Question 1

________ expense is rarely analyzed unless analytical procedures indicate high potential for material misstatement.

Accepted Answer

A) Repairs and maintenance 
B) Legal 
C) Utilities 
D) Rent and lease 
A) Repairs and maintenance 
B) Legal 
C) Utilities 
D) Rent and lease

Question 2

When auditors verify accrued property taxes,two audit objectives are especially significant.These are

Accepted Answer

A) completeness and accuracy. 
B) completeness and net realizable value. 
C) detail tie-in and completeness. 
D) accuracy and classification. 
A) completeness and accuracy. 
B) completeness and net realizable value. 
C) detail tie-in and completeness. 
D) accuracy and classification.

Question 3

When the auditor is determining whether the client followed a consistent depreciation policy from period to period,and the client's depreciation calculations are correct,the balance-related audit objective of ________ is being determined for depreciation expense.

Accepted Answer

A) completeness 
B) existence 
C) classification 
D) accuracy 
A) completeness 
B) existence 
C) classification 
D) accuracy

Question 4

The estimated unpaid obligations for services or benefits that have been received before the balance sheet date are

Accepted Answer

A) accounts payable. 
B) accounts receivable. 
C) unearned liabilities. 
D) accrued liabilities. 
A) accounts payable. 
B) accounts receivable. 
C) unearned liabilities. 
D) accrued liabilities.

Question 5

Insurance expense for the period is a function of which of the following?

Accepted Answer

A) the beginning prepaid balance,current premium payments and the ending prepaid balance 
B) the beginning prepaid balance and the current period premium payments 
C) the current period premium payments 
D) the current period premium payments and the ending prepaid balance 
A) the beginning prepaid balance,current premium payments and the ending prepaid balance 
B) the beginning prepaid balance and the current period premium payments 
C) the current period premium payments 
D) the current period premium payments and the ending prepaid balance

Question 6

Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?

Accepted Answer

A) Extraordinary repairs have lengthened the life of an asset. 
B) Prior years' depreciation charges were erroneously understated. 
C) A reserve for possible loss on retirement has been recorded. 
D) An asset has been recorded at its fair value. 
A) Extraordinary repairs have lengthened the life of an asset. 
B) Prior years' depreciation charges were erroneously understated. 
C) A reserve for possible loss on retirement has been recorded. 
D) An asset has been recorded at its fair value.

Question 7

Auditors verify the accruals before they verify the current year property tax payments.

Accepted Answer

A) True 
 B)False

Question 8

The auditor's tests for proper cutoff of current year acquisitions of property,plant,and equipment are usually done as part of accounts payable cutoff tests.

Accepted Answer

A) True 
 B)False

Question 9

You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets.You may conclude that

Accepted Answer

A) insured values are greater than book values. 
B) there are a large number of fully depreciated assets. 
C) depreciation charges may by insufficient. 
D) the company has a policy of selling relatively new assets. 
A) insured values are greater than book values. 
B) there are a large number of fully depreciated assets. 
C) depreciation charges may by insufficient. 
D) the company has a policy of selling relatively new assets.

Question 10

Explain the audit objective allocation and why it is important to have accurate allocation within the financial statements,particularly for property,plant,and equipment.

Accepted Answer

Several expense accounts result from the

Question 11

Typically,analytical procedures are the primary means of verifying income statement accounts resulting from allocations.

Accepted Answer

A) True 
 B)False

Question 12

When auditing accrued property taxes,

Accepted Answer

A) the source for the debits to the liability account is the acquisitions journal. 
B) realizable value is an important balance-related audit objective. 
C) the ending balance in the account should be confirmed with the applicable taxing authority. 
D) the most important consideration for the auditor is that the same portion of each tax payment for the accrual that was used in the preceding year is used in the current year. 
A) the source for the debits to the liability account is the acquisitions journal. 
B) realizable value is an important balance-related audit objective. 
C) the ending balance in the account should be confirmed with the applicable taxing authority. 
D) the most important consideration for the auditor is that the same portion of each tax payment for the accrual that was used in the preceding year is used in the current year.

Question 13

Which of the following accounts is not associated with the acquisition and payment cycle?

Accepted Answer

A) common stock 
B) property,plant and equipment 
C) accrued property taxes 
D) income tax expense 
A) common stock 
B) property,plant and equipment 
C) accrued property taxes 
D) income tax expense

Question 14

Which of the following audit procedures would be least likely to lead the auditor to find an unrecorded fixed asset disposal?

Accepted Answer

A) Examination of insurance policies 
B) Review of repairs and maintenance expense 
C) Review of property tax files 
D) Scanning of invoices for fixed asset additions 
A) Examination of insurance policies 
B) Review of repairs and maintenance expense 
C) Review of property tax files 
D) Scanning of invoices for fixed asset additions

Question 15

Which of the following is a substantive analytical procedure to determine if there is idle equipment or equipment that was disposed of but not written off?

Accepted Answer

A) Compare depreciation expense divided by gross equipment cost with previous years. 
B) Compare gross manufacturing cost divided by some measure of production with previous years. 
C) Compare accumulated depreciation divided by gross equipment cost with previous years. 
D) Compare annual repairs and maintenance accounts with previous years. 
A) Compare depreciation expense divided by gross equipment cost with previous years. 
B) Compare gross manufacturing cost divided by some measure of production with previous years. 
C) Compare accumulated depreciation divided by gross equipment cost with previous years. 
D) Compare annual repairs and maintenance accounts with previous years.

Question 16

Performance materiality is important for verifying current year additions because these transactions have consistent dollar amounts from year to year.

Accepted Answer

A) True 
 B)False

Question 17

The failure to capitalize a permanent asset,or the recording of an asset acquisition at the improper amount,affects the balance sheet

Accepted Answer

A) forever. 
B) for the current period. 
C) for the depreciable life of the asset. 
D) until the firm disposes of the asset. 
A) forever. 
B) for the current period. 
C) for the depreciable life of the asset. 
D) until the firm disposes of the asset.

Question 18

Depreciation expense is normally verified as a part of tests of details of balances rather than as part of tests of controls or substantive tests of transactions.

Accepted Answer

A) True 
 B)False

Question 19

Describe the audit procedures used to verify the accuracy and detail tie-in objectives for prepaid insurance.

Accepted Answer

The accuracy objective is tested by veri

Question 20

Methods used to determine if there are legal encumbrances related to fixed assets include all but which of the following?

Accepted Answer

A) Read the terms of loan and credit agreements. 
B) Send loan confirmation requests to banks and other lending institutions. 
C) Have discussions with the client or send letters to legal counsel. 
D) All of the above may be used to identify legal encumbrances. 
A) Read the terms of loan and credit agreements. 
B) Send loan confirmation requests to banks and other lending institutions. 
C) Have discussions with the client or send letters to legal counsel. 
D) All of the above may be used to identify legal encumbrances.

Exam 19: Completing the Tests in the Acquisition and Payment Cycle:

________ expense is rarely analyzed unless analytical procedures indicate high potential for material misstatement.

When auditors verify accrued property taxes,two audit objectives are especially significant.These are

When the auditor is determining whether the client followed a consistent depreciation policy from period to period,and the client's depreciation calculations are correct,the balance-related audit objective of ________ is being determined for depreciation expense.

The estimated unpaid obligations for services or benefits that have been received before the balance sheet date are

Insurance expense for the period is a function of which of the following?

Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?

Auditors verify the accruals before they verify the current year property tax payments.

The auditor's tests for proper cutoff of current year acquisitions of property,plant,and equipment are usually done as part of accounts payable cutoff tests.

You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets.You may conclude that

Explain the audit objective allocation and why it is important to have accurate allocation within the financial statements,particularly for property,plant,and equipment.

Typically,analytical procedures are the primary means of verifying income statement accounts resulting from allocations.

When auditing accrued property taxes,

Which of the following accounts is not associated with the acquisition and payment cycle?

Which of the following audit procedures would be least likely to lead the auditor to find an unrecorded fixed asset disposal?

Which of the following is a substantive analytical procedure to determine if there is idle equipment or equipment that was disposed of but not written off?

Performance materiality is important for verifying current year additions because these transactions have consistent dollar amounts from year to year.

The failure to capitalize a permanent asset,or the recording of an asset acquisition at the improper amount,affects the balance sheet

Depreciation expense is normally verified as a part of tests of details of balances rather than as part of tests of controls or substantive tests of transactions.

Describe the audit procedures used to verify the accuracy and detail tie-in objectives for prepaid insurance.

Methods used to determine if there are legal encumbrances related to fixed assets include all but which of the following?

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters