Audit Class Quiz #1

When control risk for the existence assertion is assessed at a high level, which of the following is a likely effect with respect to the auditor's confirmation of receivables? A- the account balances as of year-end will generally be confirmed B- The auditors will in general use blank rather than positive confirmation requests. C-the auditors will be required to confirm accounts as of an interim date (during the year under audit) and as of year-end D- Confirmation will not in general be used as the auditor will rely primarily upon support such as vendors' invoices, purchase orders, and receiving reports

A- the account balances as of year-end will generally be confirmed

Which of the following is most likely to be used in determining a proper amount to be included in the allowance for doubtful accounts? A- accounts receivable divided by cost of goods sold B- aging of accounts receivable C- Cash sales divided by accounts receivable D- Year 2 accounts receivable compared to year 1 accounts receivable

B- Aging of accounts receivable

The confirmation of accounts receivable is most closely associated with: A- business risk B- detection risk C- inherent risk D- relative risk

B- detection risk

Richard Scrushy was CEO at what company: A- Enron B- Bank of America C- HealthSouth D- WorldCom

C- Healthsouth

Tracing recorded sales transactions to bills of lading provides evidence about the: A- completeness of sales transactions B- collectibility of sales transactions C- occurrence of sales transactions D- billing of all sales transactions

C- Occurrence of sales transactions

To test the existence assertion for recorded receivables, an auditor would select a sample from the: a-sales order files b-customer purchase orders c-accounts receivable subsidiary ledger d-shipping documents (bills of lading) file

C- accounts receivable subsidiary ledger

An audit basically consists of having the auditor forming an opinion regarding managements financial statement assertions. The auditor therefore develops general and specific procedures to apply to the accounts and transactions in particular case. She might do this by: A- Tracing sales invoices to shipping documents to test completeness of reported sales B- tracing shipping documents to sales invoices to test the occurrence of reported sales C- tracing sales invoices to shipping documents to test the accuracy of reported sales D-Tracing sales invoices to shipping documents to test the completeness of recorded accounts receivable

C- tracing sales invoices to shipping documents to test the accuracy of reported sales

Your client performed the physical count of inventory as of November 30, one month prior to year-end. Subsequently, they closed the sales journal on 12/29/XX, two days before year-end, and reported those two days' credit sales in January of the next year. Assuming the client uses a perpetual inventory system, which of the following is most likely to be overstated relating to the year XX financial statements? A- Sales B- Cash C- Inventory D- Accounts Receivable

C-inventory

A client might overstate December 31 accounts receivable balances by dating and recording January transactions in December. Such entries recorded in which journal are most likely to achieve this end? A- cash receipts B- payroll C- purchases D- sales

D-sales

How many former CFOs at Scrushy's company pleaded guilty to financial fraud and implicated Scrushy?

Five