Audit Exam 1

A small manufacturing company makes only credit sales. If cash receipts from sales are misappropriated, which of the following acts would most likely conceal this fraud?

Understating the cash receipts journal.

If an auditor performs analytical procedures on rent expense and finds that rent expense has increased 50%, he or she is most likely to perform which of the following additional procedures?

Vouch larger items in rent expense in a search for unrecorded finance leases

An imprest payroll bank account is

a bank account where a company only deposits sufficient funds to process net payroll transactions.

The key documents involved in recording a purchase adjustment involve:

a purchase return authorization, a shipping report, and a debit memo.

An auditor uses nonstatistical ratio estimation to evaluate the results of a sample. The population book value was $2,000,000 and contained 350 items. The auditor selected 100 items with a book value of $500,000. The audited value of the sample was $480,000. The estimated audited value of the population is: a) $1,920,000. b) $1,980,000. c) $1,930,000. d) $1,900,000.

a) $1,920,000.

What step follows planning the ADA? a) Accessing and preparing the data for ADA. b) Considering the relevance and reliability of data used c) Performing the ADA. d) Evaluating results and concluding whether the purpose of the ADA has been achieved.

a) Accessing and preparing the data for ADA.

Which of the following types of evidence would an auditor most likely examine to determine whether controls are operating as designed? a) Client records documenting the use of computer programs. b) Letters of representations corroborating inventory pricing. c) Attorneys' responses to the auditor's inquiries. d) Confirmations of receivables verifying account balances.

a) Client records documenting the use of computer programs.

If a customer pays its receivable in full but a client fails to record cash received from the customer, which of the following account balance assertions related to accounts receivable is misstated? a) Existence. b) Completeness. c) Rights and obligations. d) Valuation at net realizable value.

a) Existence.

An auditor discovers that an account balance believed not to be materially misstated based on an audit sample was materially misstated based on the total population of the account balance. This is an example of which of the following sampling types of risks? a) Incorrect acceptance. b) Assessing control risk too high. c) Assessing control risk too low. d) Incorrect rejection.

a) Incorrect acceptance.

An underlying feature of random-based selection of items is that each a) Item in the accounting population should have an opportunity to be selected. b) Item must be systematically selected using replacement. c) Item in the accounting population be randomly ordered. d) Stratum of the accounting population be given equal representation in the sample.

a) Item in the accounting population should have an opportunity to be selected.

When performing a test of a control with respect to control over cash receipts, an auditor may use a systematic sampling technique with a start at any randomly selected item. The biggest disadvantage of this type of sampling is that the items in the population a) May occur in a systematic pattern, thus destroying the sample randomness. b) Must be systematically replaced in the population after sampling. c) Must be recorded in a systematic pattern before the sample can be drawn. d) May systematically occur more than once in the sample.

a) May occur in a systematic pattern, thus destroying the sample randomness.

An auditor is using regression analysis to investigate battery expense for a computer manufacturer that purchases batteries. Which of the following would be a good choice of independent variable for the regression? a) Number of computers sold. b) Number of employees. c) Square footage of manufacturing space. d) Revenues.

a) Number of computers sold.

Which of the following ultimately determines the sufficiency and appropriateness of audit evidence to support the auditor's conclusions? a) Professional judgment. b) Professional requirements. c) Professional experience. d) Professional standards.

a) Professional judgment.

Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive tests? a) Relationships involving income statement accounts b) Data subject to audit testing in the prior year c) Relationships involving balance sheet accounts d) Transactions subject to management discretion

a) Relationships involving income statement accounts

Assume that an auditor is auditing a public company client that manufactures computer hardware and markets significant maintenance and consulting services. The auditor should be concerned about which of the following? a) Significant revenue issues associated with bundling products and services. b) More than the usual concern about collection risk. c) Significant concerns about the completeness of revenues. d) Appropriate accounting for commissions on sales.

a) Significant revenue issues associated with bundling products and services.

Classes of transactions_____ __ ________ in the revenue process

1. credit sales 2. cash receipts 3. sales adjustments

consequences of sampling risk

1. the risk that the audit will be ineffective2. the risk that the audit will be inefficient

The auditor is studying a ratio of accounts payable turnover in days. Which of the following indicates a potential risk of unrecorded liabilities?

Accounts payable turnover in days decreased from 28 days to 15 days from year one to year two.

If the auditor is concerned about the risk of fraud in the purchasing process, which of the following best describes the auditor's potential fraud risk assessments?

Fraudulent financial reporting-high risk; misappropriation of assets-high risk.

An auditor decided to confirm accounts payable to accomplish a low level of detection risk for the completeness assertion. Which of the following is the most reasonable sampling plan?

Confirm accounts payable with an emphasis on all vendors including zero and small balances.

A cutoff test designed to detect credit sales made before the end of the fiscal year that have been recorded in the subsequent year provides assurance about which of the following management assertions?

Classification.

Which of the following control activities would be a reasonable control over the accuracy of recorded sales?

The software application matches sales invoice quantities with the underlying packing slip and prices with the sales order.

Which of the following IT application control procedures would be most effective in assuring that recorded purchases are accurately recorded for transactions that actually occurred?

The software application matches voucher information with information supporting purchase orders, receiving reports, and vendor invoices

Which of the following internal control procedures would most likely assure that all billed sales are correctly posted to the accounts receivable ledger?

Daily sales summaries are compared to daily postings to the accounts receivable ledger.

In the audit of inventory, selecting inventory items from a perpetual master file, going to the locations, and obtaining test counts is intended to produce evidence for which audit assertion?

Existance

When sending positive confirmations, which of the following would not be an appropriate way to address nonresponse by a customer?

If the customer's account balance is individually immaterial, conclude that no further work or analysis is necessary.

A client just read about a business paying extraordinary sums of money to a variety of employees. How would the client company use an IT application control to prevent this type of valuation problem?

Perform a limit test related to the class of employee.

When performing an audit, a CPA notes that bad-debt expense is unusually high relative to similar firms in the industry. The CPA should recommend which of the following controls?

Require credit checks on all new customers.

Which of the following industries would have the greatest concerns about purchases cutoff at month end, unrecorded liabilities, and accounting for advertising allowances provided by vendors?

Retail grocer.

Which of the following procedures is best for identifying unrecorded trade accounts payable?

Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor in the conduct of an audit?

Selling of goods for cash.

Which of the following situations increases the risk of fraud due to "lapping?"

The accounts receivable clerk also has responsibilities for receiving cash.

Which of the following audit assertions is least likely to be accomplished by vouching payroll transactions to supporting documentation (e.g., time cards and employee contracts)

The completeness of payroll transactions.

Which of the following control activities would most likely assure that no fictitious billings have been posted to the sales journal?

The software application compares each sales invoice with the supporting shipping documents and notes any discrepancies.

Which of the following is a good example of an IT application control over the occurrence of revenue transactions?

The software application compares information on a sales invoice with information from the bill of lading to ensure that sales invoices are only prepared for actual shipments. Any exceptions are not processed and are set aside for manual follow-up.

Which of the following controls would most likely prevent a vendor's invoice from being paid twice?

The software application has a field that identifies a vendor's invoice has been paid and the voucher number cannot be reused.

Probability Proportionate to Size (PPS) sampling is _______. a) an approach that uses attribute sampling theory to express a conclusion in dollar amounts b) an approach that uses non-statistical sampling theory to express a conclusion in dollar amounts c) rarely used in auditing, due to its prohibitive cost d)required to be used in the auditing of publicly traded companies

a) an approach that uses attribute sampling theory to express a conclusion in dollar amounts

An auditor is testing accounts receivable for a client that has 1,000 customers with customer balances that range from $150 to $185,000. The auditor subdivided the receivables into three groups: group 1 has all customers with receivable balances between $185,000 and $100,000, group 2 has all customers with receivable balances between $100,000 and $25,000, and group 3 has all customers with receivable balances less than $25,000. The auditor then randomly selects customers out of each group. This is known as: a) stratified sampling. b) random selection. c) haphazard selection. d) block selection.

a) stratified sampling.

An audit client that manufactures and sells goods to a network of authorized dealers may create the equivalent of a consignment sale if the client:

allows an unconditional right of return at any time until the goods are sold by the dealer.

In an audit of a nonissuer's financial statements, projected misstatement is a) The likely amount of misstatement in the subsequent period's financial statements if a control is not properly implemented. b) An auditor's best estimate of misstatements in a population extrapolated from misstatements identified in an audit sample. c) An auditor's best estimate, before performing audit procedures, of misstatements that the auditor expects to find during the audit. d) The only amount that the auditor considers in evaluating materiality and fairness of the financial statements.

b) An auditor's best estimate of misstatements in a population extrapolated from misstatements identified in an audit sample.

Which of the following procedures would provide the most reliable audit evidence? a) Audit evidence provided by copies is more reliable than that provided by facsimiles. b) Audit evidence obtained from knowledgeable independent sources outside the client company is more reliable than audit evidence obtained from nonindependent sources. c) Audit evidence obtained from indirect sources rather than directly is more reliable than evidence obtained directly by the auditor. d) Audit evidence provided by original documents is more reliable than audit evidence generated through a system of effective controls.

b) Audit evidence obtained from knowledgeable independent sources outside the client company is more reliable than audit evidence obtained from nonindependent sources.

Which of the following best describes the distinguishing feature of statistical sampling? a) It allows the auditor to substitute sampling techniques for audit judgment. b) It provides for measuring mathematically the degree of uncertainty that results from examining only a part of the data. c) It provides for measuring the actual misstatements in financial statements in terms of sampling risk and allowance for sampling risk. d) It allows the auditor to have the same degree of sampling risk as with nonstatistical sampling but with substantially less work.

b) It provides for measuring mathematically the degree of uncertainty that results from examining only a part of the data.

A senior auditor conducted a dual-purpose test on a client's invoice to determine whether the invoice was approved and to ascertain the amount and other terms of the invoice. Which of the following lists two tests that the auditor performed? a) Tests of details and substantive procedures b) Tests of controls and tests of details c) Substantive procedures and analytical procedures d) Substantive analytical procedures and tests of controls

b) Tests of controls and tests of details

An auditor may decide to increase the risk of incorrect rejection when a) Increased reliability from the sample is desired. b) The cost and effort of selecting additional sample items are low. c) Initial sample results do not support the planned level of control risk. d) Many differences (audit value minus recorded value) are expected.

b) The cost and effort of selecting additional sample items are low.

An auditor of a non-issuer should design tests of details to ensure that sufficient audit evidence supports which of the following? a) Management's assertions that internal controls exist and are operating efficiently. b) The planned level of assurance at the relevant assertion level. c) The planned level of control risk. d) The effectiveness of internal controls.

b) The planned level of assurance at the relevant assertion level.

Which of the following is an important consideration when deciding the nature of tests to use in a financial statement audit? a) Tests of details typically provide a low level of assurance. b) The procedures to be applied on a particular engagement are a matter of the auditor's professional judgment. c) Analytical procedures are an inefficient means of obtaining assurance. d) The use of tests of controls should be considered without regard to the level of assurance required.

b) The procedures to be applied on a particular engagement are a matter of the auditor's professional judgment.

Probability proportionate to size sampling _______. a) should only be used in substantive testing of transactions b) can be used for substantive testing of transactions and balances c) should only be used in substantive testing of balances d) should not be used for substantive testing of transactions and balances

b) can be used for substantive testing of transactions and balances

The optimal number of strata depends on _______. a) the pattern of variation only b) the pattern of variation in the population values and the additional costs associated with designing, executing, and evaluating each stratified sample c) a determination by senior management d) the additional costs associated with designing, executing, and evaluating each stratified sample only

b) the pattern of variation in the population values and the additional costs associated with designing, executing, and evaluating each stratified sample

The critical difference between statistical and nonstatistical sampling is: a) the elimination of nonsampling risk with statistical sampling. b) the use of the laws of probability in statistical sampling to determine sample size and develop a confidence interval around the results of the sample. c) that more representative samples are attained with statistical sampling. d) the required use of judgment in nonstatistical sampling.

b) the use of the laws of probability in statistical sampling to determine sample size and develop a confidence interval around the results of the sample.

Holding all other factors constant, which of the following factors results in an increase in sample size for substantive tests? a) An increase in the amount of tolerable misstatement. b) Stratifying the population when appropriate. c) An increase in the desired level of assurance that the tolerable misstatement is not exceeded by the actual amount of misstatement in the population. d) A decrease in the amount of expected misstatement in the population to be tested.

c) An increase in the desired level of assurance that the tolerable misstatement is not exceeded by the actual amount of misstatement in the population.

The degree of audit risk always present in an audit engagement is referred to as a combination of nonsampling and sampling risk. Which of the following is an example of nonsampling risk? a) The internal control not being as effective as the auditor believes. b) The auditor concluding the account balance is not materially misstated, but is, in fact, materially misstated. c) The internal control being more effective than the auditor believes. d) The auditor selecting inappropriate auditing procedures.

d) The auditor selecting inappropriate auditing procedures.

Before applying principal substantive tests to the details of accounts at an interim date prior to the balance sheet date, an auditor should: a) Obtain written representations from management that all financial records and related data will be made available b) Assess control risk at below the maximum for the assertions embodied in the accounts selected for interim testing c) Consider whether the amounts of the year-end balances selected for interim testing are reasonably predictable d) Determine that the accounts selected for interim testing are not material to the financial statements taken as a whole.

c) Consider whether the amounts of the year-end balances selected for interim testing are reasonably predictable

In a financial statement audit of a non-issuer, an auditor would consider a judgmental misstatement to be a misstatement that a) Arises from a flaw in the accounting system. b) Arises from a routine calculation. c) Involves an estimate. d) Exists because of non-statistical sampling performed by the auditor.

c) Involves an estimate.

A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size? a) Greater reliance on internal control. b) Greater reliance on analytical procedures. c) Smaller measure of tolerable misstatement. d) Smaller expected frequency of errors.

c) Smaller measure of tolerable misstatement.

Which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements? a) Continue to draw new samples until all the unusually large disbursements appear in the sample. b) Increase the sample size to reduce the effect of the unusually large disbursements. c) Stratify the cash disbursements population so that the unusually large disbursements are selected. d) Set the tolerable rate of deviation at a lower level than originally planned.

c) Stratify the cash disbursements population so that the unusually large disbursements are selected.

An auditor is performing a cluster analysis and sorts a client's customers into groups based on the aging of accounts receivable. The auditor is most likely auditing which of the following assertions?a) Existence. b) Completeness. c) Valuation and allocation. d) Rights and obligations.

c) Valuation and allocation.

Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?Expected amount of misstatements Measure of tolerable misstatement a) No Yes b) Yes No c) Yes Yes d) No No

c) Yes Yes

When defining the population and sampling unit, sometimes an auditor must look for a reciprocal population. A reciprocal population is: a) a class of transactions or the account balance to be tested. b) a subset of the population that is the basis for sampling. c) a population that is overstated if the population of interest is understated (or vice versa). d) a class of transactions related to the account balance being tested (e.g., sales to accounts receivable)

c) a population that is overstated if the population of interest is understated (or vice versa).

A key aspect of preparing the data for ADA is: a) determining the validity of data obtained from an external source b) determining the source of the data c) determining if the data is complete d) evaluating the reliability of internally generated evidence

c) determining if the data is complete

A "false positive" is: a) another term for a notable item b) a notable item that requires further investigation c) incorrectly identified as a notable item and requires no further response to identify new or higher risks d) indicative of a higher risk of material misst

c) incorrectly identified as a notable item and requires no further response to identify new or higher risks

Audit sampling is defined as a situation where: a) the auditor screens less than 100% of the population to identify a subset with particular risk traits. b) the auditor screens 100% of the population to identify a subset with particular risk traits. c) the auditor tests a representative group that is less than 100% of the population for the purpose of drawing a conclusion about the entire population. d) the auditor tests a subset of the population to draw a conclusion about a subset of the population.

c) the auditor tests a representative group that is less than 100% of the population for the purpose of drawing a conclusion about the entire population.

When performing ADA as a substantive test, the auditor: a) uses ADA to identify breakdowns in the client's system of internal control b) relies solely on the client's system of internal controls c) uses ADA to match electronic information that otherwise would have been audited manually d) uses ADA to identify high-risk transactions and balances and then audits those high-risk items with traditional audit tests.

c) uses ADA to match electronic information that otherwise would have been audited manually

Sampling risk: a) can be eliminated by taking a random sample. b) is the risk that the results of the test will be misinterpreted by the auditor. c)is the risk that the sample chosen by the auditoris not representative of the population of transactions. d) applies only to samples for substantive testing.

c)is the risk that the sample chosen by the auditoris not representative of the population of transactions.

If there is a completeness problem with cash receipts, are accounts receivable overstated or understated? Cash receipts // Accounts receivable

overstated // understated

In a probability-proportional-to-size sample with a sampling interval of $5,000, an auditor discovered that a selected account receivable with a recorded amount of $10,000 had an audit amount of $8,000.If this were the only error discovered by the auditor, the projected error of this sample would be a) $5,000. b) $4,000. c) $1,000. d) $2,000.

d) $2,000.

Which of the following best illustrates the concept of sampling risk? a) The documents related to the chosen sample may not be available for inspection. b) An auditor may fail to recognize errors in the documents examined for the chosen sample. c) An auditor may select audit procedures that are not appropriate to achieve the specific objective. d) A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.

d) A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.

When performing ADA as a risk assessment procedure, a notable item: a) is indicative of a risk of material misstatement not previously identified by the auditor b) is indicative of a higher risk of material misstatement than anticipated by the auditor c) provides information useful in designing procedures to address the risk of material misstatement d) All of these answer choices describe notable items

d) All of these answer choices describe notable items

How would an auditor of a non-issuer most appropriately respond to a heightened assessed risk of material misstatement? a) By obtaining a management representation letter. b) By performing analytical procedures, but not substantive procedures, at period end. c) By performing tests of controls at interim-and period-end dates. d) By assigning more experienced staff or those with specialized skills to high-risk areas.

d) By assigning more experienced staff or those with specialized skills to high-risk areas.

An auditor wants to determine that all sales adjustments are recorded. This relates to which of the following transaction-class assertions? a) Occurrence. b) Classification. c) Accuracy. d) Completeness.

d) Completeness.

How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details?Increase in tolerable misstatement / Increase in assessed level of control risk a) Increase sample size Increase sample size b) Increase sample size Decrease sample size c) Decrease sample size Decrease sample size d) Decrease sample size Increase sample size

d) Decrease sample size Increase sample size

Which of the following procedures would provide the most reliable audit evidence? a) Analytical procedures performed by the auditor on the entity's trial balance. b) Inspection of pre-numbered client purchase orders filed in the vouchers payable department. c) Inquiries of the client's internal audit staff held in private. d) Inspection of bank statements obtained directly from the client's financial institution.

d) Inspection of bank statements obtained directly from the client's financial institution.

An advantage that using statistical sampling has over nonstatistical sampling is that statistical sampling helps an auditor to a) Reduce the level of audit risk and materiality to a relatively low amount. b) Minimize the failure to detect errors and irregularities. c) Eliminate the risk of nonsampling errors. d) Measure the sufficiency of the evidential matter obtained.

d) Measure the sufficiency of the evidential matter obtained.

Which of the following statements about audit sampling risks is correct for a nonissuer? a) Nonsampling risk arises from the possibility that, when a substantive test is restricted to a sample, conclusions might be different than if the auditor had tested each item in the population. b) Sampling risk is derived from the uncertainty in applying audit procedures to specific risks. c) Sampling risk includes the possibility of selecting audit procedures that are not appropriate to achieve the specific objective. d) Nonsampling risk can arise because an auditor failed to recognize misstatements.

d) Nonsampling risk can arise because an auditor failed to recognize misstatements.

Which of the following procedures would an auditor ordinarily perform first in evaluating management's accounting estimates for reasonableness? a) Develop independent expectations of management's estimates. b) Test the calculations used by management in developing the estimates. c) Consider the appropriateness of the key factors or assumptions used in preparing the estimates. d) Obtain an understanding of how management developed its estimates.

d) Obtain an understanding of how management developed its estimates.

The auditor's decision about the risk of incorrect acceptance affects which of the following factors in a statistical PPS sample? a) Expected misstatement. b) Tolerable misstatement. c) Book value of the population. d) Reliability factor

d) Reliability factor

An auditor is studying a ratio of accounts receivable growth rate to sales growth rate. Which of the following indicates a potential risk of collection problem in accounts receivable? a) Sales grew by 10% and receivables grew by 11% from year one to year two. b) Sales declined by 2% and receivables declined by 7% from year one to year two. c) Sales grew by 10% and receivables declined by 2% from year one to year two. d) Sales grew by 5% and receivables grew by 17% from year one to year two.

d) Sales grew by 5% and receivables grew by 17% from year one to year two.

If certain forms are not consecutively numbered a) Selection of a random sample probably is not possible. b) Random number tables cannot be used. c) Stratified sampling should be used. d) Systematic sampling may be appropriate.

d) Systematic sampling may be appropriate.

When planning a classical variables sample, the risk of incorrect acceptance and the risk of incorrect rejection are related to what general factor that influences sample size? a) The use of stratification when sampling. b) Tolerable misstatement. c) Expected misstatement. d) The desired level of assurance from the sample.

d) The desired level of assurance from the sample.

Which of the following is the primary objective of probability proportional to sample size? a) To increase the proportion of smaller-value items in the sample. b) To identify items where controls were not properly applied. c) To identify zero and negative balances. d) To identify overstatement errors.

d) To identify overstatement errors.

An auditor is using ADA as a substantive test to validate accounts receivable because consumers are poor at responding to confirmations. In this case, the auditor validates the receivable by: a) finding electronic evidence of strong internal controls b) tracing shipping documents to bills of lading c) vouching the receivable back to sales orders d) finding electronic evidence that the receivable is supported by subsequent cash receipt in the same amount

d) finding electronic evidence that the receivable is supported by subsequent cash receipt in the same amount

The risk of incorrect acceptance has _______. a) direct effect on sample size —the lower the specified risk, the lower the sample size b) a proportional effect on sample size c) no effect on sample size d) inverse effect on sample size —the lower the specified risk, the larger the sample size

d) inverse effect on sample size —the lower the specified risk, the larger the sample size

Nonsampling risk: a) only applies to samples taken for the purposes of substantive testing. b) only occurs if you test every item of the population. c) does not occur if an auditor relies on unreliable evidence. d) is the risk that an auditor arrives at an inappropriate conclusion for a reason unrelated to sampling issues.

d) is the risk that an auditor arrives at an inappropriate conclusion for a reason unrelated to sampling issues.

If an auditor desires more precise estimates, _______. a) the smaller the sample size should be b) this judgment would have no bearing on sample size c) he or she should request them from management d) the larger the sample size should be

d) the larger the sample size should be

Which of the following factors would most likely cause an auditor to use audit sampling versus audit data analytics? a) The audit population is large, and the auditor's tests are supported by reliable and relevant data in electronic form, making ADA efficient. b) Relevant data are clean or can be cleaned up easily. c) Relevant data are reliable and internal controls over the reliability of data are strong. d)Evidence to support the audit test is not available in electronic form.

d)Evidence to support the audit test is not available in electronic form.

Understanding how the entity earns and recognizes revenue assists the auditor in ________.

developing an expectation of total revenues by understanding the client's capacity, market place, and customers

For which of the following companies would the auditor have the least concern about the existence of inventory?

hotel

A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is low, an auditor would probably

observe the client's inventory count at an interim date.

The primary objective of a CPA's observation of a client's physical inventory count is to:

obtain direct knowledge that the inventory exists and has been properly counted

An auditor may plan to test controls in the payroll process because, among other factors:

payroll transactions are generally routine and processed in a high volume, which makes controls effective for management to employ

When detection risk is low, the auditor is likely to:

prepare the bank reconciliation using bank data in the client's possession or audit the bank reconciliation using a cutoff bank statement obtained from the bank.

The purchasing process normally includes all of the following transactions:

purchases on account, purchase returns, and cash disbursements.

Describe the IT application control procedure that provides assurance that all the merchandise for which the client was billed was received. Assume the software application prepares an exception report and follow-up procedures are effective. IT application edit checks compare:

quantities on the vendor's invoice with quantities entered in receiving.

An example of a sales-related factor that would increase inherent risk would be ________.

significant legal compliance issues when making sales

When auditing the payroll process, the auditor will normally want to understand:

the extent to which a company is capital-intensive or laborintensive.

An inherent risk of major concern to the auditor in the payroll process is:

the occurrence and cutoff assertions for payroll.

Sound control activities dictate that defective merchandise returned by customers should be presented initially to:

the receiving department.

Assume an auditor is testing an IT application control over the accuracy of purchases. The auditor is most likely to submit test data for a:

voucher with different quantities than on the receiving report.

The internal document commonly used to record a credit purchase in the purchases journal is a:

voucher.