prices. Budd was probably able to accomplish this because of Lake's poor internal control over

Accepted Answer

A) purchase requisitions. 
B) cash receipts. 
C) perpetual inventory records. 
D) purchase orders. 
A) purchase requisitions. 
B) cash receipts. 
C) perpetual inventory records. 
D) purchase orders.

Question 18

Which of the following expense accounts would not normally be tested by listing all debits and examining any significant items?

Accepted Answer

A) Legal Expense 
B) Miscellaneous Expense 
C) Repairs and Maintenance 
D) Payroll Expense. 
A) Legal Expense 
B) Miscellaneous Expense 
C) Repairs and Maintenance 
D) Payroll Expense.

Question 19

An auditor most likely would perform substantive procedures on payroll transactions and balances when

Accepted Answer

A) cutoff tests indicate a substantial amount of accrued payroll expense. 
B) the assessed level of control risk relative to payroll transactions is low. 
C) analytical procedures indicate unusual fluctuations in recurring payroll entries. 
D) accrued payroll expense consists primarily of unpaid commissions. 
A) cutoff tests indicate a substantial amount of accrued payroll expense. 
B) the assessed level of control risk relative to payroll transactions is low. 
C) analytical procedures indicate unusual fluctuations in recurring payroll entries. 
D) accrued payroll expense consists primarily of unpaid commissions.

Question 20

Auditors can compare the _______ file to the _______ to determine whether the company has material unrecorded liabilities on the financial statement date.

Accepted Answer

[unmatched

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be

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

The typical functions of the personnel and payroll cycle would not include

Improperly capitalizing an expense item results in.

A CPA learns that his client has paid a vendor twice for the same shipment; once based upon the original invoice and once based upon the monthly statement sent from the vendor. A control procedure that should have prevented this duplicate payment is

To test the transaction assertion of occurrence in the area of payroll, the auditor most likely would

Which of the following controls should prevent an invoice for the purchase of merchandise from being paid twice?

Which of the following procedures is least likely to be performed before the balance-sheet date?

An auditor is planning the testing of the accounts payable balance. The auditor's main concerns should be

Which of the following would not be included in the supporting documents for a voucher?

For which of the following accounts would the matching concept be the most appropriate?

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to

Purchase cutoff procedures should be designed to produce evidence of whether merchandise is included in the inventory of the client company if the company

The auditor traces items from the receiving reports to the accounts payable journal in order to satisfy the

When goods are received, the receiving clerk should match the goods with the

Which of the following expense accounts would not normally be tested by listing all debits and examining any significant items?

An auditor most likely would perform substantive procedures on payroll transactions and balances when

Auditors can compare the _ file to the _ to determine whether the company has material unrecorded liabilities on the financial statement date.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters

Exam 8: Acquisition and Expenditure Cycle 336

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be

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

The typical functions of the personnel and payroll cycle would not include

Improperly capitalizing an expense item results in.

A CPA learns that his client has paid a vendor twice for the same shipment; once based upon the original invoice and once based upon the monthly statement sent from the vendor. A control procedure that should have prevented this duplicate payment is

To test the transaction assertion of occurrence in the area of payroll, the auditor most likely would

Which of the following controls should prevent an invoice for the purchase of merchandise from being paid twice?

Which of the following procedures is least likely to be performed before the balance-sheet date?

An auditor is planning the testing of the accounts payable balance. The auditor's main concerns should be

Which of the following would not be included in the supporting documents for a voucher?

For which of the following accounts would the matching concept be the most appropriate?

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to

Purchase cutoff procedures should be designed to produce evidence of whether merchandise is included in the inventory of the client company if the company

The auditor traces items from the receiving reports to the accounts payable journal in order to satisfy the

When goods are received, the receiving clerk should match the goods with the

Which of the following expense accounts would not normally be tested by listing all debits and examining any significant items?

An auditor most likely would perform substantive procedures on payroll transactions and balances when

Auditors can compare the _______ file to the _______ to determine whether the company has material unrecorded liabilities on the financial statement date.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters

Auditors can compare the _ file to the _ to determine whether the company has material unrecorded liabilities on the financial statement date.