Question 1

Tests of controls for the occurrence assertion for purchases include all of the following except:

Accepted Answer

A)  Evaluating proper segregation of duties. 
B)  Testing a sample of vouchers for an authorized purchase order. 
C)  Testing a sample of vouchers for matching receiving reports. 
D)  Tracing a sample of vouchers to purchases journal. 
A)  Evaluating proper segregation of duties. 
B)  Testing a sample of vouchers for an authorized purchase order. 
C)  Testing a sample of vouchers for matching receiving reports. 
D)  Tracing a sample of vouchers to purchases journal.

Question 2

An auditor wishes to perform tests of controls on an entity's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by

Accepted Answer

A)  Inquiry and analytical procedures. 
B)  Confirmation and observation. 
C)  Observation and inquiry. 
D)  Analytical procedures and confirmation. 
A)  Inquiry and analytical procedures. 
B)  Confirmation and observation. 
C)  Observation and inquiry. 
D)  Analytical procedures and confirmation.

Question 3

The cash disbursements journal is also called the

Accepted Answer

A)  Voucher register. 
B)  Purchases journal. 
C)  Check register. 
D)  Accounts payable subsidiary ledger. 
A)  Voucher register. 
B)  Purchases journal. 
C)  Check register. 
D)  Accounts payable subsidiary ledger.

Question 4

The auditor can often obtain sufficient appropriate evidence in the audit of a tax provision without the use of a specialist. However, several situations may indicate a need for the auditor to involve a tax specialist. Identify three of these situations.

Accepted Answer

Answers should include three of the foll

Question 5

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

Accepted Answer

A)  Supported by a vendor's invoice. 
B)  Stamped "paid" by the check signer. 
C)  Prenumbered and accounted for. 
D)  Approved for authorized purchases. 
A)  Supported by a vendor's invoice. 
B)  Stamped "paid" by the check signer. 
C)  Prenumbered and accounted for. 
D)  Approved for authorized purchases.

Question 6

The purchase journal is referred to as a check register.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following describes a permanent difference?

Accepted Answer

A)  A difference that will be corrected in an amended tax return. 
B)  A difference arising from an uncertain tax position. 
C)  A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. 
D)  A timing difference between the recognition of revenue or expense under GAAP and tax purposes. 
A)  A difference that will be corrected in an amended tax return. 
B)  A difference arising from an uncertain tax position. 
C)  A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. 
D)  A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

Question 8

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively?

Accepted Answer

A)  Select and examine receiving reports and ascertain that the related canceled checks are dated no earlier than the receiving reports. 
B)  Select and examine receiving reports and ascertain that the related canceled checks are dated no later than the receiving reports. 
C)  Select and examine canceled checks and ascertain that the related receiving reports are dated no earlier than the checks. 
D)  Select and examine canceled checks and ascertain that the related receiving reports are dated no later than the checks. 
A)  Select and examine receiving reports and ascertain that the related canceled checks are dated no earlier than the receiving reports. 
B)  Select and examine receiving reports and ascertain that the related canceled checks are dated no later than the receiving reports. 
C)  Select and examine canceled checks and ascertain that the related receiving reports are dated no earlier than the checks. 
D)  Select and examine canceled checks and ascertain that the related receiving reports are dated no later than the checks.

Question 9

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

Accepted Answer

A)  Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher? 
B)  Are purchase requisitions prenumbered and independently matched with vendor invoices? 
C)  Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions? 
D)  Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for? 
A)  Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher? 
B)  Are purchase requisitions prenumbered and independently matched with vendor invoices? 
C)  Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions? 
D)  Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for?

Question 10

When searching for unrecorded liabilities at year-end, the population identified for sampling would be

Accepted Answer

A)  Cash receipts from related parties recorded before year-end. 
B)  Creditors whose accounts appear on a subsidiary trial balance of accounts payable. 
C)  Cash disbursements recorded in the period subsequent to year-end. 
D)  Invoices dated a few days before and after year-end. 
A)  Cash receipts from related parties recorded before year-end. 
B)  Creditors whose accounts appear on a subsidiary trial balance of accounts payable. 
C)  Cash disbursements recorded in the period subsequent to year-end. 
D)  Invoices dated a few days before and after year-end.

Question 11

The auditor is most likely to verify accrued commissions payable in conjunction with the

Accepted Answer

A)  Sales cutoff review. 
B)  Verification of employees. 
C)  Review of post balance sheet date disbursements. 
D)  Examination of trade accounts payable. 
A)  Sales cutoff review. 
B)  Verification of employees. 
C)  Review of post balance sheet date disbursements. 
D)  Examination of trade accounts payable.

Question 12

A product cost is

Accepted Answer

A)  An expense allocated by a systematic procedure. 
B)  Recognized during the period in which a liability is incurred. 
C)  Recognized in the period during which related revenue is recognized. 
D)  Recognized in the period in which cash is spent. 
A)  An expense allocated by a systematic procedure. 
B)  Recognized during the period in which a liability is incurred. 
C)  Recognized in the period during which related revenue is recognized. 
D)  Recognized in the period in which cash is spent.

Question 13

Which of the following describes a temporary difference?

Accepted Answer

A)  A difference that will be corrected in an amended tax return. 
B)  A difference arising from an uncertain tax position. 
C)  A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. 
D)  A timing difference between the recognition of revenue or expense under GAAP and tax purposes. 
A)  A difference that will be corrected in an amended tax return. 
B)  A difference arising from an uncertain tax position. 
C)  A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. 
D)  A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

Question 14

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the checks also

Accepted Answer

A)  Reviews the monthly bank reconciliation. 
B)  Returns the checks to accounts payable. 
C)  Is denied access to the supporting documents. 
D)  Is responsible for mailing the checks. 
A)  Reviews the monthly bank reconciliation. 
B)  Returns the checks to accounts payable. 
C)  Is denied access to the supporting documents. 
D)  Is responsible for mailing the checks.

Question 15

Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue.

Accepted Answer

A) True 
 B)False

Question 16

Which type of confirmation is used more frequently by auditors―accounts receivable confirmations or accounts payable confirmations? Why?

Accepted Answer

Auditors typically use confirmations for

Question 17

Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Accepted Answer

A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Contrast the ratio of accounts payable to purchases with the prior year's ratio. 
C)  Vouch a sample of creditor balances to supporting invoices, receiving reports and purchase orders. 
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance. 
A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Contrast the ratio of accounts payable to purchases with the prior year's ratio. 
C)  Vouch a sample of creditor balances to supporting invoices, receiving reports and purchase orders. 
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

Question 19

The accounts payable department receives the purchase order form to accomplish all of the following except to:

Accepted Answer

A)  Compare invoice price to purchase order price. 
B)  Ensure that the purchase had been properly authorized. 
C)  Ensure that the goods had been received by the party requesting the goods. 
D)  Compare quantity ordered to quantity purchased. 
A)  Compare invoice price to purchase order price. 
B)  Ensure that the purchase had been properly authorized. 
C)  Ensure that the goods had been received by the party requesting the goods. 
D)  Compare quantity ordered to quantity purchased.

Question 20

Budd, the purchasing agent for 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 C.O.D. 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.

Tests of controls for the occurrence assertion for purchases include all of the following except:

An auditor wishes to perform tests of controls on an entity's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by

The cash disbursements journal is also called the

The auditor can often obtain sufficient appropriate evidence in the audit of a tax provision without the use of a specialist. However, several situations may indicate a need for the auditor to involve a tax specialist. Identify three of these situations.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

The purchase journal is referred to as a check register.

Which of the following describes a permanent difference?

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively?

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

When searching for unrecorded liabilities at year-end, the population identified for sampling would be

The auditor is most likely to verify accrued commissions payable in conjunction with the

A product cost is

Which of the following describes a temporary difference?

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the checks also

Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue.

Which type of confirmation is used more frequently by auditors―accounts receivable confirmations or accounts payable confirmations? Why?

Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

The accounts payable department receives the purchase order form to accomplish all of the following except to:

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 11: Auditing the Purchasing Process

Tests of controls for the occurrence assertion for purchases include all of the following except:

An auditor wishes to perform tests of controls on an entity's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by

The cash disbursements journal is also called the

The auditor can often obtain sufficient appropriate evidence in the audit of a tax provision without the use of a specialist. However, several situations may indicate a need for the auditor to involve a tax specialist. Identify three of these situations.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

The purchase journal is referred to as a check register.

Which of the following describes a permanent difference?

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively?

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

When searching for unrecorded liabilities at year-end, the population identified for sampling would be

The auditor is most likely to verify accrued commissions payable in conjunction with the

A product cost is

Which of the following describes a temporary difference?

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the checks also

Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue.

Which type of confirmation is used more frequently by auditors―accounts receivable confirmations or accounts payable confirmations? Why?

Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

The accounts payable department receives the purchase order form to accomplish all of the following except to:

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters