Question 1

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

Accepted Answer

A)  Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable. 
B)  Examine a sample of cash disbursements in the period subsequent to year-end. 
C)  Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded. 
D)  Examine unusual relationships between monthly accounts payable and recorded purchases. 
A)  Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable. 
B)  Examine a sample of cash disbursements in the period subsequent to year-end. 
C)  Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded. 
D)  Examine unusual relationships between monthly accounts payable and recorded purchases.

Question 2

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day.This policy was most likely adopted to

Accepted Answer

A)  ensure that employees who were absent on a payroll distribution day are not paid for that day. 
B)  prevent the paymaster from cashing checks that are unclaimed for several weeks. 
C)  prevent a bona fide employee's check from being claimed by another employee. 
D)  detect any fictitious employee who may have been placed on the payroll. 
A)  ensure that employees who were absent on a payroll distribution day are not paid for that day. 
B)  prevent the paymaster from cashing checks that are unclaimed for several weeks. 
C)  prevent a bona fide employee's check from being claimed by another employee. 
D)  detect any fictitious employee who may have been placed on the payroll.

Question 3

A voucher would typically contain

Accepted Answer

A)  a purchase requisition, purchase order, vendor invoice, receiving report, and check copy. 
B)  a purchase requisition, purchase order, sales invoice, receiving report, and check copy. 
C)  a purchase requisition, sales order, sales invoice, receiving report, and check copy. 
D)  a purchase requisition, sales order, vendor invoice, receiving report, and check copy. 
A)  a purchase requisition, purchase order, vendor invoice, receiving report, and check copy. 
B)  a purchase requisition, purchase order, sales invoice, receiving report, and check copy. 
C)  a purchase requisition, sales order, sales invoice, receiving report, and check copy. 
D)  a purchase requisition, sales order, vendor invoice, receiving report, and check copy.

Question 4

F.Jack,CPA,is the auditor of Jill Corporation.Jack plans to follow last year's work papers in selecting accounts payable to be confirmed.Confirmations were mailed 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 Jack should use 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 the concern for understatemen

Question 5

Which of the following would detect the understatement of a purchase discount?

Accepted Answer

A)  Verify the arithmetic accuracy of the purchases journal. 
B)  Compare purchase disbursement records and checks with invoice terms. 
C)  Compare approved purchase orders to receiving reports. 
D)  Verify the receipt of items ordered and invoiced. 
A)  Verify the arithmetic accuracy of the purchases journal. 
B)  Compare purchase disbursement records and checks with invoice terms. 
C)  Compare approved purchase orders to receiving reports. 
D)  Verify the receipt of items ordered and invoiced.

Question 6

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Accepted Answer

A)  Personnel. 
B)  Treasurer. 
C)  Controller. 
D)  Payroll. 
A)  Personnel. 
B)  Treasurer. 
C)  Controller. 
D)  Payroll.

Question 7

Computer controls that might be found in an advanced on-line acquisition and expenditure system would not include

Accepted Answer

A)  all vendor invoices are prenumbered and the numbers accounted for. 
B)  each terminal performs only designated functions. 
C)  an identification number and password are required to enter the nonautomatic purchase orders. 
D)  the check signature is printed using a signature plate that is installed on the computer printer only when checks are printed. 
A)  all vendor invoices are prenumbered and the numbers accounted for. 
B)  each terminal performs only designated functions. 
C)  an identification number and password are required to enter the nonautomatic purchase orders. 
D)  the check signature is printed using a signature plate that is installed on the computer printer only when checks are printed.

Question 8

A furniture company ordered 84 tables from a supplier.The supplier accidentally sent only 48 tables,but the receiving department at the furniture company accepted the tables.The invoice was eventually received but was for the 84 tables ordered.The furniture company paid the entire amount.Which of the following controls would have been least likely to have prevented this erroneous payment?

Accepted Answer

A)  The copy of the purchase order sent to the furniture company's receiving department should not have shown an expected quantity. 
B)  Personnel in the furniture company's accounts payable department should compare the receiving report to the purchase invoice before creation of the voucher. 
C)  Personnel in the furniture company's cash disbursements department should compare the check that is prepared to all of the backup documentation. 
D)  Personnel in the furniture company's purchasing department should compare the purchase requisition to the purchase order. 
A)  The copy of the purchase order sent to the furniture company's receiving department should not have shown an expected quantity. 
B)  Personnel in the furniture company's accounts payable department should compare the receiving report to the purchase invoice before creation of the voucher. 
C)  Personnel in the furniture company's cash disbursements department should compare the check that is prepared to all of the backup documentation. 
D)  Personnel in the furniture company's purchasing department should compare the purchase requisition to the purchase order.

Question 9

In order to ensure appropriate segregation of duties,the supervisor in each department handles the custody of the payroll checks.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would not overstate current-period net income?

Accepted Answer

A)  Capitalizing an expenditure that should be expensed. 
B)  Failing to record a liability for an expenditure. 
C)  Failing to record a check paying an item in vouchers payable. 
D)  All of the above would overstate net income. 
A)  Capitalizing an expenditure that should be expensed. 
B)  Failing to record a liability for an expenditure. 
C)  Failing to record a check paying an item in vouchers payable. 
D)  All of the above would overstate net income.

Question 11

Explain why auditors must put more emphasis on the completeness and obligation assertion when auditing payables and contrast this with the audit of asset accounts.

Accepted Answer

The emphasis on completeness is rightly

Question 12

Which of the following would not typically be a specific relevant assertion about fixed asset accounts?

Accepted Answer

A)  Fixed assets in the accounts exist and are in productive use. 
B)  Net carrying book values in the accounts are reflected at current market values. 
C)  Depreciation has been calculated properly using accepted methods and reasonable estimates of useful life and other factors. 
D)  Fixed assets are properly classified in the balance sheet under appropriate descriptive captions. 
A)  Fixed assets in the accounts exist and are in productive use. 
B)  Net carrying book values in the accounts are reflected at current market values. 
C)  Depreciation has been calculated properly using accepted methods and reasonable estimates of useful life and other factors. 
D)  Fixed assets are properly classified in the balance sheet under appropriate descriptive captions.

Question 13

Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion of

Accepted Answer

A)  valuation or allocation. 
B)  existence or occurrence. 
C)  completeness. 
D)  rights and obligations. 
A)  valuation or allocation. 
B)  existence or occurrence. 
C)  completeness. 
D)  rights and obligations.

Question 14

In performing a search for unrecorded retirements of fixed assets,an auditor most likely would

Accepted Answer

A)  inspect the property ledger and the insurance and tax records, and then tour the client's facilities. 
B)  tour the client's facilities, and then inspect the property ledger, and the insurance and tax records. 
C)  analyze the repair and maintenance account, and then tour the client's facilities. 
D)  tour the client's facilities, and then analyze the repair and maintenance account. 
A)  inspect the property ledger and the insurance and tax records, and then tour the client's facilities. 
B)  tour the client's facilities, and then inspect the property ledger, and the insurance and tax records. 
C)  analyze the repair and maintenance account, and then tour the client's facilities. 
D)  tour the client's facilities, and then analyze the repair and maintenance account.

Question 15

When verifying debits to the perpetual inventory records of a nonmanufacturing company,auditors would be most interested in examining a sample of purchase

Accepted Answer

A)  approvals. 
B)  requisitions. 
C)  invoices. 
D)  orders. 
A)  approvals. 
B)  requisitions. 
C)  invoices. 
D)  orders.

Question 16

Improperly capitalizing an expense item results in

Accepted Answer

A)  understatement of profit in the current year and overstatement in future years. 
B)  understatement of profit in the current year and in future years. 
C)  overstatement of profit in the current year and understatement in future years. 
D)  overstatement of profit in the current year and in future years. 
A)  understatement of profit in the current year and overstatement in future years. 
B)  understatement of profit in the current year and in future years. 
C)  overstatement of profit in the current year and understatement in future years. 
D)  overstatement of profit in the current year and in future years.

Question 17

___________________________________ and ___________________________________ can cause "unmatched" invoices and related "unmatched" receiving reports to be unnoticed.
Question also found in study guide

Accepted Answer

System fai

Question 18

The five functional responsibilities of a payroll cycle are ____________________________,____________________________,____________________________,____________________________,and ________________________________.
Question also found in study guide

Accepted Answer

personnel ; supervis

Question 19

If internal controls over the expenditure cycle are weak,auditors will need to design substantive procedures to try to detect whether control failures have produced misleading financial statement account balances.

Accepted Answer

A) True 
 B)False

Question 20

An auditor most likely would extend substantive tests of payroll when

Accepted Answer

A)  payroll is extensively audited by the state government. 
B)  payroll expense is substantially higher than in the prior year. 
C)  overpayments are discovered in performing tests of controls. 
D)  employees complain to management about too much overtime. 
A)  payroll is extensively audited by the state government. 
B)  payroll expense is substantially higher than in the prior year. 
C)  overpayments are discovered in performing tests of controls. 
D)  employees complain to management about too much overtime.

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day.This policy was most likely adopted to

A voucher would typically contain

Which of the following would detect the understatement of a purchase discount?

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Computer controls that might be found in an advanced on-line acquisition and expenditure system would not include

In order to ensure appropriate segregation of duties,the supervisor in each department handles the custody of the payroll checks.

Which of the following would not overstate current-period net income?

Explain why auditors must put more emphasis on the completeness and obligation assertion when auditing payables and contrast this with the audit of asset accounts.

Which of the following would not typically be a specific relevant assertion about fixed asset accounts?

Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion of

In performing a search for unrecorded retirements of fixed assets,an auditor most likely would

When verifying debits to the perpetual inventory records of a nonmanufacturing company,auditors would be most interested in examining a sample of purchase

Improperly capitalizing an expense item results in

_ and _ can cause "unmatched" invoices and related "unmatched" receiving reports to be unnoticed. Question also found in study guide

The five functional responsibilities of a payroll cycle are ,,,,and ____. Question also found in study guide

If internal controls over the expenditure cycle are weak,auditors will need to design substantive procedures to try to detect whether control failures have produced misleading financial statement account balances.

An auditor most likely would extend substantive tests of payroll when

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 8: Acquisition and Expenditure Cycle

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day.This policy was most likely adopted to

A voucher would typically contain

Which of the following would detect the understatement of a purchase discount?

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Computer controls that might be found in an advanced on-line acquisition and expenditure system would not include

In order to ensure appropriate segregation of duties,the supervisor in each department handles the custody of the payroll checks.

Which of the following would not overstate current-period net income?

Explain why auditors must put more emphasis on the completeness and obligation assertion when auditing payables and contrast this with the audit of asset accounts.

Which of the following would not typically be a specific relevant assertion about fixed asset accounts?

Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion of

In performing a search for unrecorded retirements of fixed assets,an auditor most likely would

When verifying debits to the perpetual inventory records of a nonmanufacturing company,auditors would be most interested in examining a sample of purchase

Improperly capitalizing an expense item results in

___________________________________ and ___________________________________ can cause "unmatched" invoices and related "unmatched" receiving reports to be unnoticed. Question also found in study guide

The five functional responsibilities of a payroll cycle are ____________________________,____________________________,____________________________,____________________________,and ________________________________. Question also found in study guide

If internal controls over the expenditure cycle are weak,auditors will need to design substantive procedures to try to detect whether control failures have produced misleading financial statement account balances.

An auditor most likely would extend substantive tests of payroll when

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

_ and _ can cause "unmatched" invoices and related "unmatched" receiving reports to be unnoticed. Question also found in study guide

The five functional responsibilities of a payroll cycle are ,,,,and ____. Question also found in study guide