4-7

which of the following controls is most likely to prevent the improper disposition of equipment

a separation of duties between those authorized to dispose of equipment and those authorized to approve removal work orders

an auditor attempts to determine whether any such restrictions on retained earnings exist to verify

a proper classification and understandability

investigation of variances in a formal budget might show maintenance costs over budget or

acquisition costs under budget which both would trigger an investigation

when control risk is low the auditor would only perform ____ to test related balances

analytical procedures

an auditor most likely would perform substantive test of details on payroll transactions and balances when:

analytical procedures indicate unusual fluctuations in recurring payroll entries

what acitivty performed by a department supervisor most likely would help in the prevention or detection of payroll fraud

approving a summary of hours each employee worked during the pay period

the purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the:

authorization of transactions from the custody of related assets

an internal control questionnaire for notes payable would likely ask if direct borrowings on notes payable are

authorized by the board of directors

the payroll department prepares checks, the ____ signs the pay roll checks

chief financial officer

in auditing long-term bonds payable, an auditor most likely would:

compare interest expense with the bond payable amount for reasonableness

in auditing payroll, an auditor most likely would:

compare payroll costs with entity standards or budgets

In auditing an entity's computerized payroll transactions, an auditor would be least likely to use test data to test controls concerning: a. Overpayment of employees for hours not worked. b. Control and distribution of unclaimed checks. c. Withholding of taxes and Social Security contributions. d. Missing employee identification numbers.

contorl and distribution of unclaimed checks

an auditor's plan to examine longterm debt most likely would include steps that require:

correlating interest expense recorded for the period with outstanding debt

an auditor's principal objective in analyzing repairs and meaintenance expense accounts is to:

discover expenditures that were expensed but should have been capitalized

an audtior's program to examine long term debt should include steps that require:

examining bond trust indentures

by examining assets listed as new additions on an analysis of plant and equipment, an auditor obtains evidence concerning management's assertion of

existence

An auditor analyzes repairs and maintenance accounts primarily to obtain evidence in support of the audit assertion that all: a. Noncapitalizable expenditures for repairs and maintenance have been recorded in the proper period . b. Expenditures for property and equipment have been recorded in the proper period. c. Noncapitalizable expenditures for repairs and maintenance have been properly charged to expense. d. Expenditures for property and equipment have not been charged to expense.

expenditures for property and equipment have NOT been charged to expense

an auditor reviews the reconciliation of payroll tax forms that a client is responsible for filing in order to:

id potential liab for unpaid payroll taxes

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

inspect the property ledger and the insurance and tax records, and then tour the client's facilities

what combination of procedures would an audtior most likely perform to obtain evidence about fixed asset additions?

inspecting documents and physically examining assets

when auditing prepaid insurance, an auditor discovers that the orignial insurance policy on plant equipment is not available for inspection, the policy's absence most likely indicates the possiblity of an

lien on the plant equipment

an auditor should trace corporate stock issuance and treasury stock transactions to the

minutes of board of directors

in determining the effectiveness of an entity's intenral controls relating to the occurence assertion for payroll transactions, an auditor most likely would inquire about and

observe the segregation of duties concerning personnel responsiblities and payroll disbursement

what procedures would an audtior perofrm to test the existence assertion of property, plant, and equipment

obtaining a listing of all current-yeawr additions, vouching significant additions to original invoices, and determining that they have been placed in service

an auditor would most likely extend sustantive tests of payroll when

overpayments are discovered during test of details

an auditor would mostliekly extend substantive tests of payroll hwne

overpayments are discovered in performing test of details

the payroll department prepares checks using a signature plate, the _____ supervises the process before payroll checks are distributed

payroll department (record keeping) treasurer (custodial)

to text existence of payroll transactions the sampling unit for a test of controls ordinarily is

payroll register entry

what internal control most likely would justify a reduced assessed level of control risk concerning plant and equipment acquisitions?

periodic physical inspection of plant and equipment by the internal audit staff

in auditing payroll an auditor most likely would

prepare payroll costs with entity standards or budgets

when control risk is assessed as low for assertions related to payroll, substantive tests of payroll balances most likely would be limited to appyling analtical procedures AND

recalculating payroll accurals

what payroll control activity would most effectively ensure that payment is made only for work performed

require employees to have their direct supervisors approve their time cards

how to test if unrecorded disposition or retirements occurred

select certain items of equipment from the accounting records and locate them in the plant

in testing for unrecorded retirements of equipment an auditor most likely would

select items of equipment from the accounting records and then locate them during the plant tour

what control would most likely prevent improper disposition of equipment

separation of duties between those authrooized to dispose the equipment and those authroized to approve removal work orders

when there are numerous ppe transactions during the year, an auditor plans to assess control risk at a low level usually performs

test of controls and limited tests of current year property and equipment transactions

when a client company does NOT maintain its own stock records, the auditor should obtain a written confirmation from the transfer agent and registrar concerning

the number of shares issued and outstanding

where should undistributed checks be returned?

to an independent third party NOT PAYROLL DEPT

in performing substantive tests regarding the granting of stock options to senior management of an issuer, an auditor most likely would:

trace the authorization for the options granted to the board of director's approval

in performing test concerning the granting of stock options, an auditor should:

trace the authorization of a vote of the board of directors

an auditor's purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence conerning management's assertions about:

understanability and classification (current or noncurrent)

analysis of repair and mainteanice is used to identify transactions that have been capitalized vs. expensed (ie____)

unrecorded additions by touring the facility first and then comparing assets found to those recorded on the property ledger

what internal control would most likely prevent direct labor hours from being charged to manufacturing overhead

use of time tickets to record actual labor worked on production orders

the primary responsibility of a bank acting as registrar of capital stock is to:

verify that stock is only issued with proper authrooization from the board and articles of incorporation