Question 1

Which of the following substantive tests of cash account balances are always performed?

Accepted Answer

A)  Test cut-off of cash receipts, cash payments and transfers at year-end 
B)  Confirm cash held by others 
C)  Examine the client's bank reconciliations 
D)  All of the above 
A)  Test cut-off of cash receipts, cash payments and transfers at year-end 
B)  Confirm cash held by others 
C)  Examine the client's bank reconciliations 
D)  All of the above C

Question 2

The typical procedures performed to verify that the client has not omitted any amounts from the payables balance include:

Accepted Answer

A)  vouching recorded payables to supporting documentation. 
B)  performing analytical review procedures. 
C)  performing confirmations of payables accounts. 
D)  subsequent payments testing. 
A)  vouching recorded payables to supporting documentation. 
B)  performing analytical review procedures. 
C)  performing confirmations of payables accounts. 
D)  subsequent payments testing. D

Question 3

The rights and obligations assertion for inventory relates to which of the following audit objectives?

Accepted Answer

A)  Inventory is properly classified, described and disclosed in the financial statements. 
B)  The entity owns, or has the legal right to, all of the inventory on the balance sheet. 
C)  All inventory on the inventory listing is included in the financial statements. 
D)  All inventory owned by the entity at year-end is included on the balance sheet. 
A)  Inventory is properly classified, described and disclosed in the financial statements. 
B)  The entity owns, or has the legal right to, all of the inventory on the balance sheet. 
C)  All inventory on the inventory listing is included in the financial statements. 
D)  All inventory owned by the entity at year-end is included on the balance sheet. C

Question 4

Observing the client's inventory taking enables the auditor to establish that:

Accepted Answer

A)  count tags, sheets or cards are properly controlled. 
B)  the client's personnel are complying with the instructions for inventory counts. 
C)  items belonging to the client are accurately counted and recorded. 
D)  all of the above. 
A)  count tags, sheets or cards are properly controlled. 
B)  the client's personnel are complying with the instructions for inventory counts. 
C)  items belonging to the client are accurately counted and recorded. 
D)  all of the above.

Question 5

The key objective when performing substantive procedures is to determine whether there are material misstatements within an account balance.

Accepted Answer

A) True 
 B)False

Question 6

Priscille White was performing the review of cash transactions at Banker's Trust. Which three assertions are the most important when ensuring that there are no material misstatements for cash at Banker's Trust?

Accepted Answer

A)  existence, completeness, valuation and allocation 
B)  existence, valuation and allocation, rights and obligations 
C)  existence, completeness, classification 
D)  none of the above 
A)  existence, completeness, valuation and allocation 
B)  existence, valuation and allocation, rights and obligations 
C)  existence, completeness, classification 
D)  none of the above

Question 7

The valuation and allocation assertion relates to which of the following audit objectives?

Accepted Answer

A)  All accounts payable on the balance sheet are real accounts payable for goods received or services performed. 
B)  All accounts payable owed by the entity at year-end are included on the balance sheet. 
C)  Accounts payable are stated at the amounts owed at year-end. 
D)  Accounts payable are properly classified, described and disclosed in the financial statements. 
A)  All accounts payable on the balance sheet are real accounts payable for goods received or services performed. 
B)  All accounts payable owed by the entity at year-end are included on the balance sheet. 
C)  Accounts payable are stated at the amounts owed at year-end. 
D)  Accounts payable are properly classified, described and disclosed in the financial statements.

Question 8

Evaluating the adequacy of the allowance for doubtful accounts account is an example of a substantive test of trade receivables that is always performed.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following are substantive tests of payables balances that are always performed?

Accepted Answer

A)  performing a search for unrecorded liabilities 
B)  examining the client's bank reconciliations 
C)  testing the cut-off by inspecting the payments ledger and supporting documents to determine that transactions are recorded in the correct period 
D)  all of the above. 
A)  performing a search for unrecorded liabilities 
B)  examining the client's bank reconciliations 
C)  testing the cut-off by inspecting the payments ledger and supporting documents to determine that transactions are recorded in the correct period 
D)  all of the above.

Question 10

What are the principal objectives in auditing trade receivables?

Accepted Answer

The principal objectives in auditing tra

Question 11

Explain examples of substantive tests of inventory that are always performed.

Accepted Answer

Examples of substantive tests of invento

Question 12

Which are the two audit assertions considered most important to the auditor concluding there are no material misstatements in trade receivables at year-end?

Accepted Answer

A)  valuation and allocation, and rights and obligations 
B)  existence and occurrence 
C)  occurrence and rights and obligations 
D)  existence and valuation and allocation 
A)  valuation and allocation, and rights and obligations 
B)  existence and occurrence 
C)  occurrence and rights and obligations 
D)  existence and valuation and allocation

Question 13

A pledge is something delivered as security for the payment of a debt or the fulfilment of a promise.

Accepted Answer

A) True 
 B)False

Question 14

The typical procedures performed to search for unrecorded payables are referred to as subsequent payments testing and cut-off testing.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements regarding a share register is incorrect?

Accepted Answer

A)  It is a list of all the items of inventory that a company has. 
B)  It is used to capture purchases and sales of shares. 
C)  It is essentially the sub-ledger reconciled to the general ledger account for share capital. 
D)  It is prepared by the auditor. 
A)  It is a list of all the items of inventory that a company has. 
B)  It is used to capture purchases and sales of shares. 
C)  It is essentially the sub-ledger reconciled to the general ledger account for share capital. 
D)  It is prepared by the auditor.

Question 16

Moore Packaging is a manufacturer of corrugated products servicing all of Ontario. It's annual audit was in progress and the senior on the audit, Ray Radcliffe, was reviewing procedures over accounts receivable, inventory, property plant and equipment and accounts payable.
The accounts receivable accounts were deemed to be key when it came to possible material misstatements. The preliminary work on test of controls had indicated higher than usual exceptions of shipments of goods to customers without the appropriate credit checks being performed.
The property plant and equipment account had not changed significantly over the last 5 years, and it was anticipated that there would be little extra effort required to audit this account. Last year's balance - net of amortization was $7,600,000. The preliminary amount - net of amortization for this year was $7,700,000.
Total accounts payable was $2,200.000. The accounts payable amounts seemed to be all zero balances or relatively low balances. The exceptions consisted of two major suppliers to whom the company owed $1,800,000.
The inventory taking was missed this year at two of the three locations as local flooding had prevented the auditors from attending the annual inventory. The company keeps perpetual records for 90% of its inventory values. Year-end inventory balances tend to be in the $10,000,000-$12,000,000 range.
Materiality has been set at $2,000,000 for the Moore Packaging audit.
Required:
a) What are the key assertions that Ray Radcliffe will need to focus on for accounts receivable?
b) What work will Ray Radcliffe's audit team be doing to substantiate the accounts receivable valuation at Moore Packaging?
c) What procedures can be taken for the substantive tests of inventory, given the fact the company keeps perpetual records.
d) What work will the auditors have to perform to substantiate the inventory valuation at Moore Packaging?
e) What are the two key assertions for payables? Discuss their importance and the techniques used to ensure they are fulfilled.
f) Where should the auditors focus their confirmation procedures for accounts payable at Moore Packaging?
g) What substantive procedures will Ray Radcliffe's team have to consider for Property Plant & Equipment accounts?

Accepted Answer

a) When accounts receivable is a signifi

Question 17

Which type of leases are not recorded on the balance sheet?

Accepted Answer

A)  operating 
B)  finance 
C)  direct financing 
D)  sale and leaseback 
A)  operating 
B)  finance 
C)  direct financing 
D)  sale and leaseback

Question 18

When trade receivables is a significant account in an entity's balance sheet, the two audit assertions that are considered most important are existence and valuation and allocation.

Accepted Answer

A) True 
 B)False

Question 19

The additional opportunities for influencing the timing of the work include:

Accepted Answer

A)  reviewing provisions prior to year-end. 
B)  leveraging off the activities of the internal audit function. 
C)  reviewing activity in the period to date. 
D)  all of the above. 
A)  reviewing provisions prior to year-end. 
B)  leveraging off the activities of the internal audit function. 
C)  reviewing activity in the period to date. 
D)  all of the above.

Question 20

Natalya Rovinescu, the external auditor at Nautilus Minerals, was trying to determine whether she could rely on the relevant work of the internal audit department. She would place most confidence if the internal auditor reported to the

Accepted Answer

A)  Treasurer. 
B)  President. 
C)  Board of Directors. 
D)  Chief Financial Officer. 
A)  Treasurer. 
B)  President. 
C)  Board of Directors. 
D)  Chief Financial Officer.

Which of the following substantive tests of cash account balances are always performed?

The typical procedures performed to verify that the client has not omitted any amounts from the payables balance include:

The rights and obligations assertion for inventory relates to which of the following audit objectives?

Observing the client's inventory taking enables the auditor to establish that:

The key objective when performing substantive procedures is to determine whether there are material misstatements within an account balance.

Priscille White was performing the review of cash transactions at Banker's Trust. Which three assertions are the most important when ensuring that there are no material misstatements for cash at Banker's Trust?

The valuation and allocation assertion relates to which of the following audit objectives?

Evaluating the adequacy of the allowance for doubtful accounts account is an example of a substantive test of trade receivables that is always performed.

Which of the following are substantive tests of payables balances that are always performed?

What are the principal objectives in auditing trade receivables?

Explain examples of substantive tests of inventory that are always performed.

Which are the two audit assertions considered most important to the auditor concluding there are no material misstatements in trade receivables at year-end?

A pledge is something delivered as security for the payment of a debt or the fulfilment of a promise.

The typical procedures performed to search for unrecorded payables are referred to as subsequent payments testing and cut-off testing.

Which of the following statements regarding a share register is incorrect?

Which type of leases are not recorded on the balance sheet?

When trade receivables is a significant account in an entity's balance sheet, the two audit assertions that are considered most important are existence and valuation and allocation.

The additional opportunities for influencing the timing of the work include:

Natalya Rovinescu, the external auditor at Nautilus Minerals, was trying to determine whether she could rely on the relevant work of the internal audit department. She would place most confidence if the internal auditor reported to the

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Testing of Controls

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

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Exam 10: Substantive Testing and Balance Sheet Accounts

Which of the following substantive tests of cash account balances are always performed?

The typical procedures performed to verify that the client has not omitted any amounts from the payables balance include:

The rights and obligations assertion for inventory relates to which of the following audit objectives?

Observing the client's inventory taking enables the auditor to establish that:

The key objective when performing substantive procedures is to determine whether there are material misstatements within an account balance.

Priscille White was performing the review of cash transactions at Banker's Trust. Which three assertions are the most important when ensuring that there are no material misstatements for cash at Banker's Trust?

The valuation and allocation assertion relates to which of the following audit objectives?

Evaluating the adequacy of the allowance for doubtful accounts account is an example of a substantive test of trade receivables that is always performed.

Which of the following are substantive tests of payables balances that are always performed?

What are the principal objectives in auditing trade receivables?

Explain examples of substantive tests of inventory that are always performed.

Which are the two audit assertions considered most important to the auditor concluding there are no material misstatements in trade receivables at year-end?

A pledge is something delivered as security for the payment of a debt or the fulfilment of a promise.

The typical procedures performed to search for unrecorded payables are referred to as subsequent payments testing and cut-off testing.

Which of the following statements regarding a share register is incorrect?

Which type of leases are not recorded on the balance sheet?

When trade receivables is a significant account in an entity's balance sheet, the two audit assertions that are considered most important are existence and valuation and allocation.

The additional opportunities for influencing the timing of the work include:

Natalya Rovinescu, the external auditor at Nautilus Minerals, was trying to determine whether she could rely on the relevant work of the internal audit department. She would place most confidence if the internal auditor reported to the

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Testing of Controls

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters