Question 1

Theresa Bamboukian started her sales process audit and was accounting for the numerical sequence of sales invoices, sales orders and shipping documents. In addition she performed a reconciliation of billings with shipping documents. Which assertions was she fulfilling?

Accepted Answer

A)  existence, accuracy 
B)  completeness, cutoff 
C)  existence, valuation and allocation 
D)  none of the above

Question 2

Lynn Kevorkian was not sure which customers of her client to send confirmations. Who should she send confirmations to?

Accepted Answer

A)  to the customers who will be most likely to reply 
B)  to the customers with the largest balances 
C)  to the customers with the oldest balances 
D)  both b and c

Question 3

When Costa Zimbalist observes the inventory count at a client to establish that the client's personnel are complying with inventory count instructions, which assertions are in play?

Accepted Answer

A)  completeness, cutoff, rights and obligations 
B)  completeness, cutoff 
C)  existence, classification 
D)  existence, completeness, valuation and accuracy

Question 4

Which of the following is a substantive test of the trade receivables balance that is always performed?

Accepted Answer

A)  testing the accounting classification of sales transactions 
B)  testing the mathematical accuracy of the cash receipts ledger 
C)  evaluating the adequacy of the provision for doubtful accounts 
D)  none of the above

Question 5

What are the key assertions for payables?

Accepted Answer

A)  completeness and valuation and allocation 
B)  existence and completeness 
C)  completeness and rights and obligations 
D)  classification and valuation and allocation

Question 6

When performing substantive procedures, the key objective is to determine whether:

Accepted Answer

A)  there are immaterial misstatements within the balance being investigated. 
B)  the client's internal controls are operating effectively. 
C)  there are material misstatements within the balance being investigated. 
D)  none of the above.

Question 7

Can you help Rosa Chaput determine why there is some effort put into testing cash when the cash account is not material?

Accepted Answer

A)  because cash can be stolen easily 
B)  because cash has to be valued properly at year-end 
C)  because so many transactions flow through cash 
D)  none of the above

Question 8

The two key assertions for inventory are completeness and rights and obligations.

Accepted Answer

A) True 
 B)False

Question 9

Martin Bellefeuille was asked by his audit manager to perform an evaluation of the operating effectiveness of controls in preventing material misstatements at the assertion level. In complying with the request, what did he do?

Accepted Answer

A)  He evaluated control risk. 
B)  He determined audit risk. 
C)  He determined inherent risk. 
D)  None of the above.

Question 10

When Silvana Mathews reviewed the physical inventory compilation she performed a procedure that included tracing the cut-off information obtained during the physical inventory observation to the accounting records of sales and purchases. Which assertion did this procedure satisfy?

Accepted Answer

A)  valuation and accuracy 
B)  completeness 
C)  existence 
D)  all of the above

Question 11

Physically sighting fixed assets enables the auditor to test the rights and obligations assertion.

Accepted Answer

A) True 
 B)False

Question 12

Provisions can be easily audited by controls testing alone.

Accepted Answer

A) True 
 B)False

Question 13

George Malinowski was trying to check whether the receivables of Cosentino Distributors were being carried at their net realizable value. His objective was to fulfill which assertion?

Accepted Answer

A)  completeness 
B)  valuation and allocation 
C)  existence 
D)  none of the above

Question 14

When substantive tests performed identify errors or exceptions, the first response is to:

Accepted Answer

A)  qualify the audit report. 
B)  understand why the exception or error has arisen. 
C)  report the client to CRA. 
D)  perform additional substantive testing.

Question 15

Auditors usually test for the existence of property, plant and equipment by:

Accepted Answer

A)  physically sighting the assets on the fixed assets register in the first year the client is audited. 
B)  vouching to supporting documentation. 
C)  re-performing depreciation calculations. 
D)  performing analytical review procedures.

Question 16

Explain how substantive testing is used for prepayments, investments and intercompany balances.

Accepted Answer

The answer of Explain how substantive testing is used for...

Question 17

Which of the following account balances are typically audited fully or substantially with limited or no controls testing?

Accepted Answer

A)  Investments 
B)  Intercompany balances 
C)  Prepayments 
D)  All of the above

Question 18

Which of the following is not an example of a substantive test of cash payments transactions?

Accepted Answer

A)  test the account classifications of cash payments 
B)  account for the numerical sequence of cheques issued during a specified period 
C)  test the mathematical accuracy of the cash receipts ledger 
D)  determine whether the signatures on paid cheques are authorized

Question 19

Discuss the specific issues that auditors should consider when designing substantive procedures.

Accepted Answer

The answer of Discuss the specific issues that auditors should...

Question 20

Accounting for the numerical sequence of cheques issued during a specific period is a substantive test relating to the purchases process.

Accepted Answer

A) True 
 B)False

Exam 10: Substantive Testing and Balance Sheet Accounts

Theresa Bamboukian started her sales process audit and was accounting for the numerical sequence of sales invoices, sales orders and shipping documents. In addition she performed a reconciliation of billings with shipping documents. Which assertions was she fulfilling?

Lynn Kevorkian was not sure which customers of her client to send confirmations. Who should she send confirmations to?

When Costa Zimbalist observes the inventory count at a client to establish that the client's personnel are complying with inventory count instructions, which assertions are in play?

Which of the following is a substantive test of the trade receivables balance that is always performed?

What are the key assertions for payables?

When performing substantive procedures, the key objective is to determine whether:

Can you help Rosa Chaput determine why there is some effort put into testing cash when the cash account is not material?

The two key assertions for inventory are completeness and rights and obligations.

Martin Bellefeuille was asked by his audit manager to perform an evaluation of the operating effectiveness of controls in preventing material misstatements at the assertion level. In complying with the request, what did he do?

When Silvana Mathews reviewed the physical inventory compilation she performed a procedure that included tracing the cut-off information obtained during the physical inventory observation to the accounting records of sales and purchases. Which assertion did this procedure satisfy?

Physically sighting fixed assets enables the auditor to test the rights and obligations assertion.

Provisions can be easily audited by controls testing alone.

George Malinowski was trying to check whether the receivables of Cosentino Distributors were being carried at their net realizable value. His objective was to fulfill which assertion?

When substantive tests performed identify errors or exceptions, the first response is to:

Auditors usually test for the existence of property, plant and equipment by:

Explain how substantive testing is used for prepayments, investments and intercompany balances.

Which of the following account balances are typically audited fully or substantially with limited or no controls testing?

Which of the following is not an example of a substantive test of cash payments transactions?

Discuss the specific issues that auditors should consider when designing substantive procedures.

Accounting for the numerical sequence of cheques issued during a specific period is a substantive test relating to the purchases process.