Question 1

No individual with authority to sign payroll cheques or approve direct bank transfers should be permitted access to:

Accepted Answer

A)  timekeeping. 
B)  the computer. 
C)  the preparation of payroll. 
D)  both A and B 
A)  timekeeping. 
B)  the computer. 
C)  the preparation of payroll. 
D)  both A and B

Question 2

The most common type of fraud by employees in the payroll area is:

Accepted Answer

A)  nonexistent employees. 
B)  fraudulent hours. 
C)  unauthorized bonuses. 
D)  A and B 
A)  nonexistent employees. 
B)  fraudulent hours. 
C)  unauthorized bonuses. 
D)  A and B

Question 3

Which is the BEST audit procedure for the discovery of damaged merchandise?

Accepted Answer

A)  Review the management's inventory representation letter for accuracy. 
B)  Be alert for items that are located in inappropriate places while observing the client's physical inventory count. 
C)  Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average. 
D)  Compare the physical quantities of slow-moving items with corresponding quantities of the prior year. 
A)  Review the management's inventory representation letter for accuracy. 
B)  Be alert for items that are located in inappropriate places while observing the client's physical inventory count. 
C)  Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average. 
D)  Compare the physical quantities of slow-moving items with corresponding quantities of the prior year.

Question 4

Match between columns
                        Premises: a document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition
a document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted
a document used to establish a formal means of recording and controlling acquisitions, including a cover sheet and a package of relevant documents
a listing of the amount owed to each vendor at a point in time
a document prepared by the purchasing department indicating the description, quantity, and related information for goods and services that the company intends to purchase

Accepted Answer

The Answer of summary acquisitions report and accounts payable trial is...

Question 5

Discuss each of the primary documents and records used in the personnel and employment function in the payroll and personnel cycle.

Accepted Answer

The primary documents and records used i

Question 6

In connection with the client's physical count of inventory, adequate controls include:

Accepted Answer

A)  adequate control over count sheets or tags. 
B)  proper instructions for the physical count and supervision by responsible personnel. 
C)  independent internal verification including reconciliation of physical counts with perpetual inventory master files. 
D)  all of the above 
A)  adequate control over count sheets or tags. 
B)  proper instructions for the physical count and supervision by responsible personnel. 
C)  independent internal verification including reconciliation of physical counts with perpetual inventory master files. 
D)  all of the above

Question 7

For effective internal control purposes, the accounts payable department generally should:

Accepted Answer

A)  stamp, perforate, or otherwise cancel supporting documentation after payment is mailed. 
B)  obliterate the quantity ordered on the receiving department copy of the purchase order. 
C)  establish the agreement of the vendor's invoice with the receiving report and purchase order. 
D)  ascertain that each requisition is approved as to price, quantity, and quality by an authorised employee. 
A)  stamp, perforate, or otherwise cancel supporting documentation after payment is mailed. 
B)  obliterate the quantity ordered on the receiving department copy of the purchase order. 
C)  establish the agreement of the vendor's invoice with the receiving report and purchase order. 
D)  ascertain that each requisition is approved as to price, quantity, and quality by an authorised employee.

Question 8

To test for proper sales cutoff, an auditor would obtain the number of the last shipping document (bill of lading)issued during the period under audit and verify that the item shipped had been excluded from the inventory listing.

Accepted Answer

A) True 
 B)False

Question 9

To test for overstatement cutoff amounts when auditing accounts payable, the auditor should trace receiving reports issued before year-end to related vendors' invoices to make sure they are not recorded as accounts payable.

Accepted Answer

A) True 
 B)False

Question 10

Failure to record the acquisition of goods and services directly affects the balance in accounts payable and may result in an overstatement of net income and owner's equity.

Accepted Answer

A) True 
 B)False

Question 11

The audit procedure 'examine paid cheque for authorised signature, proper endorsement, and cancellation by the bank' is used to test the existence objective for cash payments.

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following would NOT justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

Accepted Answer

A)  The new payroll bookkeeper has a much better educational background than the former one. 
B)  Payroll transactions are uniform and uncomplicated. 
C)  Employees will detect any underpayments. 
D)  Payroll transactions are extensively audited by government agencies. 
A)  The new payroll bookkeeper has a much better educational background than the former one. 
B)  Payroll transactions are uniform and uncomplicated. 
C)  Employees will detect any underpayments. 
D)  Payroll transactions are extensively audited by government agencies.

Question 13

State each of the six specific transaction-related audit objectives for acquisitions, and, for each objective, describe one common substantive test of transactions.

Accepted Answer

The six specific transaction-related aud

Question 14

Which of the following is NOT a factor affecting the complexity of the audit of inventory?

Accepted Answer

A)  inventory often being the largest item on the balance sheet 
B)  different acceptable valuation methods 
C)  counting inventory at different locations 
D)  inventory being stored at more than one location 
A)  inventory often being the largest item on the balance sheet 
B)  different acceptable valuation methods 
C)  counting inventory at different locations 
D)  inventory being stored at more than one location

Question 15

A document frequently used by organisations to establish a formal means of recording the controlling acquisitions, and which usually contains a package of documents relevant to the acquisition, is the:

Accepted Answer

A)  receiving report. 
B)  voucher. 
C)  purchase order. 
D)  purchase requisition. 
A)  receiving report. 
B)  voucher. 
C)  purchase order. 
D)  purchase requisition.

Question 16

The basis for the auditor's verification of inventory pricing and compilation is the substantive testing performed in that area.What is the purpose of each group of tests?

Accepted Answer

The purpose of inventory pricing tests i

Question 17

The reliability of the perpetual inventory master file will affect the extent of the auditor's physical examination of inventory.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following is a test of controls?

Accepted Answer

A)  Examine time records for indication of supervisor approval. 
B)  Prove the bank reconciliation. 
C)  Reconcile payments in the payroll journal with payments on the bank statement. 
D)  Review the payroll journal, general ledger, and payroll earnings records for large or unusual amounts. 
A)  Examine time records for indication of supervisor approval. 
B)  Prove the bank reconciliation. 
C)  Reconcile payments in the payroll journal with payments on the bank statement. 
D)  Review the payroll journal, general ledger, and payroll earnings records for large or unusual amounts.

No individual with authority to sign payroll cheques or approve direct bank transfers should be permitted access to:

The most common type of fraud by employees in the payroll area is:

Which is the BEST audit procedure for the discovery of damaged merchandise?

Discuss each of the primary documents and records used in the personnel and employment function in the payroll and personnel cycle.

In connection with the client's physical count of inventory, adequate controls include:

For effective internal control purposes, the accounts payable department generally should:

To test for proper sales cutoff, an auditor would obtain the number of the last shipping document (bill of lading)issued during the period under audit and verify that the item shipped had been excluded from the inventory listing.

To test for overstatement cutoff amounts when auditing accounts payable, the auditor should trace receiving reports issued before year-end to related vendors' invoices to make sure they are not recorded as accounts payable.

Failure to record the acquisition of goods and services directly affects the balance in accounts payable and may result in an overstatement of net income and owner's equity.

The audit procedure 'examine paid cheque for authorised signature, proper endorsement, and cancellation by the bank' is used to test the existence objective for cash payments.

Which one of the following would NOT justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

State each of the six specific transaction-related audit objectives for acquisitions, and, for each objective, describe one common substantive test of transactions.

Which of the following is NOT a factor affecting the complexity of the audit of inventory?

A document frequently used by organisations to establish a formal means of recording the controlling acquisitions, and which usually contains a package of documents relevant to the acquisition, is the:

The basis for the auditor's verification of inventory pricing and compilation is the substantive testing performed in that area.What is the purpose of each group of tests?

The reliability of the perpetual inventory master file will affect the extent of the auditor's physical examination of inventory.

Which one of the following is a test of controls?

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

Filters

Exam 15: Audit of transaction cycles and financial statement balances I

No individual with authority to sign payroll cheques or approve direct bank transfers should be permitted access to:

The most common type of fraud by employees in the payroll area is:

Which is the BEST audit procedure for the discovery of damaged merchandise?

Discuss each of the primary documents and records used in the personnel and employment function in the payroll and personnel cycle.

In connection with the client's physical count of inventory, adequate controls include:

For effective internal control purposes, the accounts payable department generally should:

To test for proper sales cutoff, an auditor would obtain the number of the last shipping document (bill of lading)issued during the period under audit and verify that the item shipped had been excluded from the inventory listing.

To test for overstatement cutoff amounts when auditing accounts payable, the auditor should trace receiving reports issued before year-end to related vendors' invoices to make sure they are not recorded as accounts payable.

Failure to record the acquisition of goods and services directly affects the balance in accounts payable and may result in an overstatement of net income and owner's equity.

The audit procedure 'examine paid cheque for authorised signature, proper endorsement, and cancellation by the bank' is used to test the existence objective for cash payments.

Which one of the following would NOT justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

State each of the six specific transaction-related audit objectives for acquisitions, and, for each objective, describe one common substantive test of transactions.

Which of the following is NOT a factor affecting the complexity of the audit of inventory?

A document frequently used by organisations to establish a formal means of recording the controlling acquisitions, and which usually contains a package of documents relevant to the acquisition, is the:

The basis for the auditor's verification of inventory pricing and compilation is the substantive testing performed in that area.What is the purpose of each group of tests?

The reliability of the perpetual inventory master file will affect the extent of the auditor's physical examination of inventory.

Which one of the following is a test of controls?

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

Filters