Question 1

An auditor performs a test to determine whether all merchandise for which the client was billed was received.The population for this test consists of all:

Accepted Answer

A) Merchandise received. 
B) Vendor's invoices. 
C) Canceled checks. 
D) Receiving reports. 
A) Merchandise received. 
B) Vendor's invoices. 
C) Canceled checks. 
D) Receiving reports. B

Question 2

The accuracy of perpetual inventory records may be established,in part,by comparing perpetual inventory records with:

Accepted Answer

A) Purchase requisitions. 
B) Receiving reports. 
C) Purchase orders. 
D) Vendor payments. 
A) Purchase requisitions. 
B) Receiving reports. 
C) Purchase orders. 
D) Vendor payments. B

Question 3

A client uses a perpetual inventory system.Would one expect a credit to which of the following accounts at the point of sale?  
$\quad $ $\quad $ $\quad $$\begin{array} { c c c } 
& \text { Sales } &\quad \text { Inventory } \\end{array}$
A- $\begin{array} { c c c }  \quad\quad\quad\text { Yes } &\quad\quad\quad\quad \text { Yes } \\end{array}$ 
B-  $\begin{array} { c c c }\quad\quad\quad \text { Yes } &\quad\quad\quad\quad \text {  No } \\end{array}$
C-  $\begin{array} { c c c } \quad\quad\quad\text {  No } & \quad\quad\quad\quad\text {Yes } \\end{array}$
D-   $\begin{array} { c c c }\quad\quad\quad \text { No } &\quad\quad\quad\quad \text {  No }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D A

Question 4

Which of the following is not true relating to the auditors' observation of the client's physical inventory?

Accepted Answer

A) The auditors should evaluate the client's planning of the physical inventory. 
B) The auditors should supervise the taking of the inventory. 
C) The auditors should evaluate the adequacy of the client's counting procedures. 
D) The auditors should take test counts of the client's inventory. 
A) The auditors should evaluate the client's planning of the physical inventory. 
B) The auditors should supervise the taking of the inventory. 
C) The auditors should evaluate the adequacy of the client's counting procedures. 
D) The auditors should take test counts of the client's inventory.

Question 5

The auditors plan to use data analytics to audit purchases.Which of the following is least likely to be performed efficiently using data analytics?

Accepted Answer

A) Identification of unusually large purchases. 
B) Identification of purchases from vendors that are not authorized. 
C) Identification of purchases of non-standard items. 
D) Identification of purchases of goods from related parties that the auditors had not been informed of and were not aware of the relationship. 
A) Identification of unusually large purchases. 
B) Identification of purchases from vendors that are not authorized. 
C) Identification of purchases of non-standard items. 
D) Identification of purchases of goods from related parties that the auditors had not been informed of and were not aware of the relationship.

Question 6

Which of the following is not one of the independent auditor's objectives regarding the examination of inventories?

Accepted Answer

A) Verifying that inventory counted is owned by the client. 
B) Verifying that the client has used proper inventory pricing. 
C) Ascertaining the physical quantities of inventory on hand. 
D) Verifying that all inventory owned by the client is on hand at the time of the count. 
A) Verifying that inventory counted is owned by the client. 
B) Verifying that the client has used proper inventory pricing. 
C) Ascertaining the physical quantities of inventory on hand. 
D) Verifying that all inventory owned by the client is on hand at the time of the count.

Question 7

A client's physical count of inventories was higher than the inventory quantities per the perpetual records.This situation could be the result of the failure to record:

Accepted Answer

A) Sales. 
B) Sales discounts. 
C) Purchases. 
D) Purchase returns. 
A) Sales. 
B) Sales discounts. 
C) Purchases. 
D) Purchase returns.

Question 8

From the auditor's point of view,inventory counts are more acceptable prior to the year-end when:

Accepted Answer

A) Internal control is weak. 
B) Accurate perpetual inventory records are maintained. 
C) Inventory is slow-moving. 
D) Significant amounts of inventory are held on a consignment basis. 
A) Internal control is weak. 
B) Accurate perpetual inventory records are maintained. 
C) Inventory is slow-moving. 
D) Significant amounts of inventory are held on a consignment basis.

Question 9

Tracing copies of computer-generated sales invoices to copies of the corresponding computer-generated shipping documents provides evidence that:

Accepted Answer

A) Shipments to customers were properly billed. 
B) Entries in the accounts receivable subsidiary ledger were for sales actually shipped. 
C) Sales billed to customers were actually shipped. 
D) No duplicate shipments to customers were made. 
A) Shipments to customers were properly billed. 
B) Entries in the accounts receivable subsidiary ledger were for sales actually shipped. 
C) Sales billed to customers were actually shipped. 
D) No duplicate shipments to customers were made.

Question 10

In verifying credits to perpetual inventory records of a nonmanufacturing firm,the auditor would be most interested in examining the:

Accepted Answer

A) Shipping documents. 
B) Receiving reports. 
C) Purchase orders. 
D) Vendors' invoices. 
A) Shipping documents. 
B) Receiving reports. 
C) Purchase orders. 
D) Vendors' invoices.

Question 11

The auditor determines that each of the following objectives will be part of your audit of Cameron Co. ,Inc.For each audit objective,select a substantive procedure that would help to achieve that objective.Each of the procedures may be used once,more than once,or not at all.
Subtantive Procedures:
- Select a sample of items during the physical inventory count and determine that they have been included on count sheets.
- Select a sample of recorded items and examine supporting vendors' invoices and contracts.
- Review drafts of the financial statements.
- Select a sample of recorded items and examine supporting vendors' invoices and contracts.
- Select a sample of recorded items on count sheets during the physical inventory count and determine that items are on hand.
 $\begin{array}{|l|l|l|}
\hline & \text { Audit Objective }& \text { Substantive Procedures }\
\hline 1 & \text { Establish the completeness of } \
\hline 2 & \text { Establish the accuracy of cost } \
& \text { amounts of inventories. } \
\hline & \text { Determine that the presentation } \
& \text { and disclosure of inventories } \
& \text { and cost of goods sold is } \
3 & \text { adeguate. } \
\hline & \text { Establish that the client has } \
4 & \text { rights to the recorded } \
& \text { inventories. } \
\hline  & \text { Establish the existence of } \
 5 &\text { ending inventory. }\
\hline
\end{array}$

Accepted Answer

1.The requirement is to identify an audi

Question 12

Which of the following is an effective control that encourages receiving department personnel to count and inspect all merchandise received?

Accepted Answer

A) Quantities ordered are excluded from the receiving department copy of the purchase order. 
B) Vouchers are prepared by accounts payable department personnel only after they match item counts on the receiving report with the purchase order. 
C) Receiving department personnel are expected to match and reconcile the receiving report with the purchase order. 
D) Internal auditors periodically examine,on a surprise basis,the receiving department copies of receiving reports. 
A) Quantities ordered are excluded from the receiving department copy of the purchase order. 
B) Vouchers are prepared by accounts payable department personnel only after they match item counts on the receiving report with the purchase order. 
C) Receiving department personnel are expected to match and reconcile the receiving report with the purchase order. 
D) Internal auditors periodically examine,on a surprise basis,the receiving department copies of receiving reports.

Question 13

To test the client's cutoff of inventories,the auditors will make a record of the serial number of the final receiving and shipping documents used prior to the taking of the physical inventory.

Accepted Answer

A) True 
 B)False

Question 14

Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company")is involved with counting a client's inventory?

Accepted Answer

A) The auditor should consider the company a specialist,and follow the procedures outlined for addressing an auditor's specialist. 
B) The auditor should not consider the counts by the company,by themselves,sufficient appropriate audit evidence. 
C) The auditor must observe all inventory counts taken by the company. 
D) The auditor should observe a letter of representations form the company. 
A) The auditor should consider the company a specialist,and follow the procedures outlined for addressing an auditor's specialist. 
B) The auditor should not consider the counts by the company,by themselves,sufficient appropriate audit evidence. 
C) The auditor must observe all inventory counts taken by the company. 
D) The auditor should observe a letter of representations form the company.

Question 15

Which of the following most likely would be an internal control procedure designed to detect errors and fraud concerning the custody of inventory?

Accepted Answer

A) Periodic reconciliation of work in process with job cost sheets. 
B) Segregation of functions between general accounting and cost accounting. 
C) Independent comparisons of finished goods records with counts of goods on hand. 
D) Approval of inventory journal entries by the storekeeper. 
A) Periodic reconciliation of work in process with job cost sheets. 
B) Segregation of functions between general accounting and cost accounting. 
C) Independent comparisons of finished goods records with counts of goods on hand. 
D) Approval of inventory journal entries by the storekeeper.

Question 16

A client uses a periodic inventory system.Would one expect a credit to which of the following accounts at the point of sale?

$\quad $ $\quad $ $\quad $$\begin{array} { c c c } 
& \text { Sales } & \quad\text { Inventory } \\end{array}$
A- $\begin{array} { c c c }  \quad\quad\quad\text { Yes } &\quad\quad\quad\quad \text { Yes } \\end{array}$ 
B-  $\begin{array} { c c c }\quad\quad\quad \text { Yes } &\quad\quad\quad\quad \text {  No } \\end{array}$
C-  $\begin{array} { c c c } \quad\quad\quad\text {  No } & \quad\quad\quad\quad\text {Yes } \\end{array}$
D-   $\begin{array} { c c c }\quad\quad\quad \text { No } &\quad\quad\quad\quad \text {  No }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 17

Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of the client company,if the company:

Accepted Answer

A) Has paid for the merchandise. 
B) Has physical possession of the merchandise. 
C) Holds legal title to the merchandise. 
D) Holds the shipping documents for the merchandise issued in the company's name. 
A) Has paid for the merchandise. 
B) Has physical possession of the merchandise. 
C) Holds legal title to the merchandise. 
D) Holds the shipping documents for the merchandise issued in the company's name.

Question 18

An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise.When vendors' invoices arrive,one of the employees approves the invoices for payment.After the invoices are paid,the employee destroys the invoices and the related vouchers.In gathering evidence regarding the fraud,the auditor most likely would select items for testing from the file of all:

Accepted Answer

A) Cash disbursements. 
B) Approved vouchers. 
C) Receiving reports. 
D) Vendors' invoices. 
A) Cash disbursements. 
B) Approved vouchers. 
C) Receiving reports. 
D) Vendors' invoices.

Question 19

Observation of inventories is a required audit procedure under all circumstances.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true about the auditors' observation of the client's physical inventory?

Accepted Answer

A) The auditors should plan the physical inventory. 
B) The auditors should segregate damaged and obsolete goods. 
C) The auditors should evaluate the condition of the inventory. 
D) The auditors should supervise the client's personnel. 
A) The auditors should plan the physical inventory. 
B) The auditors should segregate damaged and obsolete goods. 
C) The auditors should evaluate the condition of the inventory. 
D) The auditors should supervise the client's personnel.

An auditor performs a test to determine whether all merchandise for which the client was billed was received.The population for this test consists of all:

The accuracy of perpetual inventory records may be established,in part,by comparing perpetual inventory records with:

A client uses a perpetual inventory system.Would one expect a credit to which of the following accounts at the point of sale? $\quad$ $\quad$ $\quad$ Sales Inventory A- Yes Yes B- Yes No C- No Yes D- No No

Which of the following is not true relating to the auditors' observation of the client's physical inventory?

The auditors plan to use data analytics to audit purchases.Which of the following is least likely to be performed efficiently using data analytics?

Which of the following is not one of the independent auditor's objectives regarding the examination of inventories?

A client's physical count of inventories was higher than the inventory quantities per the perpetual records.This situation could be the result of the failure to record:

From the auditor's point of view,inventory counts are more acceptable prior to the year-end when:

Tracing copies of computer-generated sales invoices to copies of the corresponding computer-generated shipping documents provides evidence that:

In verifying credits to perpetual inventory records of a nonmanufacturing firm,the auditor would be most interested in examining the:

Which of the following is an effective control that encourages receiving department personnel to count and inspect all merchandise received?

To test the client's cutoff of inventories,the auditors will make a record of the serial number of the final receiving and shipping documents used prior to the taking of the physical inventory.

Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company")is involved with counting a client's inventory?

Which of the following most likely would be an internal control procedure designed to detect errors and fraud concerning the custody of inventory?

A client uses a periodic inventory system.Would one expect a credit to which of the following accounts at the point of sale? $\quad$ $\quad$ $\quad$ Sales Inventory A- Yes Yes B- Yes No C- No Yes D- No No

Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of the client company,if the company:

Observation of inventories is a required audit procedure under all circumstances.

Which of the following is true about the auditors' observation of the client's physical inventory?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters

Exam 12: Inventories and Cost of Goods Sold

An auditor performs a test to determine whether all merchandise for which the client was billed was received.The population for this test consists of all:

The accuracy of perpetual inventory records may be established,in part,by comparing perpetual inventory records with:

A client uses a perpetual inventory system.Would one expect a credit to which of the following accounts at the point of sale? \quad \quad \quad Sales Inventory A- Yes Yes B- Yes No C- No Yes D- No No

Which of the following is not true relating to the auditors' observation of the client's physical inventory?

The auditors plan to use data analytics to audit purchases.Which of the following is least likely to be performed efficiently using data analytics?

Which of the following is not one of the independent auditor's objectives regarding the examination of inventories?

A client's physical count of inventories was higher than the inventory quantities per the perpetual records.This situation could be the result of the failure to record:

From the auditor's point of view,inventory counts are more acceptable prior to the year-end when:

Tracing copies of computer-generated sales invoices to copies of the corresponding computer-generated shipping documents provides evidence that:

In verifying credits to perpetual inventory records of a nonmanufacturing firm,the auditor would be most interested in examining the:

Which of the following is an effective control that encourages receiving department personnel to count and inspect all merchandise received?

To test the client's cutoff of inventories,the auditors will make a record of the serial number of the final receiving and shipping documents used prior to the taking of the physical inventory.

Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company")is involved with counting a client's inventory?

Which of the following most likely would be an internal control procedure designed to detect errors and fraud concerning the custody of inventory?

A client uses a periodic inventory system.Would one expect a credit to which of the following accounts at the point of sale? \quad \quad \quad Sales Inventory A- Yes Yes B- Yes No C- No Yes D- No No

Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of the client company,if the company:

Observation of inventories is a required audit procedure under all circumstances.

Which of the following is true about the auditors' observation of the client's physical inventory?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters

A client uses a perpetual inventory system.Would one expect a credit to which of the following accounts at the point of sale? $\quad$ $\quad$ $\quad$ Sales Inventory A- Yes Yes B- Yes No C- No Yes D- No No

A client uses a periodic inventory system.Would one expect a credit to which of the following accounts at the point of sale? $\quad$ $\quad$ $\quad$ Sales Inventory A- Yes Yes B- Yes No C- No Yes D- No No