Becker Set 5

At December 30, Year 3, Vida Co. had cash of $200,000, a current ratio of 1.5:1 and a quick ratio of .5:1. On December 31, Year 3, all cash was used to reduce accounts payable. How did these cash payments affect the ratios? Current Ratio Quick Ratio A.increased decreased B. increased No effect C. Decreased Increased D. Decreased No effect

A

The objective of performing analytical procedures in planning an audit is to identify the existence of: A. unusual transactions and events B. acts of noncompliance with laws and regulations that went undetected because of internal control weaknesses C. related party transactions D. recorded transactions that were not properly authorized

A

analytical procedures are required for which of the following? A. audit planning B. tests of balances C. client retention decision D. Internal control evaluation

A

which of the following is an analytical procedure? A. comparing current-year balances to prior-year balances B. matching sales invoices to shipping documents C. confirming accounts receivable D. Making inquiries of client management

A

An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This may indicate that A. Obsolete inventory has not yet been reduced to fair market value. B. There was an improper cutoff of sales at the end of the year. C. An unusually large receivable was written off near the end of the year. D. The aging of accounts receivable was improperly performed in both years.

B

Which of the following statements is correct regarding the predictability of analytical procedures in a financial statement audit? A. relationships involving only balance sheet accounts tend to be more predictable than relationships B. Relationships involving income statement accounts tend to be more predictable than relationships involving only balance sheet accounts C. relationships involving transactions subject to management discretion tend to be more predictable than automated transactions D. Relationships in a dynamic environment tend to be more predictable than relationships in a stable environment

B

analytical procedures used in planning an audit should focus on: A. identifying material weaknesses in internal control B. enhancing the auditor's understanding of the client's business C. testing individual account balances that depend on accounting estimates D. evaluating the adequacy of the evidence gathered concerning unusual balances

B

Of the following non-financial information, what would an auditor most likely consider in performing analytical procedures during the planning phase of an audit? a. Turnover of personnel in the accounting department. b. Objectivity of audit committee members. c. Square footage of selling space. d. Management's plans to repurchase stock.

C

The accounts receivable turnover ratio increased significantly over a two-year period. This trend could indicate that: A. the accounts receivable aging has deteriorated B. the company has eliminated its discount policy C. the company is more aggressively collecting customer accounts D. customer sales have substantially decreased

C

which of the following steps should be performed first in applying analytical procedures? A. determine whether the difference between the expectation and the recorded amount is reasonable B. Investigate and evaluate significant differences from the expectation C. develop an expectation of a balance or ratio by using relationships that are expected to exist D. compare the client's recorded balance or ratio with the expectation

C

At December 31, Year 2, Curry Co. had the following balances in selected asset accounts: Year 2 Increase Year 1 Cash $ 300 $ 100 A/R net 1,200 400 Inventory 500 200 Prepaid exp 100 40 Other assets 400 150 Total assets $ 2,500 $ 890 Curry also had current liabilities of $1,000 at December 31, Year 2, and net sales of $7,200 for the year then ended. What was Curry's days sales in accounts receivable during Year 2? a. 30.4 b. 40.6 c. 50.7 d. 60.8

D

In a comparison of 20X2 to 20X1, Neir Co's inventory turnover ratio increased substantially although sales and inventory amounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio? A. Cost of goods sold decreased B. accounts receivable turnover increased C. Asset turnover increased D. Gross profit percentage decreased

D