Question 1

A risk to the auditor due to the complexity of physical inventory includes possible

Accepted Answer

A) overstatement of individual items across multiple locations for cutoff testing. 
B) utility of the items exceeding their cost for existence testing. 
C) movement of goods during existence testing. 
D) stocking of only one type of inventory in the warehouse for presentation and disclosure testing. 
A) overstatement of individual items across multiple locations for cutoff testing. 
B) utility of the items exceeding their cost for existence testing. 
C) movement of goods during existence testing. 
D) stocking of only one type of inventory in the warehouse for presentation and disclosure testing.

Question 2

Acquisition and payment processes
What are the five major phases of the acquisition and payment process?

Accepted Answer

The five phases of the acquisition and p

Question 3

When auditing accounts payable,the greatest emphasis is placed on

Accepted Answer

A) the existence assertion. 
B) the completeness assertion. 
C) the presentation assertion. 
D) the disclosure assertion. 
A) the existence assertion. 
B) the completeness assertion. 
C) the presentation assertion. 
D) the disclosure assertion.

Question 4

The benefit of a cross sectional analysis of inventory across multiple stores includes

Accepted Answer

A) Auditor identification of locations for detailed testing of inventory. 
B) Auditor detail as to specific units by month. 
C) Auditor conclusions regarding the fair presentation of obsolescence. 
D) Auditor evidence of physical existence. 
A) Auditor identification of locations for detailed testing of inventory. 
B) Auditor detail as to specific units by month. 
C) Auditor conclusions regarding the fair presentation of obsolescence. 
D) Auditor evidence of physical existence.

Question 5

An auditor may best test commissions expense for salespeople when control risk is low by performing:

Accepted Answer

A) Analytical procedures 
B) Tagging and tracing 
C) Alternative procedures. 
D) Subsequent proof of cash. 
A) Analytical procedures 
B) Tagging and tracing 
C) Alternative procedures. 
D) Subsequent proof of cash.

Question 6

Test counts are performed by the auditor to give the impression of control and they are not used for substantive testing.

Accepted Answer

A) True 
 B)False

Question 7

A primary feature of automated control in the acquisition cycle includes

Accepted Answer

A) that authorization is no longer required. 
B) limits as to the number of items that can be received by the warehouse. 
C) calculated order quantities based on set criteria. 
D) funds transfer at the request of the controller. 
A) that authorization is no longer required. 
B) limits as to the number of items that can be received by the warehouse. 
C) calculated order quantities based on set criteria. 
D) funds transfer at the request of the controller.

Question 8

Inventory is a complex accounting and auditing area due to all of the following except

Accepted Answer

A) diversity of items in inventory. 
B) low volume of activity. 
C) potential difficulty in classifying inventory. 
D) difficulty in applying the lower of cost or market principle. 
A) diversity of items in inventory. 
B) low volume of activity. 
C) potential difficulty in classifying inventory. 
D) difficulty in applying the lower of cost or market principle.

Question 9

The auditor would most likely use attribute sampling to test transactions in the acquisition cycle for timeliness of recording transactions.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following signals a potential fraud that may occur for the overstatement of inventory accounts?

Accepted Answer

A) Reserves for contingencies are reducing rapidly. 
B) Inventory amounts are growing faster than sales. 
C) Repairs and maintenance accounts have significant credit entries. 
D) The purchase of manufacturing equipment is occurring at a rapid rate. 
A) Reserves for contingencies are reducing rapidly. 
B) Inventory amounts are growing faster than sales. 
C) Repairs and maintenance accounts have significant credit entries. 
D) The purchase of manufacturing equipment is occurring at a rapid rate.

Question 11

When auditing expense accounts,which of the following would the auditor be least likely to subject to a detailed test of transactions?

Accepted Answer

A) legal expense 
B) utilities expense 
C) repairs and maintenance expense 
D) travel expense 
A) legal expense 
B) utilities expense 
C) repairs and maintenance expense 
D) travel expense

Question 12

Please indicate the proper sequence of the acquisition cycle: 1.Approval of items for payment.
2)Authorized requisition for goods or services.
3)Cash disbursements.
4)Receipt of goods and services.
5)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 13

An individual outside of the purchasing department should be the only individual with access to the vendor tables in the database.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) expenses that are significantly above or below industry norms. 
B) expense accounts that have significant debit entries. 
C) payments made to senior officers in the form of loans that are subsequently forgiven. 
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) payments made to senior officers in the form of loans that are subsequently forgiven. 
D) capital assets that seem to be growing faster than the business.

Question 15

In order for the auditor to perform an engagement on a manufacturing firm,it is important that the entire integrated process is understood.

Accepted Answer

A) True 
 B)False

Question 16

The acquisition cycle begins with a

Accepted Answer

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

Question 17

What is the primary reason for management's ability to easily overvalue inventory without rapid detection by auditors?

Accepted Answer

A) The limited volume of transactions in the inventory accounts. 
B) The auditor's assessment of inventory as a low-risk area. 
C) Complexity in the valuation of inventory. 
D) Consideration by the auditor of non-financial indicators of inventory fraud. 
A) The limited volume of transactions in the inventory accounts. 
B) The auditor's assessment of inventory as a low-risk area. 
C) Complexity in the valuation of inventory. 
D) Consideration by the auditor of non-financial indicators of inventory fraud.

Question 18

When a purchasing agent benefits personally by accepting payment from a vendor,the purchasing agent is guilty of

Accepted Answer

A) performing kiting. 
B) committing embezzlement. 
C) receiving kickbacks. 
D) stealing company assets. 
A) performing kiting. 
B) committing embezzlement. 
C) receiving kickbacks. 
D) stealing company assets.

Question 19

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 20

When testing the existence assertion for inventory,the auditor would most likely

Accepted Answer

A) observe the client's count of the annual physical inventory and test count. 
B) review vendor invoices for the amounts recorded. 
C) perform year-end tests of invoices received in the final month. 
D) trace raw material purchases to invoices and to the general ledger. 
A) observe the client's count of the annual physical inventory and test count. 
B) review vendor invoices for the amounts recorded. 
C) perform year-end tests of invoices received in the final month. 
D) trace raw material purchases to invoices and to the general ledger.

A risk to the auditor due to the complexity of physical inventory includes possible

Acquisition and payment processes What are the five major phases of the acquisition and payment process?

When auditing accounts payable,the greatest emphasis is placed on

The benefit of a cross sectional analysis of inventory across multiple stores includes

An auditor may best test commissions expense for salespeople when control risk is low by performing:

Test counts are performed by the auditor to give the impression of control and they are not used for substantive testing.

A primary feature of automated control in the acquisition cycle includes

Inventory is a complex accounting and auditing area due to all of the following except

The auditor would most likely use attribute sampling to test transactions in the acquisition cycle for timeliness of recording transactions.

Which of the following signals a potential fraud that may occur for the overstatement of inventory accounts?

When auditing expense accounts,which of the following would the auditor be least likely to subject to a detailed test of transactions?

Please indicate the proper sequence of the acquisition cycle: 1.Approval of items for payment. 2)Authorized requisition for goods or services. 3)Cash disbursements. 4)Receipt of goods and services. 5)Authorized purchase of goods or services.

An individual outside of the purchasing department should be the only individual with access to the vendor tables in the database.

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

In order for the auditor to perform an engagement on a manufacturing firm,it is important that the entire integrated process is understood.

The acquisition cycle begins with a

What is the primary reason for management's ability to easily overvalue inventory without rapid detection by auditors?

When a purchasing agent benefits personally by accepting payment from a vendor,the purchasing agent is guilty of

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

When testing the existence assertion for inventory,the auditor would most likely

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

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Exam 11: Audit of Acquisition and Payment Cycle and Inventory

A risk to the auditor due to the complexity of physical inventory includes possible

Acquisition and payment processes What are the five major phases of the acquisition and payment process?

When auditing accounts payable,the greatest emphasis is placed on

The benefit of a cross sectional analysis of inventory across multiple stores includes

An auditor may best test commissions expense for salespeople when control risk is low by performing:

Test counts are performed by the auditor to give the impression of control and they are not used for substantive testing.

A primary feature of automated control in the acquisition cycle includes

Inventory is a complex accounting and auditing area due to all of the following except

The auditor would most likely use attribute sampling to test transactions in the acquisition cycle for timeliness of recording transactions.

Which of the following signals a potential fraud that may occur for the overstatement of inventory accounts?

When auditing expense accounts,which of the following would the auditor be least likely to subject to a detailed test of transactions?

Please indicate the proper sequence of the acquisition cycle: 1.Approval of items for payment. 2)Authorized requisition for goods or services. 3)Cash disbursements. 4)Receipt of goods and services. 5)Authorized purchase of goods or services.

An individual outside of the purchasing department should be the only individual with access to the vendor tables in the database.

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

In order for the auditor to perform an engagement on a manufacturing firm,it is important that the entire integrated process is understood.

The acquisition cycle begins with a

What is the primary reason for management's ability to easily overvalue inventory without rapid detection by auditors?

When a purchasing agent benefits personally by accepting payment from a vendor,the purchasing agent is guilty of

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

When testing the existence assertion for inventory,the auditor would most likely

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

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