ACG 5635 FINAL
a
Which cycle is not directly linked to the production cycle? a. Finance and investment cycle b. Revenue and collection cycle c. Payroll cycle d. Acquisition and expenditure cycle
a
An auditor would vouch inventory on the inventory status report to the vendor's invoice to obtain evidence concerning management's balance assertions about: a. valuation b. completeness c. existence d. rights and obligations
a
The auditor tests the quantity of materials charged to work-in-process by vouching these quantities to: a. material requisitions b. perpetual inventory records c. cost ledgers d. receiving reports
d
A client maintains perpetual inventory records in both quantities and dollars. If the auditor is able to accept a high level of detection risk, the auditor would probably: a. request the client to schedule the physical inventory count at the end of the year. b. request that the client perform physical counts of inventory items several times during the year. c. increase the extent of substantive procedures in the inventory cycle. d. apply gross profit tests to ascertain the reasonableness of the physical inventory counts.
a
An auditor's analytical procedures indicate a lower than expected return on an equity method investment. This situation most likely could have been caused by: a. an error in recording amortization of the excess of the investor's cost over the investment's underlying book value. b. an error in recording the unrealized gain from an increase in the fair value of available for sale securities in the income account for trading securities. c. a substantial fluctuation in the price of the investee's common stock on a national stock exchange. d. the investee's decision to reduce cash dividends declared per share of its common stock.
c
Entities often implement control activities designed to prevent, detect, and limit the damage related to computer frauds. Which of the following control activities is an example of a prevention type control? a. Program testing controls after modification b. Transaction limit controls c. Controlled access type controls d. Transaction log controls
b
A portion of a client's inventory is in public warehouses. Evidence of the existence of this merchandise can most efficiently be acquired through which of the following methods? a. inspection b. confirmation c. observation d. calculation
d
According to the COSO Integrated Framework, reviews of business performance are an example of which of the five components of internal control? a. Risk assessment b. Control environment c. Monitoring d. Control activities
a
Canceling invoices with a "PAID" stamp after payment is a control that relates to which assertion? a. Existence or occurrence b. Completeness c. Rights and obligations d. Valuation or allocations
c
An assurance service is defined as a service that: a. expands auditing services to nonfinancial information. b. reviews unaudited financial information. c. improves the quality of information for decision makers. d. reduces the risk in management decision making.
a
A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the auditors are unable to count securities at the balance sheet date, they most likely will: a. request the client to have the bank seal the safe deposit box until the auditors can count the securities at a subsequent date. b. examine supporting evidence for transactions occurring during the year. c. count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance-sheet date. d. request the bank to confirm to the auditors the contents of the safe deposit box at the balance-sheet date.
b
An advantage of statistical sampling over non-statistical sampling is that statistical sampling helps an auditor to a. reduce the level of audit risk & materiality to a relatively low amt b. measure the sufficiency of the evidential matter obtained c. minimize the failure to detect errors & fraud d. elim the risk of non-sampling errors e. choose the approp method of selecting items to test
c
ABC Company has 100 shares of IBM stock that it holds as an investment. The stock was purchased three years ago and has been in the client's safe deposit box along with other investment securities. During an inspection of securities held by the client, the auditor noted the 100 shares of IBM stock had a different CUSIP number than the number listed when purchased and the number verified during the previous audit. Which of the following would be the auditor's main concern about this discovery? a. ABC Company no longer owns the securities. b. The securities may be misclassified on the balance sheet. c. There had been unauthorized buying and selling of investment securities. d. The certificates in the safe deposit box were forgeries.
c
All of the following procedures are common uses of audit data analytics in risk assessment procedures except: a. analyzing trends in inventory costs. b. identifying sales which did not follow the typical three way match control in the revenue cycle. c. comparing cash collections to sales invoices and discounts in the revenue cycle. d. calculating accounts receivable collection periods by region.
a
An audit team testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the: a. completeness of recorded investment income. b. existence of unrealized gains or losses. c. classification as available-for-sale or trading securities. d. valuation of trading securities.
a
An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about: a. classification b. completeness c. valuation d. existence
d
An auditor imports a client's purchasing cycle transactions for the purposes of testing authorization controls. Which of the following is true regarding the implementation of this audit data analytic? a. The use of statistical sampling in the performance of the ADA increases the auditor's confidence. b. The use of ADA for purchasing transactions often significantly increases audit risk relative to traditional auditing procedures. c. A disadvantage of implementation is the increased costs associated with ADA. d. Testing can be more efficiently conducted across 100% of transactions.
c
An auditor is testing internal controls in the manufacturing of a client's inventory. Which of the following audit procedures, if used, should be combined with other audit procedures when testing the operating effectiveness of controls? a. observation b. inspection of documents c. inquiry d. reperformance
b
An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management's balance assertions about: a. existence b. valuation c. rights and obligations d. completeness
d
An auditor reviews job cost sheets to test which transaction assertion? a. occurrence b. completeness c. classification d. accuracy
d
An auditor usually traces the details of the test counts made during the observation of physical inventory counts to a final inventory compilation. This audit procedure is undertaken to provide evidence that items physically present and observed by the auditor at the time of the physical inventory count are: a. not obsolete. b. physically present at the time of the preparation of the final inventory schedule. c. owned by the client. d. included in the final inventory schedule.
b
An auditor wishes to perform tests of controls on a client's purchasing procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by a. confirmation and observation. b. observation and inquiry. c. analytical procedures and confirmation. d. inquiry and analytical procedures.
a
An auditor's objective in the performance of audit procedures is to obtain evidence that either supports or refutes management assertions. Which of the following is a procedure designed to achieve that objective? a. Analytical procedures. b. Developing and maintaining a system of quality control. c. Preparing adequate and appropriate documentation. d. Increasing the desired level of detection risk.
a
An example of a program in which the audit team would be most interested in testing automated application controls is a(n): a. payroll processing program b. operating system program c. data management system software d. utility program
c
An over-incentivized executive for a large payment processing company creates fictitious revenues by overstating the cash account and recording revenue which was not in fact even earned. Which of the following audit procedures would most likely detect this fraud? a. vouching recorded revenues to sales invoices, shipping documents, and approved customer purchase orders b. testing access control ITGCs for the accounting system c. confirmation of cash balances with banks d. tests of the application controls for the payment processing revenue-generation process
c
As part of assessing the risk of material misstatement, the audit team must assess the control risk in the computerized processing system. Initially, the audit team must identify the overall processing scope of the system(s), which would include each of the following considerations except a. the type of output that is created as a result of processing transactions through the system b. the types of transactions that are processed through the system c. the specific control procedures that have been implemented by the client to prevent or detect misstatements that could occur based on the audit team's analysis d. the programs and files that are accessed by the system in processing transactions
b
As part of its system of internal control, X Company requires that all sales orders received from customers receive approval from the credit department before they are fulfilled. What type of control activity is this? a. Physical control b. Information processing control c. Performance indicator d. Segregation of duties
b
As the acceptable level of detection risk decreases, an auditor may change the a. timing of substantive tests by performing them at an interim date rather than at year-end b. nature of substantive tests from a less effective to a more effective procedure c. timing of tests of controls by performing them at several dates rather than at one time d. assessed level of inherent risk to a higher amount
d
Assessing control risk at a low level most likely involves a. performing more extensive substantive tests with larger sample sizes than originally planned b. reducing inherent risk for most of the assertions relevant to significant account balances c. changing the timing of substantive tests by omitting interim-date testing and performing the tests at year-end d. identifying specific controls relevant to specific assertions
c
What is the most likely incentive for theft or fraud by employees? a. Compensation structures consistent with reasonable goals. b. Access to valuable inventory that is easy to resell. c. Rumors of layoffs. d. Ineffective oversight by those charged with governance.
c
For documentation of an ADA to be considered sufficient, all the following should be recorded except? a. Who reviewed work performed within the output of the ADA. b. Who performed the work and created the output of the ADA. c. The process used to produce the data examined. d. Identifying characteristics of specific items or matters tested.
d
To determine the reliability of data, the auditor may consider all but which of the following? a. The process used to produce the data b. The nature and source of the data c. The extent of other audit procedures d. Whether the auditor's system has been subject to reliability testing
a
If sales were overstated by recording a false credit sale at the end of the year, where could you find the false "dangling debit"? a. accounts receivable b. cost of goods sold c. inventory d. bad debt expense
b
If the _____________blank exceeds the _____________blank, the audit team would decide to rely on internal control as planned and maintain control risk at planned levels. a. expected population deviation rate; tolerable rate of deviation b. tolerable rate of deviation; ULRD c. tolerable rate of deviation; expected population deviation rate d. ULRD; tolerable rate of deviation
b
In connection with the audit of an issue of long-term bonds payable, the audit team should: a. calculate the effective interest rate to see whether it is substantially the same as the rates charged for similar issues. b. ascertain that the client has obtained the opinion of counsel on the legality of the issue. c. determine whether bondholders are persons other than owners, directors, or officers of the company issuing the bond. d. decide whether the bond issue was made without violating state or local laws or regulations.
b
In performing which of the following may an auditor not rely on assistance from internal auditors? a. Determining what control procedures the entity has in regard to the custody of inventory. b. Determining whether inventory is properly reported at the lower of cost or market. c. Determining whether equipment reported on the balance sheet actually exists. d. Determining whether the entity's control procedures in regard to the custody of inventory are functioning as intended.
b
In providing assurance services to clients, CPAs are building on their reputations for: a. Knowledge and integrity. b. Objectivity and integrity. c. Expertise in accounting and financial matters. d. Professionalism and trust.
c
In which of the following engagements would general use of the accountants' report be appropriate? a. Agreed-upon procedures engagement on a financial forecast. b. Examination of financial projection. c. Examination of financial forecast. d. None of the choices are correct.
c
In which step of a sampling plan is nonstatistical sampling different from statistical sampling? a. Define the population. b. Define the characteristic of interest. c. Evaluate the sample results. d. Measure the sample items.
a
Jones was engaged to examine the financial statements of Gamma Corporation for the year ended June 30. Having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income? a. Comparing recorded dividends with a standard financial reporting service's record of dividends b. Performing analytical procedures and statistical sampling c. Comparing recorded dividends with amounts appearing on federal information Form 1099 d. Tracing recorded dividend income to cash receipts records and validated deposit slips
b
LLC is performing tests of controls during an audit of a non-issuer. The auditors plan to reduce assessed control risk related to the valuation/accuracy of sales revenue. Which of the following client control activities would the auditors most likely test? a. the client uses pre-numbered sales invoices, and the numerical sequence is periodically checked b. management authorizes all sales discounts and records them immediately upon customer purchase c. the client requires a valid customer order, shipping documents, and customer invoice prior to recording a sale d. all cash collections are deposited intact and daily
b
LLC would be most concerned with which of the following duties being performed by the same individual in an audit client's purchasing cycle? a. final check signing and mailing of the checks b. preparation of voucher package and preparation of receiving reports c. preparation of purchase order and merchandise ordering d. receipt of vendor invoice and recording of accounts payable
c
Prospective financial information that reflects the results assuming the occurrence of one or more hypothetical events is referred to as a: a. financial estimate b. financial forecast c. financial projection d. pro forma financial information
a
Unrecorded liabilities are most likely to be found during the review of which of the following documents? a. unpaid bills b. shipping records c. bills of lading d. unmatched sales invoices
c
The auditor is considering the use of the client's internal auditors to assist in the audit. As a result, the auditor is evaluating the competence and objectivity of the internal auditors. Factors the auditor will consider when evaluating an internal auditor's competence will include the following except: a. The internal auditor's education. b. The internal auditor's professional certifications. c. The organizational level to which the internal auditor reports. d. The internal auditor's experience.
b
The automated approach to audit analytics can be delivered through: 1. Ad hoc procedures 2. Continuous execution 3. Repetitive analysis a. 1 only b. 2 and 3 c. 3 only d. 1, 2, and 3
b
The client's computerized exception reporting system helps audit teams conduct a more efficient audit because it: a. condenses data significantly. b. highlights abnormal conditions. c. decreases the necessary level of tests of computer controls. d. is an efficient computer input control.
b
The conclusions provided in an accountants' report on an agreed-upon procedures engagement are in the form of a(n): a. limited assurance. b. summary of findings. c. opinion. d. no conclusions are provided in an agreed-upon procedures engagement.
c
The effectiveness of general controls over information technology is an important consideration for audit teams when assessing control risk on an audit. Which management assertions are primarily affected by general controls? a. completeness and accuracy b. occurrence and rights & obligations c. accuracy and occurrence d. completeness and occurrence
c
The most important foundational component of an entity's internal control system is: a. compliance with applicable laws and regulations. b. effectiveness and efficiency of operations. c. the control environment. d. reliability of financial reporting.
b
The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to: a. determine the validity of prepaid interest expense. b. detect unrecorded liabilities. c. evaluate internal control over securities. d. ascertain the reasonableness of imputed interest.
a
W. Flintstone, CPA would like to rely on her client's controls designed to prevent recording the purchase of a stone wheel in an incorrect account. Which of the following would not be a test of controls relating to the operating effectiveness of a client control appropriately designed for the above purpose? a. Flintstone analyzes the current balance in the stone wheels account compared with the prior year audited balance b. Flintstone observes her client's use of a chart of accounts c. Flintstone observes correct account classification for a sample of purchases d. Flintstone inspects evidence of managerial journal entry review
a
The use of the ratio estimation sampling technique is most effective when a. the calculated audit amts are approx proportional to the client's carrying amts b. a relatively small # of difs exist in the pop c. estimating pops whose records consist of qties but not carrying amts d. large overstatement difs & large understatement difs exist in the pop e. you have a calculator handy
a
To avoid potential errors and fraud, well-designed internal control in the accounts payable area should include a separation of which of the following functions? a. cash disbursements and vendor invoice verification b. vendor invoice verification and merchandise ordering c. physical handling of merchandise received and preparation of receiving reports d. check signing and cancellation of payment documentation
b
What objectives of internal controls are of primary interest to an auditor performing a financial statement audit? a. Effective and efficient operations b. Accurate and reliable financial reporting c. Compliance with applicable laws and regulations d. Prevention or detection and timely correction of errors and fraud
c
When an entity uses a trust company as custodian of its marketable securities, the possibility of concealing fraud most likely would be reduced if the: a. securities are registered in the name of the trust company rather than the entity itself. b. interest and dividend checks are mailed directly to an entity employee who is authorized to sell securities. c. trust company has no direct contact with the entity employees responsible for maintaining investment accounting records. d. the trust company places the securities in a bank safe deposit vault under the custodian's exclusive control.
c
When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, canceled stock certificates should: a. be destroyed to prevent fraudulent reissuance. b. not be defaced but be segregated from other stock certificates and retained in a canceled certificates file. c. be defaced to prevent reissuance and attached to their corresponding stubs. d. be defaced and sent to the secretary of state.
a
When performing an ADA, which of the following best describes an appropriate sequence used by an auditor for risk assessment purposes? a. An auditor develops an audit plan after evaluating the results of the risk assessment ADA. b. An auditor evaluates the results of a data analytic chosen based off of the audit plan. c. An auditor cleanses the client's data after modeling the ADA required by the audit plan. d. The auditor models an ADA based on the evaluation of the audit plan.
d
When using a specialist to obtain evidence in an audit, the auditor will consider the specialist's competence and objectivity. Which of the following would the auditor do when evaluating the specialist's objectivity? a. Make inquiries about the specialist's reputation. b. Read the specialist's written reports. c. Make inquiries regarding the specialist's licenses and certifications. d. Make inquiries regarding the specialist's relationships.
c
When verifying debits to the perpetual inventory records of a nonmanufacturing company, auditors would be most interested in examining a sample of purchase: a. approvals b. requisitions c. invoices d. orders
d
When would it not be appropriate to apply analytical procedures in an audit of financial statements? a. planning the engagement b. performing substantive tests c. overall engagement review d. performing tests of controls
d
Which of the following audit procedures would not likely be performed for audits of investments? a. Read board of directors' minutes for authorization of investment strategies. b. Confirm investments with broker or trustee. c. Compare valuation to published market prices. d. Confirm investments with registrar.
d
Which of the following control questions relates to the existence and occurrence objective in purchasing and accounts payable? a. Are the purchase order forms prenumbered and the numerical sequence checked for missing documents? b. Does the accounting department check invoices for mathematical accuracy? c. Does the chart of accounts and accounting manual give instructions for classifying debit entries? d. Are receiving reports prepared for each item received?
b
Which of the following courses of action would an audit team most likely follow in planning a sample of cash disbursements if the audit team is aware of several unusually large cash disbursements? a. set the tolerable dev rate at a lower level than OG planned b. stratify the cash disbursements pop so that the unusually large disbursements are selected c. increase the sample size to reduce the effect of the unusually large disbursements d. continue to draw new samples until all unusually large disbursements appear in the sample e. increase control risk to the max
c
Which of the following financial ratios would be most useful to an auditor seeking information on a company's ability to sustain losses? a. inventory turnover b. earnings per share c. debt to equity d. days' sales in accounts receivable
d
Which of the following is a common use of ADA in performing tests of controls? a. The auditor performs an aging of accounts receivable. b. The auditor conducts a trend analysis on inventory costs. c. The auditor runs a predictive model of interest expense. d. The auditor performs journal entry exception testing for employee entry amount limits.
b
Which of the following is a standard control over cash disbursements? a. checks should be signed by the controller and at least one other employee of the company b. checks should be sequentially numbered and the numerical sequence should be accounted for by the person preparing bank reconciliations c. checks and supporting documents should be marked "Paid" immediately after the check is returned with the bank statement d. checks should be sent directly to the payee by the employee who prepares documents that authorize check preparation
b
Which of the following is an example of an auditor's response to the risk of material misstatement at the financial statement level? a. Determine if existing control procedures will prevent the theft of inventory. b. Increase the need for professional skepticism among members of the engagement team. c. Trace recorded transactions to shipping documents. d. Test the shipping terms for sales recorded near the end of the year.
d
Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items? a. Supplies of relatively little value are expensed when purchased. b. Perpetual inventory records are maintained only for items of significant value. c. The cycle basis is used for physical counts. d. The warehouse manager is responsible for maintenance of perpetual inventory records.
b
Which of the following is not a step in the search for unrecorded liabilities? a. Examine the open purchase order file. b. Examine disbursements for the period immediately before the end of the period. c. Examine the unmatched receiving reports. d. All of the above are steps in the search.
c
Which of the following is not an example of an input control? a. Valid sign tests b. Hash totals c. Run to run totals d. Check digits
d
Which of the following is not correct with respect to a user auditors' request for a SOC 1 report? a. A SOC 1 report should be requested in the audit of an issuer. b. The user entity is the entity on whom the audit of the financial statements and internal control over financial reporting is being conducted. c. A SOC 1 report expresses an opinion on the design and/or operating effectiveness of internal controls. d. Type 1 reports would be most appropriate for auditors' reporting requirements for issuers.
a
Which of the following is not true with respect to the test data approach for evaluating computer controls? a. the test data are created for a separate entity and are run simultaneously with the client's actual data b. the manual results of processing the test data are compared to the results of processing these data through the client's computerized processing system c. audit teams consider potential errors and conditions of interest in generating the test data d. only one of each type of error transaction needs to be included in the test data
b
Which of the following is the best audit procedure for determining the existence of unrecorded liabilities? a. Examine unusual relationships between monthly accounts payable and recorded purchases b. Examine a sample of cash disbursements in the period subsequent to year-end c. Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable d. Examine a sample of invoices a few days prior to and subsequent to the year-end to ascertain whether they have been properly recorded
a
Which of the following items would be the least persuasive type of audit evidence? a. A letter of representation signed by the client's president and chief executive officer. b. A schedule comparing an estimate of interest expense, prepared by the auditor, to the amount reported on the client's trial balance. c. A confirmation of bank balances as of year-end received by the auditor directly from the bank. d. A copy of a bank statement provided to the auditor by the client.
b
Which of the following items would be the most persuasive type of audit evidence? a. A letter of representation signed by the client's president and chief executive officer. b. A schedule comparing an estimate of interest expense, prepared by the auditor, to the amount reported on the client's trial balance. c. A confirmation of bank balances as of year-end received by the auditor directly from the bank. d. A copy of a bank statement provided to the auditor by the client.
d
Which of the following major stages of the audit is most closely related to attributes sampling? a. Performing substantive procedures. b. Searching for the possible occurrence of subsequent events. c. Determining preliminary levels of materiality. d. Performing tests of controls.
c
Which of the following matters relating to an entity's operations would an auditor most likely consider as an inherent risk factor in planning an audit? a. The entity's financial statements are generated at an outside service center. b. The entity's fiscal year ends on June 30. c. The entity enters into significant derivative transactions as hedges. d. The entity's financial data is available only in computer-readable form.
c
Which of the following procedures is least likely to be performed before the balance-sheet date? a. Review of internal control over cash disbursements b. Confirmation of receivables c. Search for unrecorded liabilities d. Observation of inventory
b
Which of the following procedures would a CPA most likely perform in planning a financial statement audit? a. Make inquiries of the client's lawyer concerning pending litigation. b. Compare financial information with nonfinancial operating data. c. Perform cutoff tests of cash receipts and disbursements. d. Recalculate the prior-years' accruals and deferrals.
c
Which of the following procedures would best prevent or detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars? a. Require a manager's signature for the removal of any inventory item with a value of more than $50 b. Have an independent accounting firm prepare an internal control report on the effectiveness of the controls over inventory c. Have separate warehouse space for the more valuable items with frequent periodic physical counts and comparison to perpetual inventory records d. Maintain a perpetual inventory of only the more valuable items with frequent periodic verification of the accuracy of the perpetual inventory record
c
Which of the following relates to the sufficiency of audit evidence? a. The client maintains good perpetual inventory records, enabling the auditor to reconcile amounts to inventory counts that were taken prior to year-end. b. Because of a large number of small balances, the auditor decides to use negative accounts receivable confirmations rather than positive confirmations. c. When no exceptions were discovered in a preliminary sample, the auditor decided that no further testing was necessary. d. The auditor reviewed vendor invoices to support a sample of purchases rather than rely exclusively on the client's receiving reports.
c
Which of the following should an auditor do when control risk is assessed at the maximum level? a. perform fewer substantive tests of details b. perform more tests of controls c. document the assessment d. document the control structure more extensively
a
Which of the following sources of evidence would least likely be used by LLC in a search for unrecorded liabilities? a. vouchers payable listing b. listing of unmatched receiving reports c. accounts payable confirmations d. open purchase order file
c
Which of the following statements regarding fraud is not true? a. Professional skepticism requires that an audit team begin an engagement with a conscious recognition of the possibility of material misstatement due to fraud. b. Fraud resulting in material misstatement may not involve direct personal financial gain to the person(s) committing the fraud. c. Criminal intent is what distinguishes fraud from error. d. The Fraud Triangle consists of Incentive, Opportunity, and Rationalization.
c
Which of the following statements should be included in a practitioners' report on the application of agreed-upon procedures? a. A statement that the practitioner performed an examination of prospective financial statements. b. A statement of scope limitation that will qualify the practitioners' opinion. c. A statement referring to standards established by the AICPA. d. A statement of limited assurance based on procedures performed.
b
Which of the following statements would not be included in an accountants' report on an examination of a financial forecast? a. The examination was conducted in accordance with attestation standards established by the AICPA. b. An opinion on the likelihood of achieving the forecasted results. c. An acknowledgement that differences may occur between forecasted and actual results. d. A statement indicating the accountants have no responsibility to update the report for future events and circumstances.
b
Which of the following steps involved with determining the upper limit on misstatements is ordinarily performed earliest? a. Multiply the sampling interval by the tainting percentage b. Determine the audited value of the item and compare it to the recorded balance c. Calculate the basic allowance for sampling risk d. Calculate the incremental allowance for sampling risk
d
Which of the following tests of details most likely would help an auditor determine whether accounts payable have been misstated? a. Reviewing bank transfers recorded as cash received from customers b. Examining reported purchase returns that appear too low c. Searching for customer-returned goods that were not reported as returns d. Examining vendor statements for amounts not reported as purchases
c
Which of the following would be a potential internal control deficiency because of a lack of segregation of duties? a. The person responsible for maintaining the accounts receivable subsidiary ledger is also responsible for maintaining the accounts payable subsidiary ledger. b. The person who reconciles the bank accounts is also responsible for reconciling the accounts receivable subsidiary ledger to the control account in the general ledger. c. The person who is responsible for ordering equipment is also responsible for inspecting the equipment when it is received before it is released to the shop floor. d. The person who is responsible for receiving inventory ordered is also responsible for custody of the inventory and releasing it to the factory as authorized requisitions are received.
a
Which of the following would be considered a Level 3 fair value estimate? a. The valuation of goodwill obtained from a purchase transaction. b. The valuation of a building held for over 20 years. c. The valuation of an equity investment traded on the NYSE. d. The valuation of a bond investment with a 10 year maturity and an A+ S&P bond rating.
b
Which of the following would be considered an analytical procedure? a. Testing purchasing, shipping, and receiving cutoff activities b. Comparing inventory balances to recent sales activities c. Reconciling physical counts to perpetual records and general ledger balances d. Projecting the deviation rate of a statistical sample to the population
c
Which of the following would be considered corroborative evidence? a. Checks, invoices, and contracts. b. General and subsidiary ledgers. c. Minutes from meetings of the board of directors. d. Worksheets and spreadsheets supporting cost allocations.
a
Which of the following would not be considered when planning an Audit Data Analytic (ADA)? a. determine the sample of the population to be analyzed b. determine the overall purpose & specific objectives of the ADA c. determine the relevant financial statement assertions d. all of the above would be considered during the planning of an ADA
a
Which of the following would not result in an exposure to non-sampling risk? a. selecting items that are not representative of the population of int b. measuring the characteristics of int in an approp manner c. making an unintentional mistake in measuring the characteristics of int d. all of the above would result in exposure to non-sampling risk
b
While performing substantive procedures in the purchasing cycle, CPAs examines receiving reports completed around year-end to verify that purchases were included in the appropriate period. Which assertion is the auditor most likely testing with this procedure? a. completeness b. cutoff c. occurrence d. accuracy
a
While performing tests of controls in the audit of the sales cycle of an issuer, an auditor would consider which evidence to be the most reliable? a. inspection of documentation of sales transactions showing credit approval prior to granting credit to customers b. a written manual outlining the specifics of the client's revenue recognition policy and procedures c. confirmations of sales with customers indicating that sales existed d. interviews with a credit manager indicating that credit approval is granted prior to shipment of goods
