Question 1

Tests of controls for the occurrence assertion for purchases include all of the following except:

Accepted Answer

A)  evaluating proper segregation of duties. 
B)  testing a sample of vouchers to an authorised purchase order. 
C)  testing a sample of vouchers to receiving reports. 
D)  tracing a sample of vouchers to the purchases journal.

Question 2

An auditor most likely would limit substantive audit tests of sales transactions when control risk is assessed as low for the occurrence assertion concerning sales transactions and the auditor has already gathered evidence supporting:

Accepted Answer

A)  opening and closing inventory balances. 
B)  cash receipts and accounts receivable. 
C)  shipping and receiving activities. 
D)  cut-offs for sales and purchases.

Question 3

In auditing the purchases system, an auditor vouches a sample of entries in the voucher register (accounting records) to the supporting documents. Which assertion would this test of controls most likely support?

Accepted Answer

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

Question 4

The cut-off assertion for accounts payable includes:

Accepted Answer

A)  determining whether all accounts payable are recorded at their correct amount. 
B)  determining whether all accounts payable are actually liabilities. 
C)  determining whether all accounts payable are recorded in the proper period. 
D)  determining whether all accounts payable are properly classified in the financial statements.

Question 5

To ensure the completeness of purchases made during the year, the auditor should:

Accepted Answer

A)  select a sample of transactions from the accounts payable master file and vouch to related invoices. 
B)  select a sample of invoices received before the year-end and ensure that they are appropriately recorded in the accounts payable master file. 
C)  perform a bank reconciliation. 
D)  select a sample of receiving reports before and after the year-end and ensure they have been appropriately recorded.

Question 6

An audit client erroneously recorded a large purchase twice. Which of the following tests of control measures would be most likely to detect this error in a timely and efficient manner?

Accepted Answer

A)  Reconciling vendors' monthly statements with subsidiary payable ledger accounts. 
B)  Footing the purchases journal. 
C)  Sending written quarterly confirmations to all vendors. 
D)  Tracing totals from the purchases journal to the ledger accounts.

Question 7

Selected employee time cards that have been approved by supervisory personnel during the year are compared to the payroll register to ensure that they have been recorded. Which of the following assertions for payroll expense does this test?

Accepted Answer

A)  Occurrence. 
B)  Completeness. 
C)  Accuracy. 
D)  Cut-off.

Question 8

Selected items from the payroll register are compared to employee time cards that have been approved by supervisory personnel.Which of the following assertions for payroll expense does this test?

Accepted Answer

A)  Occurrence. 
B)  Completeness. 
C)  Accuracy. 
D)  Cut-off.

Question 9

Tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of:

Accepted Answer

A)  Classification. 
B)  Cut-off. 
C)  Occurrence. 
D)  Accuracy.

Question 10

When goods are received, the receiving clerk should match the goods with:

Accepted Answer

A)  the receiving report and the vendor shipping document. 
B)  the vendor shipping document and the purchase order. 
C)  the vendor invoice and the receiving report. 
D)  the purchase order and the requisition form.

Question 11

Which of the following is not among the errors that an auditor might include in the test data when auditing a client's IT system?

Accepted Answer

A)  Authorisation code. 
B)  Numeric characters in alphanumeric fields. 
C)  Illogical entries in fields whose logic is tested by programmed consistency checks. 
D)  Differences in description of units of measure.

Question 12

An auditor may decide to assess control risk at high for certain assertions because the auditor believes:

Accepted Answer

A)  evaluating the effectiveness of control policies and procedures is inefficient. 
B)  sufficient evidential matter to support the assertions is likely to be available. 
C)  considering the relationship of assertions to specific account balances is more efficient. 
D)  more emphasis on tests of controls than substantive tests is warranted.

Question 13

In a properly-designed accounts payable system, a voucher is prepared after the invoice, purchase order, requisition and receiving report are verified. The next step in the system is:

Accepted Answer

A)  approval of the voucher for payment. 
B)  entering of the voucher into the voucher register. 
C)  entry of the cheque amount in the cheque register. 
D)  cancellation of the supporting documents.

Question 14

An internal control questionnaire indicates that an approved receiving report is required to accompany every cheque request for payment of merchandise. Which of the following tests of control provides the greatest assurance that this control is operating effectively?

Accepted Answer

A)  Select and examine receiving reports and ascertain that the related voucher documents are dated no later than the receiving reports. 
B)  Select and examine receiving reports and ascertain that the cancelled voucher documents are dated no earlier than the receiving reports. 
C)  Select and examine voucher documents and ascertain that the related receiving reports are dated no later than the date of payment. 
D)  Select and examine voucher documents and ascertain that the related receiving reports are dated no earlier than the date of payment.

Question 15

Assessing control risk at a level below high most likely would involve:

Accepted Answer

A)  identifying specific internal controls relevant to specific assertions. 
B)  changing the timing of substantive tests by omitting interim testing and performing the tests at year-end. 
C)  reducing inherent risk for most of the assertions relevant to significant account balances. 
D)  performing more extensive substantive tests with larger sample sizes than originally planned.

Question 16

Which of the following is a primary function of the purchasing department?

Accepted Answer

A)  Reducing expenditures for goods acquired. 
B)  Verifying the propriety of goods acquired. 
C)  Ensuring the acquisition of goods of a specified quality. 
D)  Authorising the acquisition of goods.

Question 17

An auditor who is testing IT controls in a payroll system would most likely use test data that contain conditions such as:

Accepted Answer

A)  payroll cheques with unauthorised signatures. 
B)  time cards with invalid job numbers. 
C)  overtime not approved by supervisors. 
D)  deductions not authorised by employees.

Question 18

An approach to testing real-time processing of a computer-based information system is known as the integrated test facility (ITF) technique. This approach involves:

Accepted Answer

A)  testing the computer hardware at the same time as test transactions enter the real-time system. 
B)  validating as well as editing all input transactions entering the real-time system. 
C)  running monthly activities simultaneously with current transactions so that the two are integrated in the result of the test. 
D)  setting up a small set of records for a fictitious entity in the master files and then processing dummy transactions against the fictitious entity.

Question 19

All of the following are important controls over credit memos except:

Accepted Answer

A)  proper segregation of duties to ensure that sales discounts taken were earned. 
B)  credit memos should be approved by someone other than whoever initiated it. 
C)  credit memos should be supported by a receiving document for returned goods. 
D)  proper segregation of duties between access to customer records and authorising credit memos.

Question 20

When undertaking tests of controls which are related to controls built around a major transaction flow, which assertion would be of least interest to the auditor?

Accepted Answer

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

Exam 9: Tests of Controls