Audit 439: Chapters 10-14 HW Answers

A clients physical count of inventories was lower than the inventory quantities shown in its perpetual records. This could be b/c of a failure to record:

Sales

To strengthen the system of I/C over the purch of merch, a company's receiving dept should:

Accept merch only if a PO or approval granted by the purch dept is on hand

From the auditor's point of view, inventory counts are more acceptable prior to YE when:

Accurate perpetual inventory records are maintained

The auditors who physically examine securities should insist that a client representative be present in order to:

Acknowledge the receipt of securities returned

What doc of customers' A/R should be prepared at regular intervals for use by the credit dept in carrying out its collection program?

Aged trial balance

Purchase cutoff procedures should be designed to test whether purchases recorded near YE:

Are owned by the company

If a response to a negative confirmation request is not received, the auditors ordinarily:

Assume the balance is correct

An auditor has accounted for a sequence of inventory tags and is now going to trace info on a representative number of tags to inventory sheets. The purpose of this procedure is to:

Attain assurance that all inventory represented by an inventory tag is listed on the inventory sheets

Which control would most likely reduce the risk of diversion of customer receipts by a client's employees?

Bank lockbox system

What is a shipping document that is prepared for goods shipped by a common carrier?

Bill of lading

What should account for the serially numbered shipping documents to ensure that an invoice be prepared for all shipments?

Billing dept

Receivables written off are often turned over to a:

Collection agency

The best evidence of collectibility of A/R is examination os subsequent what of the accounts?

Collections

When testing other accrued liabilities, auditors may independently calculate the amount and do what with it to mgmts estimate?

Compare

What assertion are auditors most concerned with in terms of recorded payables?

Completeness

You have been assigned to the YE audit of a financial institution and are planning the timing of audit procedures relating to cash. It would be preferable to:

Coordinate the count of cash with count of marketable securities and other negotiable assets

When testing a client's cost acctg system, the auditor's tests are primarily designed to determine that:

Costs have been properly assigned to finished goods, WIP, and COGS

Before goods are shipped on open account, the sale should be approved by the:

Credit dept

The auditors suspect that a client's cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this, the auditors would most likely compare the:

Details of the bank deposit slips with details of credits to customer accounts

If an auditor cannot satisfy himself w/ respect to opening inventories, what kind of opinion does he give?

Disclaimer or qualified opinion on the I/S and stat. of CF's, but could issue an unmodified opinion on the B/S

A client's material purch cycle begins with req's from user dept and ends with the receipt of materials and the recognition of a liability. An auditors primary objective in reviewing this cycle is to:

Eval the reliability of info generated as a result of the purch process

Are property taxes typically many or few in number?

Few

What assets arises in acctg for a business combination and should be amortized as its value is impaired over the years?

Goodwill

How would an auditor lean of slow-moving inventory?

Inquiry of sales personnel, inquiry of stores personnel, and review of perpetual inventory records

In testing controls over cash disbursements, the auditors most likely would determine that the person who signs the checks also:

Is responsible for mailing the checks

Income taxes w/held from employees but not yet submitted to the gov are a what?

Liability

When testing customer deposits, auditors typically review a what of the individual deposits?

List

Related party receivables

Loans by a company to its offers, directors, major stockholders, or affiliates (they require extra attention to ensure they are not arm's length)

Is possession of a deed proof of present ownership of property?

No

Most accrued liabilities represent what?

Obligations payable sometime during the succeeding period of svs of a continuing nature received before the B/S date

What type of confirmation request asks the debtor to respond in all cases?

Positive

Reconciliation of the bank account should not be performed by an individual who also:

Processes cash disbursements

What is an effective control that encourages receiving dept personnel to count and inspect all merch received?

Quantities ordered are excluded from the receiving dept copy of the PO

When observing physical inventory at YE, the auditors will record the serial number of the last what issued to verify the accuracy of the cutoff of A/P?

Receiving report

Federal and state govs do not specify the exact what to be maintained, but do specify the amounts to be w/held?

Records

What expenses accounts do auditors analyze in order to discover property items that should have been capitalized?

Repairs and maintenance

Auditors often obtain what kind of written docs from mgmt regarding the existence of unrecorded payables?

Representations

In order to guard against the misappropriation of company-owned marketable securities, what is the best course of action that can be taken by a company with a large portfolio of marketable securities?

Require that the safekeeping function for securities be assigned to a bank or stockbroker that will act as a custodial agent

To provide assurance that the acctg dept is notified of property retirements, a system of serially numbers what should be used?

Retirement work papers

A test of completeness of recorded sales involves tracing a sample of what to recorded sales?

Shipping documents

To provide assurance that each voucher is submitted and paid only once, the auditors most likely would examine a sample of paid vouchers and determine whether each voucher is:

Stamped "paid" by the check signer

An inventory turnover analysis is useful to the auditor b/c it may detect:

The existence of obsolete merchandise

The best way to verify the amounts of dividend revenue received during the years is:

Verification by reference to dividend record books

To gather evidence regarding the balance per bank in a bank reconciliation, the auditors would not examine: (what would they examine)?

Would not: G/L Would: cutoff bank statement, year-end bank statement, and bank confirmation

A/P from important vendors should be confirmed, even the accts have what balance at YE?

Zero