Question 1

One of the ways to prevent the use of fictitious suppliers to steal company funds is to

Accepted Answer

A)  have adequate network access controls to prevent unauthorized access to transaction files. 
B)  ensure that accounts payable programs are available only in source code. 
C)  establish controls to establish only approved vendors. 
D)  reconcile the accounts payable trial balance to the general ledger. 
A)  have adequate network access controls to prevent unauthorized access to transaction files. 
B)  ensure that accounts payable programs are available only in source code. 
C)  establish controls to establish only approved vendors. 
D)  reconcile the accounts payable trial balance to the general ledger.

Question 2

The starting point for the verification of current-year acquisitions of manufacturing equipment is normally

Accepted Answer

A)  the manufacturing equipment account in the general ledger. 
B)  the acquisitions journal. 
C)  the purchase requisitions file. 
D)  a client schedule of all acquisitions recorded during the year. 
A)  the manufacturing equipment account in the general ledger. 
B)  the acquisitions journal. 
C)  the purchase requisitions file. 
D)  a client schedule of all acquisitions recorded during the year.

Question 3

Which of the following areas are tested as part of the audit of the acquisition and payment cycle?

Accepted Answer

A)  payment for raw materials, receipt of raw materials, shipment of goods to customers 
B)  processing of sales orders, production of goods for clients, and subsequent invoicing 
C)  processing supplier invoices, vendor master file changes, shipment of goods to customers 
D)  processing purchase orders, vendor master file changes, receiving goods and services 
A)  payment for raw materials, receipt of raw materials, shipment of goods to customers 
B)  processing of sales orders, production of goods for clients, and subsequent invoicing 
C)  processing supplier invoices, vendor master file changes, shipment of goods to customers 
D)  processing purchase orders, vendor master file changes, receiving goods and services

Question 4

The internal control that requires "approval of acquisitions at the proper level" satisfies the objective of

Accepted Answer

A)  occurrence. 
B)  completeness. 
C)  accuracy. 
D)  posting and summarization. 
A)  occurrence. 
B)  completeness. 
C)  accuracy. 
D)  posting and summarization.

Question 5

To protect against theft of physical assets (such as computer equipment), the company should

Accepted Answer

A)  assign computers to specific individuals at the company. 
B)  assign computers to specific areas within the company. 
C)  use strong access controls (such as login passwords) to prevent access. 
D)  have equipment engraved or otherwise permanently labelled and a subsidiary ledger maintained. 
A)  assign computers to specific individuals at the company. 
B)  assign computers to specific areas within the company. 
C)  use strong access controls (such as login passwords) to prevent access. 
D)  have equipment engraved or otherwise permanently labelled and a subsidiary ledger maintained.

Question 6

An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result

Accepted Answer

A)  is an understatement of net earnings. 
B)  is an overstatement of net earnings. 
C)  does not affect earnings. 
D)  is indeterminable from the information given. 
A)  is an understatement of net earnings. 
B)  is an overstatement of net earnings. 
C)  does not affect earnings. 
D)  is indeterminable from the information given.

Question 7

The analytical procedure that requires the auditor to "inspect the list of accounts payable for unusual or non-vendor payables" would have the best chance of discovering which possible error?

Accepted Answer

A)  misstatement of accounts payable and expenses 
B)  classification error for non-trade liabilities 
C)  unrecorded accounts or misstatements 
D)  invalid accounts or misstatements 
A)  misstatement of accounts payable and expenses 
B)  classification error for non-trade liabilities 
C)  unrecorded accounts or misstatements 
D)  invalid accounts or misstatements

Question 8

The internal control objective to determine that "existing acquisition transactions are recorded" describes the objective of

Accepted Answer

A)  occurrence. 
B)  classification. 
C)  completeness. 
D)  accuracy. 
A)  occurrence. 
B)  classification. 
C)  completeness. 
D)  accuracy.

Question 9

The main focus taken by the auditor in verifying liability balances is on the discovery of

Accepted Answer

A)  liabilities posted to the wrong account. 
B)  overstated liabilities. 
C)  understated or omitted liabilities. 
D)  overstated or extraneous liabilities. 
A)  liabilities posted to the wrong account. 
B)  overstated liabilities. 
C)  understated or omitted liabilities. 
D)  overstated or extraneous liabilities.

Question 10

Ordinarily, it is unnecessary to test the valuation of capital assets recorded in prior periods because

Accepted Answer

A)  it will not affect the current valuations. 
B)  they were verified in previous audits. 
C)  the related amortization calculations for the current period are more important. 
D)  the emphasis of the audit is on the income statement items, not the balance sheet items. 
A)  it will not affect the current valuations. 
B)  they were verified in previous audits. 
C)  the related amortization calculations for the current period are more important. 
D)  the emphasis of the audit is on the income statement items, not the balance sheet items.

Question 11

The purpose of the audit procedure to "trace receiving reports issued before year-end to related vendors' invoices" is to determine that all

Accepted Answer

A)  merchandise received is included in accounts payable. 
B)  merchandise received is included in inventory. 
C)  merchandise was received. 
D)  invoices have been paid. 
A)  merchandise received is included in accounts payable. 
B)  merchandise received is included in inventory. 
C)  merchandise was received. 
D)  invoices have been paid.

Question 12

After the supplier master file data has been entered, to best improve internal controls the

Accepted Answer

A)  supplier master file data should be matched to the accounts payable files. 
B)  transaction file detail should be matched to the supplier master file. 
C)  data entry should be independently verified. 
D)  accounting department should file the new supplier authorization form sequentially. 
A)  supplier master file data should be matched to the accounts payable files. 
B)  transaction file detail should be matched to the supplier master file. 
C)  data entry should be independently verified. 
D)  accounting department should file the new supplier authorization form sequentially.

Question 13

The most common fraud in the acquisitions area is for the perpetrator to

Accepted Answer

A)  alter the cheque payment file before it is printed so that the payee name is changed. 
B)  issue payments to fictitious vendors and deposit the cheques to a fictitious account. 
C)  change the optical characters at the bottom of a cheque to alter the account to be credited. 
D)  issue duplicate payments for invoices and then pocket the second cheque. 
A)  alter the cheque payment file before it is printed so that the payee name is changed. 
B)  issue payments to fictitious vendors and deposit the cheques to a fictitious account. 
C)  change the optical characters at the bottom of a cheque to alter the account to be credited. 
D)  issue duplicate payments for invoices and then pocket the second cheque.

Question 14

The control test that requires "the auditor to compare recorded transactions in the acquisitions journal with the vendor's invoice, receiving report, and other supporting documentation" satisfies the objective of

Accepted Answer

A)  occurrence. 
B)  classification. 
C)  completeness. 
D)  accuracy. 
A)  occurrence. 
B)  classification. 
C)  completeness. 
D)  accuracy.

Question 15

Before a new supplier is added into the supplier master file (or the purchasing master file), the company should

Accepted Answer

A)  conduct a credit check on the new supplier. 
B)  have the supplier detail matched against the invoice detail. 
C)  ask the purchasing manager to verify the authenticity of the supplier. 
D)  have the accounting department enter the necessary detail about the supplier. 
A)  conduct a credit check on the new supplier. 
B)  have the supplier detail matched against the invoice detail. 
C)  ask the purchasing manager to verify the authenticity of the supplier. 
D)  have the accounting department enter the necessary detail about the supplier.

Question 16

When an acquisition is on an FOB (freight on board) origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were

Accepted Answer

A)  received prior to the balance sheet date. 
B)  shipped prior to the balance sheet date. 
C)  both shipped and received prior to the balance sheet date. 
D)  paid for. 
A)  received prior to the balance sheet date. 
B)  shipped prior to the balance sheet date. 
C)  both shipped and received prior to the balance sheet date. 
D)  paid for.

Question 17

Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that

Accepted Answer

A)  recorded acquisitions are for goods and services received. 
B)  existing acquisitions are recorded. 
C)  acquisitions are correctly valued. 
D)  acquisitions are correctly classified. 
A)  recorded acquisitions are for goods and services received. 
B)  existing acquisitions are recorded. 
C)  acquisitions are correctly valued. 
D)  acquisitions are correctly classified.

Question 18

Many companies have inventory that is easy to steal and is readily marketable. Which of the following controls helps to prevent theft and misuse of inventory?

Accepted Answer

A)  physical control of inventory from time of receipt until use 
B)  proper access controls over the inventory master and transaction files 
C)  dual signatures required on all purchase orders over $10 000 
D)  purchase requisitions are to be approved by the production manager 
A)  physical control of inventory from time of receipt until use 
B)  proper access controls over the inventory master and transaction files 
C)  dual signatures required on all purchase orders over $10 000 
D)  purchase requisitions are to be approved by the production manager

Question 19

Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as

Accepted Answer

A)  accounts payable. 
B)  accrued liabilities. 
C)  miscellaneous assets. 
D)  unearned revenues. 
A)  accounts payable. 
B)  accrued liabilities. 
C)  miscellaneous assets. 
D)  unearned revenues.

Question 20

The tests of details of balances procedure for manufacturing equipment that requires the auditor to examine vendors' invoices of closely related accounts (such as repairs and maintenance) to uncover items that should be manufacturing equipment would satisfy the audit objective of

Accepted Answer

A)  detail tie-in. 
B)  existence. 
C)  classification. 
D)  accuracy. 
A)  detail tie-in. 
B)  existence. 
C)  classification. 
D)  accuracy.

One of the ways to prevent the use of fictitious suppliers to steal company funds is to

The starting point for the verification of current-year acquisitions of manufacturing equipment is normally

Which of the following areas are tested as part of the audit of the acquisition and payment cycle?

The internal control that requires "approval of acquisitions at the proper level" satisfies the objective of

To protect against theft of physical assets (such as computer equipment), the company should

An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result

The analytical procedure that requires the auditor to "inspect the list of accounts payable for unusual or non-vendor payables" would have the best chance of discovering which possible error?

The internal control objective to determine that "existing acquisition transactions are recorded" describes the objective of

The main focus taken by the auditor in verifying liability balances is on the discovery of

Ordinarily, it is unnecessary to test the valuation of capital assets recorded in prior periods because

The purpose of the audit procedure to "trace receiving reports issued before year-end to related vendors' invoices" is to determine that all

After the supplier master file data has been entered, to best improve internal controls the

The most common fraud in the acquisitions area is for the perpetrator to

The control test that requires "the auditor to compare recorded transactions in the acquisitions journal with the vendor's invoice, receiving report, and other supporting documentation" satisfies the objective of

Before a new supplier is added into the supplier master file (or the purchasing master file), the company should

When an acquisition is on an FOB (freight on board) origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were

Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that

Many companies have inventory that is easy to steal and is readily marketable. Which of the following controls helps to prevent theft and misuse of inventory?

Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as

The tests of details of balances procedure for manufacturing equipment that requires the auditor to examine vendors' invoices of closely related accounts (such as repairs and maintenance) to uncover items that should be manufacturing equipment would satisfy the audit objective of

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 13: Audit of the Acquisition and Payment Cycle

One of the ways to prevent the use of fictitious suppliers to steal company funds is to

The starting point for the verification of current-year acquisitions of manufacturing equipment is normally

Which of the following areas are tested as part of the audit of the acquisition and payment cycle?

The internal control that requires "approval of acquisitions at the proper level" satisfies the objective of

To protect against theft of physical assets (such as computer equipment), the company should

An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result

The analytical procedure that requires the auditor to "inspect the list of accounts payable for unusual or non-vendor payables" would have the best chance of discovering which possible error?

The internal control objective to determine that "existing acquisition transactions are recorded" describes the objective of

The main focus taken by the auditor in verifying liability balances is on the discovery of

Ordinarily, it is unnecessary to test the valuation of capital assets recorded in prior periods because

The purpose of the audit procedure to "trace receiving reports issued before year-end to related vendors' invoices" is to determine that all

After the supplier master file data has been entered, to best improve internal controls the

The most common fraud in the acquisitions area is for the perpetrator to

The control test that requires "the auditor to compare recorded transactions in the acquisitions journal with the vendor's invoice, receiving report, and other supporting documentation" satisfies the objective of

Before a new supplier is added into the supplier master file (or the purchasing master file), the company should

When an acquisition is on an FOB (freight on board) origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were

Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that

Many companies have inventory that is easy to steal and is readily marketable. Which of the following controls helps to prevent theft and misuse of inventory?

Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as

The tests of details of balances procedure for manufacturing equipment that requires the auditor to examine vendors' invoices of closely related accounts (such as repairs and maintenance) to uncover items that should be manufacturing equipment would satisfy the audit objective of

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters