Question 1

Information gathering about the control structure often begins with an internal control questionnaire.

Accepted Answer

A) True 
 B)False

Question 2

An auditor wants to perform tests of controls on a client's cash disbursement procedures.If the control procedures leave no audit trail or documentary evidence,the auditor is most likely to test the procedures by ________.

Accepted Answer

A) confirmation and observation 
B) observation and inquiry 
C) analytical procedures and confirmation 
D) inquiry and analytical procedures 
A) confirmation and observation 
B) observation and inquiry 
C) analytical procedures and confirmation 
D) inquiry and analytical procedures

Question 3

Auditors can perform detail tests of control audit procedures to determine whether the client throughout the period of intended reliance is actually performing controls that are said to be in place and operating.What two characteristics must a detail test of controls audit procedure have in order to be successful?

Accepted Answer

The auditor must identify the population

Question 4

Martinez CA was auditing his client,Marvelous Retail Limited.He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports.This procedure was intended to satisfy which control objective?

Accepted Answer

A) Authorization. 
B) Completeness. 
C) Validity. 
D) Accuracy. 
A) Authorization. 
B) Completeness. 
C) Validity. 
D) Accuracy.

Question 5

Limiting access to blank documents,such as purchase orders,is part of the custody duty in the acquisition and expenditure cycle.

Accepted Answer

A) True 
 B)False

Question 6

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

Accepted Answer

A) True 
 B)False

Question 7

If the auditor selects a sample of open accounts payable and vouches the details to supporting purchase documents,the auditor is testing the objective of validity.

Accepted Answer

A) True 
 B)False

Question 8

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

Accepted Answer

A) Purchase requisitions and accounts payable entries. 
B) Receiving reports and purchase orders. 
C) Purchase requisitions and purchases orders. 
D) Purchase orders and bid quotes. 
A) Purchase requisitions and accounts payable entries. 
B) Receiving reports and purchase orders. 
C) Purchase requisitions and purchases orders. 
D) Purchase orders and bid quotes.

Question 9

Jack PA is the auditor of Jill Corporation.Jack followed last year's working papers in selecting accounts payable to confirm.Jack mailed confirmations to 50 of Jill's 200 suppliers.The sample was designed to select accounts with the largest balances.Jack and Jill spent a lot of time reconciling minor differences between the confirmation amounts and the accounts payable trial balance.
Required:
Do you believe that Jack should have used the same sample design for accounts payable confirmations this year? If not,what suggestions can you give to improve the design?

Accepted Answer

Because of concern about the possible un

Question 10

Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.

Accepted Answer

A) True 
 B)False

Question 11

Audit procedures used in the observation of a client's physical inventory count are designed primarily to ________.

Accepted Answer

A) test and observe the client's physical count of inventory 
B) independently verify the physical counts recorded by the client 
C) assist the client in taking test counts of year-end inventory 
D) determine whether inventory contains obsolete goods 
A) test and observe the client's physical count of inventory 
B) independently verify the physical counts recorded by the client 
C) assist the client in taking test counts of year-end inventory 
D) determine whether inventory contains obsolete goods

Question 12

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Accepted Answer

A) Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period. 
B) Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether receiving reports support them. 
C) Examining unusual relationships between monthly accounts payable balances and recorded cash payments. 
D) Reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date. 
A) Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period. 
B) Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether receiving reports support them. 
C) Examining unusual relationships between monthly accounts payable balances and recorded cash payments. 
D) Reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date.

Question 13

Mary Monitor CA noted that ABC Co.Ltd.received goods prior to year-end and included them in the physical inventory but did not record them in the accounting records.In this case,which of the following adjustments should be made?

Accepted Answer

A) Debit Purchases,credit Cost of Goods Sold. 
B) No adjustment is necessary. 
C) Debit Inventory,credit Accounts Payable. 
D) Debit Cost of Goods Sold,credit Accounts Payable. 
A) Debit Purchases,credit Cost of Goods Sold. 
B) No adjustment is necessary. 
C) Debit Inventory,credit Accounts Payable. 
D) Debit Cost of Goods Sold,credit Accounts Payable.

Question 14

When using confirmations to provide evidence about the completeness assertion for accounts payable,the appropriate population most likely would be ________.

Accepted Answer

A) vendors with whom the entity has previously done business 
B) amounts recorded in the accounts payable subsidiary ledger 
C) payees of cheques drawn in the month after the year-end 
D) invoices filed in the company's open invoice file 
A) vendors with whom the entity has previously done business 
B) amounts recorded in the accounts payable subsidiary ledger 
C) payees of cheques drawn in the month after the year-end 
D) invoices filed in the company's open invoice file

Question 15

Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?

Accepted Answer

A) Perpetual inventory records are periodically compared with the current cost of individual inventory items. 
B) A just-in-time inventory ordering system keeps inventory levels at a desired minimum. 
C) Requisitions,receiving reports,and purchase orders are independently matched before payment is approved. 
D) Periodic inventory counts are used to adjust the perpetual inventory records. 
A) Perpetual inventory records are periodically compared with the current cost of individual inventory items. 
B) A just-in-time inventory ordering system keeps inventory levels at a desired minimum. 
C) Requisitions,receiving reports,and purchase orders are independently matched before payment is approved. 
D) Periodic inventory counts are used to adjust the perpetual inventory records.

Question 16

To determine whether accounts payable is complete,an auditor performs a test to verify that all merchandise received is recorded.The population of documents for this test consists of all ________.

Accepted Answer

A) payment vouchers 
B) receiving reports 
C) purchase requisitions 
D) vendor's invoices 
A) payment vouchers 
B) receiving reports 
C) purchase requisitions 
D) vendor's invoices

Question 17

When confirming accounts payable,emphasis should be put on what kind of accounts?

Accepted Answer

A) Accounts with small or zero balances. 
B) All accounts should be equally emphasized. 
C) Accounts with large balances. 
D) Accounts listed in the accounts payable subsidiary ledger. 
A) Accounts with small or zero balances. 
B) All accounts should be equally emphasized. 
C) Accounts with large balances. 
D) Accounts listed in the accounts payable subsidiary ledger.

Question 18

A company's internal control system requires that an approved payables voucher,supported by a purchase order and a receiving report,accompany every cheque requisition.To determine whether cheques are being issued for unauthorized expenditures,an auditor is most likely to select items for testing from the population of all ________.

Accepted Answer

A) purchase orders 
B) cancelled cheques 
C) receiving reports 
D) approved vouchers 
A) purchase orders 
B) cancelled cheques 
C) receiving reports 
D) approved vouchers

Question 19

Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the equipment (fixed asset)account are not understated?

Accepted Answer

A) Amortization expense. 
B) Gain on disposal of equipment. 
C) Accounts payable. 
D) Repairs and maintenance expense. 
A) Amortization expense. 
B) Gain on disposal of equipment. 
C) Accounts payable. 
D) Repairs and maintenance expense.

Question 20

Which of the following situations indicates a potential material weakness in internal control over acquisitions and expenditures?

Accepted Answer

A) Purchase orders are not prepared for services that are acquired directly under authorization of department heads. 
B) The person who approves purchases also signs the cheques. 
C) Unacceptable goods are not recorded on receiving reports. 
D) The person who signs the cheques also stamps "paid" on the vouchers. 
A) Purchase orders are not prepared for services that are acquired directly under authorization of department heads. 
B) The person who approves purchases also signs the cheques. 
C) Unacceptable goods are not recorded on receiving reports. 
D) The person who signs the cheques also stamps "paid" on the vouchers.

Information gathering about the control structure often begins with an internal control questionnaire.

An auditor wants to perform tests of controls on a client's cash disbursement procedures.If the control procedures leave no audit trail or documentary evidence,the auditor is most likely to test the procedures by ________.

Martinez CA was auditing his client,Marvelous Retail Limited.He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports.This procedure was intended to satisfy which control objective?

Limiting access to blank documents,such as purchase orders,is part of the custody duty in the acquisition and expenditure cycle.

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

If the auditor selects a sample of open accounts payable and vouches the details to supporting purchase documents,the auditor is testing the objective of validity.

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.

Audit procedures used in the observation of a client's physical inventory count are designed primarily to ________.

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Mary Monitor CA noted that ABC Co.Ltd.received goods prior to year-end and included them in the physical inventory but did not record them in the accounting records.In this case,which of the following adjustments should be made?

When using confirmations to provide evidence about the completeness assertion for accounts payable,the appropriate population most likely would be ________.

Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?

To determine whether accounts payable is complete,an auditor performs a test to verify that all merchandise received is recorded.The population of documents for this test consists of all ________.

When confirming accounts payable,emphasis should be put on what kind of accounts?

Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the equipment (fixed asset)account are not understated?

Which of the following situations indicates a potential material weakness in internal control over acquisitions and expenditures?

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters

Exam 12: The Purchases, Payables, and Payments Process

Information gathering about the control structure often begins with an internal control questionnaire.

An auditor wants to perform tests of controls on a client's cash disbursement procedures.If the control procedures leave no audit trail or documentary evidence,the auditor is most likely to test the procedures by ________.

Martinez CA was auditing his client,Marvelous Retail Limited.He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports.This procedure was intended to satisfy which control objective?

Limiting access to blank documents,such as purchase orders,is part of the custody duty in the acquisition and expenditure cycle.

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

If the auditor selects a sample of open accounts payable and vouches the details to supporting purchase documents,the auditor is testing the objective of validity.

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.

Audit procedures used in the observation of a client's physical inventory count are designed primarily to ________.

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Mary Monitor CA noted that ABC Co.Ltd.received goods prior to year-end and included them in the physical inventory but did not record them in the accounting records.In this case,which of the following adjustments should be made?

When using confirmations to provide evidence about the completeness assertion for accounts payable,the appropriate population most likely would be ________.

Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?

To determine whether accounts payable is complete,an auditor performs a test to verify that all merchandise received is recorded.The population of documents for this test consists of all ________.

When confirming accounts payable,emphasis should be put on what kind of accounts?

Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the equipment (fixed asset)account are not understated?

Which of the following situations indicates a potential material weakness in internal control over acquisitions and expenditures?

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters