Question 1

A threefold approach is typically followed when determining the reasonableness of cutoff. Briefly describe the threefold approach.

Accepted Answer

First, auditors should decide on the appropriate cutoff criteria. Second, they must evaluate whether the client has established adequate procedures to ensure a reasonable cutoff. Finally, auditors must test whether a reasonable cutoff was obtained.

Question 2

Attributes sampling tables can be used to evaluate results of tests of details with ARACR being replaced with ARIA.

Accepted Answer

A) True 
 B)False  True

Question 3

Tests of controls for the acquisition and payment cycle are usually divided into:

Accepted Answer

A)   tests of acquisitions and payment.
B)   tests of authorization and payment.
C)   tests of authorization and acquisition.
D)   tests of acquisitions and classification. A

Question 4

Cutoff misstatements occur when:

Accepted Answer

The answer of Cutoff misstatements occur when: ...

Question 5

The most important controls over cash disbursements include all but which of the following?

Accepted Answer

A)   Signing of checks by an authorized employee.
B)   Random examination of the supporting documents by the authorized check signer before signing checks.
C)   Prenumbering of checks and investigations of missing checks.
D)   Separation of responsibilities for signing the checks and performing the accounts payable function.

Question 6

If acceptable audit risk is increased, ARIA should be:

Accepted Answer

A)   unaffected.
B)   reduced.
C)   increased.
D)   modified.

Question 7

The most effective test of details of accounts receivable is the:

Accepted Answer

A)   examination of sales invoices.
B)   detail tie- in of the records.
C)   confirmation of accounts receivable.
D)   analysis of the allowance for doubtful accounts.

Question 8

How might the auditor determine whether a client has limited rights to accounts receivable?

Accepted Answer

The answer of How might the auditor determine whether a...

Question 9

Discuss the difference in the auditor's approach to the audit of assets and the audit of liabilities.

Accepted Answer

The answer of Discuss the difference in the auditor's approach...

Question 10

An auditor using nonstatistical sampling cannot formally measure sampling error and therefore must subjectively consider the possibility that the True population misstatement exceeds a tolerable amount. Which of the following factors should be considered by the auditor in making this assessment?

Accepted Answer

The answer of An auditor using nonstatistical sampling cannot formally...

Question 11

Which department should initiate a report when goods arrive from a vendor?

Accepted Answer

A)   Manufacturing.
B)   Receiving.
C)   Treasury.
D)   Accounting.

Question 12

Which of the following items is not needed to apply MUS?

Accepted Answer

The answer of Which of the following items is not...

Question 13

Which of the following is the least important consideration in determining the sample size of confirmations?

Accepted Answer

A)   Total annual credit sales.
B)   The results of related analytical procedures.
C)   The auditor's assessment of detection risk.
D)   The types of confirmations being sent; that is, positive or negative

Question 14

Calculating the sample size using monetary unit sampling depends on which of the following factors?

Accepted Answer

The answer of Calculating the sample size using monetary unit...

Question 15

Which of the following is not a balance- related audit objective evaluated in the audit of accounts receivable?

Accepted Answer

A)   Timing.
B)   Completeness.
C)   Accuracy.
D)   Realizable value.

Question 16

Which of the following statements is False?

Accepted Answer

A)   The ownership objective is an important part of verifying assets but not liabilities.
B)   The success of the auditor's search for unrecorded liabilities is not dependent upon the materiality of the potential balance in the account.
C)   In auditing liabilities, the emphasis is on the search for understatements rather than overstatements.
D)   Because of the emphasis on understatements in liability accounts, out- of- period liability tests are important for accounts payable.

Question 17

Which of the following is not a balance- related audit objective evaluated in the audit of accounts receivable?

Accepted Answer

A)   Accuracy.
B)   Completeness.
C)   Occurrence.
D)   Rights.

Question 18

What is the purpose of applying stratified sampling to a population?

Accepted Answer

The answer of What is the purpose of applying stratified...

Question 19

Explain ARIA and ARIR within the context of variables sampling.

Accepted Answer

The answer of Explain ARIA and ARIR within the context...

Question 20

As the acceptable risk of incorrect acceptance is reduced, the required sample size:

Accepted Answer

A)   increases.
B)   is unaffected.
C)   decreases.
D)   increases or decreases.

Exam 6: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable, Audit Sampling for Tests of Details of Balances, and Audit of the Acquisition and Payment Cycle

A threefold approach is typically followed when determining the reasonableness of cutoff. Briefly describe the threefold approach.

Attributes sampling tables can be used to evaluate results of tests of details with ARACR being replaced with ARIA.

Tests of controls for the acquisition and payment cycle are usually divided into:

Cutoff misstatements occur when:

The most important controls over cash disbursements include all but which of the following?

If acceptable audit risk is increased, ARIA should be:

The most effective test of details of accounts receivable is the:

How might the auditor determine whether a client has limited rights to accounts receivable?

Discuss the difference in the auditor's approach to the audit of assets and the audit of liabilities.

An auditor using nonstatistical sampling cannot formally measure sampling error and therefore must subjectively consider the possibility that the True population misstatement exceeds a tolerable amount. Which of the following factors should be considered by the auditor in making this assessment?

Which department should initiate a report when goods arrive from a vendor?

Which of the following items is not needed to apply MUS?

Which of the following is the least important consideration in determining the sample size of confirmations?

Calculating the sample size using monetary unit sampling depends on which of the following factors?

Which of the following is not a balance- related audit objective evaluated in the audit of accounts receivable?

Which of the following statements is False?

Which of the following is not a balance- related audit objective evaluated in the audit of accounts receivable?

What is the purpose of applying stratified sampling to a population?

Explain ARIA and ARIR within the context of variables sampling.

As the acceptable risk of incorrect acceptance is reduced, the required sample size: