ACC 450 Connect Questions
The auditor's analytical procedures will be facilitated if the client: A. Uses a standard cost system that produces variance reports. B. Segregates obsolete inventory before the physical inventory count. C. Corrects material weaknesses in internal control before the beginning of the audit. D. Reduces inventory balances to the lower of cost or market
A. Uses a standard cost system that produces variance reports.
There is a presumption that auditors will confirm accounts receivable unless the auditors' assessment of the risk of material misstatement is low. A. And accounts receivable are immaterial, or the use of confirmations would be ineffective. B. And accounts receivable are composed of large accounts. C. And the effectiveness of confirmations is absolutely determined. D. Or accounts receivable are from extremely reputable customers.
A. And accounts receivable are immaterial, or the use of confirmations would be ineffective.
The document issued by a common carrier acknowledging the receipt of goods and setting forth the provisions of the transportation agreement is the: A. Bill of lading. B. Job time shipping. C. Production order. D. Production schedule.
A. Bill of lading.
An auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and: A. Valuation. B. Rights. C. Completeness. D. Existence.
A. Valuation.
McPherson Corp. does not make an annual physical count of year-end inventories, but instead makes weekly test counts on the basis of a statistical plan. During the year, Sara Mullins, CPA, observes such counts as she deems necessary and is able to satisfy herself as to the reliability of the client's procedures. In reporting on the results of her examination, Mullins: A. Can issue an unqualified opinion without disclosing that she did not observe year-end inventories. B. Must comment in the scope paragraph as to her inability to observe year-end inventories, but can nevertheless issue an unqualified opinion. C. Is required, if the inventories are material, to disclaim an opinion on the financial statements taken as a whole. D. Must, if the inventories are material, qualify her opinion.
A. Can issue an unqualified opinion without disclosing that she did not observe year-end inventories.
The organization established by Congress to narrow the options in cost accounting that are available under generally accepted accounting principles is the: A. Cost Accounting Standards Board. B. Financial Accounting Standards Board. C. Public Company Accounting Oversight Board. D. Securities and Exchange Commission.
A. Cost Accounting Standards Board.
An auditor selects items from the client's inventory listing and identifies the items in the warehouse. This procedure is most likely related to: A. Existence. B. Valuation. C. Completeness. D. Rights.
A. Existence.
When a primary risk related to an audit is possible overstated inventory, the assertion most directly related is: A. Existence. B. Completeness. C. Clarity. D. Presentation
A. Existence.
Which of the following procedures would the auditors most likely perform to test controls relating to management's assertion about the completeness of cash receipts for cash sales at a retail outlet? A. Observe the consistency of the employees' use of cash registers and tapes. B. Inquire about employees' access to recorded but undeposited cash. C. Trace deposits in the cash receipts journal to the cash balance in the general ledger. D. Compare the cash balance in the general ledger with the bank confirmation request.
A. Observe the consistency of the employees' use of cash registers and tapes.
Reconciliation of the bank account should not be performed by an individual who also: A. Processes cash disbursements. B. Has custody of securities. C. Prepares the cash budget. D. Reviews inventory reports.
A. Processes cash disbursements.
Cooper, CPA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent real estate taxes. Internal control at the municipality is weak. To determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely: A. Send positive confirmation requests. B. Send negative confirmation requests. C. Examine evidence of subsequent cash receipts. D. Inspect the internal records, such as copies of the tax invoices that were mailed to the residents.
A. Send positive confirmation requests.
To determine that all sales have been recorded, the auditors would select a sample of transactions from the: A. Shipping documents file. B Sales journal. C. Accounts receivable subsidiary ledger. D. Remittance advices.
A. Shipping documents file.
When perpetual inventory records are maintained in quantities and in dollars, and internal control over inventory is weak, the auditor would probably: A. Want the client to schedule the physical inventory count at the end of the year. B. Insist that the client perform physical counts of inventory items several times during the year. C. Increase the extent of tests for unrecorded liabilities at the end of the year. D. Have to disclaim an opinion on the income statement for that year.
A. Want the client to schedule the physical inventory count at the end of the year.
Instead of taking a physical inventory count on the balance-sheet date, the client may take physical counts prior to the year-end if internal control is adequate and: A. Well-kept records of perpetual inventory are maintained. B. Inventory is slow-moving. C. Computer error reports are generated for missing prenumbered inventory tickets. D. Obsolete inventory items are segregated and excluded.
A. Well-kept records of perpetual inventory are maintained.
Identify the control that is most likely to prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable: A. Write-offs must be approved by a responsible official after review of credit department recommendations and supporting evidence. B. Write-offs must be approved by the accounts receivable department. C. Write-offs must be authorized by the shipping department. D. Write-offs must be supported by an aging schedule showing that only receivables overdue by several months have been written off.
A. Write-offs must be approved by a responsible official after review of credit department recommendations and supporting evidence.
Which of the following controls would most likely reduce the risk of diversion of customer receipts by a client's employees? A. Bank lockbox system. B. Pre-numbered remittance advices. C. Monthly bank reconciliations. D. Daily deposit of cash receipts.
A. bank lockbox system.
On January 15, 20X4, the company settled and paid a personal injury claim of a former employee as the result of an accident that had occurred in March 20X3. The company had not previously recorded a liability for the claim.
Adjustment
On January 3, 20X4, Flowmeter, Inc., received a shipment of raw materials from Canada.The materials had been ordered in October 20X3 and shipped FOB shipping point in December 20X3.
Adjustment
During the inventory count an auditor selects items and determines that the proper description and quantity were recorded by the client. This procedure is most closely related to: A. Valuation. B. Completeness. C. Rights. D. Existence.
B. Completeness.
Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents to related sales invoices? A. Existence or occurrence. B. Completeness. C. Rights and obligations. D. Presentation and disclosure
B. Completeness.
Which of the following is not among the criteria that ordinarily exist for revenue to be recognized? A. Collectibility is reasonably assured. B. Delivery has occurred or is scheduled to occur in the near future. C. Persuasive evidence of an arrangement exists. D. The seller's price to the buyer is fixed or determinable.
B. Delivery has occurred or is scheduled to occur in the near future.
Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next: A. Notify the board of directors that the auditor's report must no longer be associated with the financial statements. B. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information. C. Request that management disclose the effects of the newly discovered information by adding a footnote to subsequently issued financial statements. D. Issue revised pro forma financial statements taking into consideration the newly discovered information.
B. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information.
A possible loss, stemming from past events that will be resolved as to existence and amount by some future event, is referred to as a(n): A. Analytical process. B. Loss contingency. C. Probable loss. D. Unasserted claim.
B. Loss contingency.
Which of the following is the best audit procedure for the discovery of damaged merchandise in a client's ending inventory? A. Compare the physical quantities of slow-moving items with corresponding quantities in the prior year. B. Observe merchandise and raw materials during the client's physical inventory taking. C. Review the management's inventory representations letter for accuracy. D. Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average
B. Observe merchandise and raw materials during the client's physical inventory taking.
The primary objective of a CPA's observation of a client's physical inventory count is to: A. Discover whether a client has counted a particular inventory item or group of items. B. Obtain direct knowledge that the inventory exists and has been properly counted. C. Provide an appraisal of the quality of the merchandise on hand on the day of the physical count. D. Allow the auditor to supervise the conduct of the count in order to obtain assurance that inventory quantities are reasonably accurate.
B. Obtain direct knowledge that the inventory exists and has been properly counted.
To provide assurance that each voucher is submitted and paid only once, the auditors most likely would examine a sample of paid vouchers and determine whether each voucher is: A. Supported by a vendor's invoice. B. Stamped "paid" by the check signer. C. Pre-numbered and accounted for. D. Approved for authorized purchases.
B. Stamped "paid" by the check signer.
To test the existence assertion for recorded receivables, the auditors would select a sample from the: A. Sales orders file. B. Customer purchase orders. C. Accounts receivable subsidiary ledger. D. Shipping documents (bills of lading) file.
C. Accounts receivable subsidiary ledger.
You have been assigned to the year-end audit of a financial institution and are planning the timing of audit procedures relating to cash. You decide that it would be preferable to: A. Count the cash in advance of the balance sheet date in order to disclose any kiting operations at year-end. B Coordinate the count of cash with the cutoff of accounts payable. C. Coordinate the count of cash with the count of marketable securities and other negotiable assets. D. Count the cash immediately upon the return of the confirmation letters from the financial institution
C. Coordinate the count of cash with the count of marketable securities and other negotiable assets.
Which of the following is most likely to be considered a Type 1 subsequent event? A. business combination completed after year-end, but for which negotiations began prior to year-end. B. A strike subsequent to year-end due to employee complaints about working conditions which originated two years ago. C. Customer checks deposited prior to year-end, but determined to be uncollectible after year-end. D. Introduction of a new line of products after year-end for which major research had been completed prior to year-end.
C. Customer checks deposited prior to year-end, but determined to be uncollectible after year-end.
The search for unrecorded liabilities for a public company includes procedures usually performed through the: A. Day the audit report is issued. B. End of the client's year. C. Date of the auditors' report. D. Date the report is filed with the SEC.
C. Date of the auditors' report.
Which of the following is least likely to be among the auditors' objectives in the audit of inventories and cost of goods sold? A. Determine that the valuation of inventories and cost of goods sold is arrived at by appropriate methods. B. Determine the existence of inventories and the occurrence of transactions affecting cost of goods sold. C. Establish that the client includes only inventory on hand at year-end in inventory totals. D. Establish the completeness of inventories.
C. Establish that the client includes only inventory on hand at year-end in inventory totals.
An auditor accepted an engagement to audit the 20X8 financial statements of EFG Corporation and began the fieldwork on September 30, 20X8. EFG gave the auditor the 20X8 financial statements on January 17, 20X9. The auditor completed the audit on February 10, 20X9, and delivered the report on February 16, 20X9. The client's representation letter normally would be dated: A. December 31, 20X8. B. January 17, 20X9. C. February 10, 20X9. D. February 16, 20X9.
C. February 10, 20X9.
The receiving department is least likely to be responsible for the: A. Determination of quantities of goods received. B. Detection of damaged or defective merchandise. C. Preparation of a shipping document. D. Transmittal of goods received to the store's department.
C. Preparation of a shipping document.
Which of the following events occurring on January 5, 20X2, is most likely to result in an adjusting entry to the 20X1 financial statements? A. business combination. B. Early retirement of bonds payable. C. Settlement of litigation. D. Plant closure due to a strike.
C. Settlement of litigation.
An auditor most likely would analyze inventory turnover rates to obtain evidence about: A. Rights. B. Presentation. C. Valuation. D. Existence.
C. Valuation.
To gather evidence regarding the balance per bank in a bank reconciliation, the auditors would examine any of the following except: A. Cutoff bank statement. B. Year-end bank statement. C. Bank confirmation. D. General ledger
D. General ledger
Which of the following would most likely be detected by an auditor's review of the client's sales cutoff? A. Excessive goods returned for credit. B. Unrecorded sales discounts. C. Lapping of year-end accounts receivable. D. Inflated sales for the year.
D. Inflated sales for the year.
In testing controls over cash disbursements, the auditors most likely would determine that the person who signs checks also: A. Reviews the monthly bank reconciliation. B. Returns the checks to accounts payable. C. Is denied access to the supporting documents. D. Is responsible for mailing the checks.
D. Is responsible for mailing the checks.
Which of the following procedures is most likely to be included in the final review stage of an audit? A. Obtain an understanding of internal control. B. Confirmation of receivables. C. Observation of inventory. D. Perform analytical procedures.
D. Perform analytical procedures.
An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete inventory to address: A. Rights. B. Presentation. C. Existence. D. Valuation.
D. Valuation.
On February 1, 20X4, a plant owned by Flowmeter, Inc., was damaged by a flood, resulting in an uninsured loss of inventory.
Disclosure
On February 5, 20X4, Flowmeter, Inc., issued to an underwriting syndicate $2 million in convertible bonds.
Disclosure
On January 25, 20X4, the company agreed to purchase for cash the outstanding stock of Porter Electrical Co. The business combination is likely to double the sales volume of Flowmeter, Inc.
Disclosure
The aggregated misstatement in the financial statements is made up of:
Known Misstatements Projected Misstatements Other Misstatements
Am I correct that our observation of the counting of the inventory primarily addresses the existence of inventory, and not the completeness of the count?
No
At the completion of the count, should I leave Jilco Inc. personnel with a copy of all my inventory test counts to help assure inventory accuracy?
No
Do I need to count all items in the inventory?
No
Jilco Inc. has inventory at many locations. Do we need to be present for the count at all locations?
No
Must I document all my test counts in the working papers?
No
Should Jilco's inventory be valued at the lower of standard cost or market?
No
When I take test counts of items, does this eliminate the need for Jilco Inc. personnel to count those items?
No
Is it correct that, since Jilco Inc. manufactures a product, direct labor and overhead ordinarily become a part of inventory costs?
Yes
Is it safe to assume that any inventory items present as "consigned in" should not be included in the clients' inventory?
Yes
With strong internal control, may Jilco Inc.'s inventory count be performed during the year rather than at year end?
Yes
Which of the following should be included as a part of inventory costs of a manufacturing company? Direct Labor Raw Materials Factory Overhead
Yes Yes Yes
1.Analyze the relationship of accounts receivable and purchases and compare it with relationships for preceding periods. 2.Vouch sales recorded in January of 20X9. 3.Vouch sales recorded in November of 20X8. 4.Review the aged trial balance for significant past due accounts. 5.Obtain an understanding of the business purpose of transactions that resulted in accounts receivable balances. 6.Review board of director minutes for approval of all customers' credit limits. 7.Review drafts of financial statements. a. Establish the completeness of receivables transactions. b. Determine that the valuation of receivables is at appropriate net realizable values. c. Verify the cutoff of sales transactions. d. Establish the accuracy of sales transactions. e. Determine that the presentation and disclosure of receivables is adequate. f. Establish that the client has rights to the recorded receivables.
a. Establish the completeness of receivables transactions. 2 correct b. Determine that the valuation of receivables is at appropriate net realizable values. 4 correct c. Verify the cutoff of sales transactions. 2 correct d. Establish the accuracy of sales transactions. 3 correct e. Determine that the presentation and disclosure of receivables is adequate. 7 correct f. Establish that the client has rights to the recorded receivables. 3 correct
1.Detect kiting. 2.Detect lapping. 3.Determine that receivables are converted to cash in a reasonable amount of time. 4.Establish the valuation of cash to reflect currency translation losses and gains. 5.Reconcile cash receipt and disbursement totals between company records and bank records. 6.Verify reconciling items on the year-end bank reconciliation. 7.Verify year-end cash and liability balance information. 8. Identify related party transactions. 9.None. This procedure serves no purpose related to cash. a. Prepare a bank transfer schedule. b.Prepare a four-column proof of cash. c.Use a standard confirmation form to confirm account balance information. d. Obtain bank cutoff statements. e. Search for large checks to directors, officers, and employees.
a. Prepare a bank transfer schedule. 1 b. Prepare a four-column proof of cash. 5 c. Use a standard confirmation form to confirm account balance information. 7 d. Obtain bank cutoff statements. 6 e. Search for large checks to directors, officers, and employees. 8