Question 1

Authorized purchase of goods or services.

Accepted Answer

A) 2,5,4,1,3 
B) 2,4,5,1,3 
C) 2,1,4,5,3 
D) 2,5,1,4,3 
A) 2,5,4,1,3 
B) 2,4,5,1,3 
C) 2,1,4,5,3 
D) 2,5,1,4,3

Question 2

Why should the client's legal expenses be examined?

Accepted Answer

A) To compare with previously released attorneys' letters. 
B) To determine the types of fraud occurring in the organization. 
C) To ensure proper recording of vendor payables. 
D) To determine if there is any litigation pending or threatened. 
A) To compare with previously released attorneys' letters. 
B) To determine the types of fraud occurring in the organization. 
C) To ensure proper recording of vendor payables. 
D) To determine if there is any litigation pending or threatened.

Question 3

Reducing the risk of understated payables can be accomplished by focusing on which assertion?

Accepted Answer

A) Existence. 
B) Rights. 
C) Presentation and disclosure. 
D) Completeness. 
A) Existence. 
B) Rights. 
C) Presentation and disclosure. 
D) Completeness.

Question 4

Physical inventory procedures Discuss the procedures that the audit team will most likely perform upon arrival at each site right before physical inventory is taken.

Accepted Answer

∙ Obtain a map of the area and a schedul

Question 5

Which relationship might suggest a heightened risk of fraud in the acquisition and payment cycle?

Accepted Answer

A) Unexpected increases in the number of suppliers. 
B) A reduction in raw material costs. 
C) Maturing capital assets with no plan for replacement. 
D) Sales expenses growing in proportion to sales revenue. 
A) Unexpected increases in the number of suppliers. 
B) A reduction in raw material costs. 
C) Maturing capital assets with no plan for replacement. 
D) Sales expenses growing in proportion to sales revenue.

Question 6

Auditors observe the client taking physical inventory at year-end primarily to obtain assurance about the value of inventory.

Accepted Answer

A) True 
 B)False

Question 7

The auditor tests significant repairs and maintenance expenses to ensure that an item that should be capitalized has not been expensed.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a potential fraud indicator in the acquisition and payment cycle?

Accepted Answer

A) Expenses that are significantly above or below industry norms. 
B) Expense accounts that have significant debit entries. 
C) Unexpected increases in gross margin. 
D) Capital assets that seem to be growing faster than the business. 
A) Expenses that are significantly above or below industry norms. 
B) Expense accounts that have significant debit entries. 
C) Unexpected increases in gross margin. 
D) Capital assets that seem to be growing faster than the business.

Question 9

Which of the following would the auditor most likely do when testing the existence assertion for inventory?

Accepted Answer

A) Observe the client's count of the annual physical inventory and perform test counts. 
B) Review vendor invoices for the amounts recorded. 
C) Review open purchase orders at year-end. 
D) Trace raw material purchases to invoices and to the general ledger. 
A) Observe the client's count of the annual physical inventory and perform test counts. 
B) Review vendor invoices for the amounts recorded. 
C) Review open purchase orders at year-end. 
D) Trace raw material purchases to invoices and to the general ledger.

Question 10

The principle of lower of cost or market and the potential obsolescence of inventory are concerns for the audit team because of which of the following?

Accepted Answer

A) They are uncommon and may not exist. 
B) They are a burden to the auditor in the undue amount of work caused. 
C) They are likely to occur in the last month of the year and cause cutoff problems. 
D) They are an inherent component of complexity related to valuation. 
A) They are uncommon and may not exist. 
B) They are a burden to the auditor in the undue amount of work caused. 
C) They are likely to occur in the last month of the year and cause cutoff problems. 
D) They are an inherent component of complexity related to valuation.

Question 11

Preparing for an inventory observation In the audit of inventory the auditor must perform important procedures prior to the actual observation.Identify the steps the auditor must take prior to the day the inventory is actually counted.

Accepted Answer

Prior to inventory-taking day the audito

Question 12

Which one of the following accounts would an auditor most likely test by performing analytical procedures?

Accepted Answer

A) Sales commissions expense. 
B) Legal expenses. 
C) Repairs and maintenance expense. 
D) Travel expense. 
A) Sales commissions expense. 
B) Legal expenses. 
C) Repairs and maintenance expense. 
D) Travel expense.

Question 13

The purchasing department should make sure that only authorized goods are received,the goods meet order specifications,an accurate count of the goods received is taken,and that accountability is established to assure that all receipts are recorded.

Accepted Answer

A) True 
 B)False

Question 14

Inventory controls What are some of the important controls that are expected to be included in a well-conceived inventory control system?

Accepted Answer

A well-conceived inventory control syste

Question 15

Physical inventory procedures Discuss the procedures the audit team will most likely perform during the physical observation of inventory.

Accepted Answer

The audit team will observe the counting

Question 16

Which assertion has the greatest emphasis when auditing accounts payable?

Accepted Answer

A) Existence. 
B) Completeness. 
C) Presentation. 
D) Obligations. 
A) Existence. 
B) Completeness. 
C) Presentation. 
D) Obligations.

Question 17

The acquisition cycle begins with which of the following?

Accepted Answer

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

Question 18

The auditor may discover that the recorded cost of inventory exceeds the designated market price when testing which assertion?

Accepted Answer

A) Existence. 
B) Cutoff. 
C) Valuation. 
D) Rights. 
A) Existence. 
B) Cutoff. 
C) Valuation. 
D) Rights.

Question 19

In an audit where there is a heightened risk of fraud related to inventory,the auditors may want to observe all inventory locations simultaneously.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following activities is not included in the acquisition and payment cycle?

Accepted Answer

A) Receipt of goods and services. 
B) Approval of items for payment. 
C) Application of cash receipts. 
D) Authorized request for goods and services. 
A) Receipt of goods and services. 
B) Approval of items for payment. 
C) Application of cash receipts. 
D) Authorized request for goods and services.

Authorized purchase of goods or services.

Why should the client's legal expenses be examined?

Reducing the risk of understated payables can be accomplished by focusing on which assertion?

Physical inventory procedures Discuss the procedures that the audit team will most likely perform upon arrival at each site right before physical inventory is taken.

Which relationship might suggest a heightened risk of fraud in the acquisition and payment cycle?

Auditors observe the client taking physical inventory at year-end primarily to obtain assurance about the value of inventory.

The auditor tests significant repairs and maintenance expenses to ensure that an item that should be capitalized has not been expensed.

Which of the following is not a potential fraud indicator in the acquisition and payment cycle?

Which of the following would the auditor most likely do when testing the existence assertion for inventory?

The principle of lower of cost or market and the potential obsolescence of inventory are concerns for the audit team because of which of the following?

Preparing for an inventory observation In the audit of inventory the auditor must perform important procedures prior to the actual observation.Identify the steps the auditor must take prior to the day the inventory is actually counted.

Which one of the following accounts would an auditor most likely test by performing analytical procedures?

The purchasing department should make sure that only authorized goods are received,the goods meet order specifications,an accurate count of the goods received is taken,and that accountability is established to assure that all receipts are recorded.

Inventory controls What are some of the important controls that are expected to be included in a well-conceived inventory control system?

Physical inventory procedures Discuss the procedures the audit team will most likely perform during the physical observation of inventory.

Which assertion has the greatest emphasis when auditing accounts payable?

The acquisition cycle begins with which of the following?

The auditor may discover that the recorded cost of inventory exceeds the designated market price when testing which assertion?

In an audit where there is a heightened risk of fraud related to inventory,the auditors may want to observe all inventory locations simultaneously.

Which of the following activities is not included in the acquisition and payment cycle?

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters

Exam 11: Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Authorized purchase of goods or services.

Why should the client's legal expenses be examined?

Reducing the risk of understated payables can be accomplished by focusing on which assertion?

Physical inventory procedures Discuss the procedures that the audit team will most likely perform upon arrival at each site right before physical inventory is taken.

Which relationship might suggest a heightened risk of fraud in the acquisition and payment cycle?

Auditors observe the client taking physical inventory at year-end primarily to obtain assurance about the value of inventory.

The auditor tests significant repairs and maintenance expenses to ensure that an item that should be capitalized has not been expensed.

Which of the following is not a potential fraud indicator in the acquisition and payment cycle?

Which of the following would the auditor most likely do when testing the existence assertion for inventory?

The principle of lower of cost or market and the potential obsolescence of inventory are concerns for the audit team because of which of the following?

Preparing for an inventory observation In the audit of inventory the auditor must perform important procedures prior to the actual observation.Identify the steps the auditor must take prior to the day the inventory is actually counted.

Which one of the following accounts would an auditor most likely test by performing analytical procedures?

The purchasing department should make sure that only authorized goods are received,the goods meet order specifications,an accurate count of the goods received is taken,and that accountability is established to assure that all receipts are recorded.

Inventory controls What are some of the important controls that are expected to be included in a well-conceived inventory control system?

Physical inventory procedures Discuss the procedures the audit team will most likely perform during the physical observation of inventory.

Which assertion has the greatest emphasis when auditing accounts payable?

The acquisition cycle begins with which of the following?

The auditor may discover that the recorded cost of inventory exceeds the designated market price when testing which assertion?

In an audit where there is a heightened risk of fraud related to inventory,the auditors may want to observe all inventory locations simultaneously.

Which of the following activities is not included in the acquisition and payment cycle?

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters