Audit Chapter 12 and 13

The auditor may use data analytics in the conduct of the audit bc it: A- Allows the auditor to review large amts of data quickly and can highlight unusual characteristics in a set of data. B- Can easily isolate accounts that contain mistakes C- Is the newest and quickest approach to finding material misstatements. D- Can be done electronically and is always less expensive to the client.

A

To test the existence assertion for recorded receivables, the auditors would select a sample from the: Sales orders file. Customer purchase orders. Accounts receivable subsidiary ledger. Shipping documents (bills of lading) file.

Accounts receivable subsidiary ledger.

4. Which of the following would the reviewer not perform in a review engagement?

Assess the risk of material misstatement While the objective of a review is to express limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with an applicable financial reporting framework (AR-C 90.17), assessing the risk of material misstatement is an audit procedure and not a review procedure.

Auditors may use data analytics on certain populations of data to: A- Avoid having to perform substantive audit procedures on the same population of data. B- Compare correlations between certain matters for example, correlating weather conditions and generation of power by location. C- Test the internal controls over data. D- Determine if management override of internal controls has occurred.

B

The document issued by a common carrier acknowledging the receipt of goods and setting forth the provisions of the transportation agreement is the: Bill of lading. Job time shipping. Production order. Production schedule.

Bill of lading.

Accounts Payable Completeness A- Compare aging of accounts payable to prior periods. B- Confirm amounts payable balance with suppliers. C- Examine invoices paid subsequent to year-end and trace to subsidiary ledger. D- Trace individual payable transactions to purchase order. E- Vouch invoices for the purchase of supplies to receiving documents.

C

An auditor may use data analytics when reviewing adjusting journal entries to: A- Perform less substantive audit procedures than otherwise would be necessary. B- As a means to guarantee identifying fraudulent items in the population. C- Identify characteristics of the entire population that are unusual, such as journal entries made after hours or amounts in large rounded numbers that require a closer examination by the auditor. D- As a test of controls to allow the auditor to limit substantive test work.

C

McPherson Corp. does not make an annual physical count of year-end inventories, but instead makes weekly test counts on the basis of a statistical plan. During the year, Sara Mullins, CPA, observes such counts as she deems necessary and is able to satisfy herself as to the reliability of the client's procedures. In reporting on the results of her examination, Mullins: Can issue an unqualified opinion without disclosing that she did not observe year-end inventories. Should comment in the scope paragraph as to her inability to observe year-end inventories, but can nevertheless issue an unqualified opinion. Is required, if the inventories are material, to disclaim an opinion on the financial statements taken as a whole. Should, if the inventories are material, qualify her opinion.

Can issue an unqualified opinion without disclosing that she did not observe year-end inventories.

Agree cash balance per the bank reconciliation to the year-end bank statement

Cash - Existence

Determine the existence of year-end recorded accounts payable and that the client has obligations to pay these liabilities.

Confirm outstanding year-end balances of payables.

Recording short-term outstanding debt (per debt agreement) as long term, debt is due loan agency.

Confirm terms of debt agreements using a debt confirmation request form.

3. The entity borrowed funds from a financial institution. Although the transaction was properly recorded, the auditor suspects that the loan created a lien on the entity's real estate that is not disclosed in its financial statements. (Select only 1 procedure.)

Confirm the terms of borrowing arrangements with the lender.

Receiving a loan from the company's primary banking institution and not recording the entry, but placing the cash in overseas account not recorded in the company's accounting records.

Confirm using public accounting profession's standard form to confirm account balance information with financial institutions.

Under SEC rules, which of the following is not among the criteria that ordinarily exist for revenue to be recognized? Collectibility is reasonably assured. Delivery has occurred or is scheduled to occur in the near future. Persuasive evidence of an arrangement exists. The seller's price to the buyer is fixed or determinable.

Delivery has occurred or is scheduled to occur in the near future.

h. 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 embezzlement scheme, the auditors most likely would compare the: Details of bank deposit slips with details of credits to customer accounts. Daily cash summaries with the sums of the cash receipts journal entries. Individual bank deposit slips with the details of the monthly bank statements. Dates uncollectible accounts are authorized to be written off with the dates the write-offs are actually recorded.

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

The auditors may conclude that depreciation charges are insufficient by noting: Insured values greatly in excess of book values. Large amounts of fully depreciated assets. Continuous trade-ins of relatively new assets. Excessive recurring losses on assets retired.

Excessive recurring losses on assets retired.

The auditors are most likely to seek information from the plant manager with respect to the: Adequacy of the provision for uncollectible accounts. Appropriateness of physical inventory observation procedures. Existence of obsolete machinery Deferral of procurement of certain necessary insurance coverage.

Existence of obsolete machinery

In performing a test of controls, the auditors vouch a sample of entries in the purchases journal to the supporting documents. Which assertion would this test of controls most likely test? Completeness. Existence. Valuation. Rights.

Existence.

In testing plant and equipment balances, an auditor may select recorded additions in the analysis of plant and equipment and inspect the actual asset(s) involved. Which management assertion is this procedure most directly related to? Existence. Completeness. Rights. Valuation.

Existence.

Invalid transactions granting credit for sales returns are recorded.

Goods returned for credit are approved by the supervisor of the sales department.

To determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be canceled by the: Authorized members of the audit committee. Accounting department. Individual who signs the checks. Chief executive officer.

Individual who signs the checks.

Determine that the presentation and disclosure of accounts payable are appropriate.

Inquire of management concerning the existence of related party transactions.

2. Permission to use results of testing from previous audits to support the opinion for the current year

No The successor auditor must obtain sufficient appropriate evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit (AU-C 200.19 and .A32-.A56). Gathering information from the predecessor auditor's prior-year audit does not provide a reasonable basis for an opinion of the current year's audit

8. Information about pending litigation

NoPending litigation would be discussed with management during the audit and confirmed through a letter to the client's attorney(s).

2. During a site visit to a branch warehouse, the auditor noted unauthorized personnel have access to the inventory.

Observation AU-C 240.A43 lists observation as one of the procedures the auditor should apply in inventories held in public warehouses. An observation would include a site visit as to the inventory's existence.

Which of the following is the best audit procedure for the discovery of damaged merchandise in a client's ending inventory?

Observe merchandise and raw materials during the client's physical inventory taking.

5. The auditor suspects that fictitious employees have been placed on the payroll by the entity's payroll supervisor, who has access to payroll records and to the paychecks. (Select only 1 procedure.)

Observe payroll check distribution on a surprise basis.

The primary objective of a CPA's observation of a client's physical inventory count is to: Discover whether a client has counted a particular inventory item or group of items. Obtain direct knowledge that the inventory exists and has been properly counted. Provide an appraisal of the quality of the merchandise on hand on the day of the physical count. Allow the auditor to supervise the conduct of the count in order to obtain assurance that inventory quantities are reasonably accurate.

Obtain direct knowledge that the inventory exists and has been properly counted.

Depreciation was not taken on a very major piece of equipment.

Perform analytical procedures on income statement accounts.

11. The auditor suspects that the entity is inappropriately increasing the cash reported on its balance sheet by drawing a check on one account and not recording it as an outstanding check on that account and simultaneously recording it as a deposit in a second account. (Select only 1 procedure.)

Prepare a bank transfer schedule.

Recording fictitious cash sales throughout the year.

Preparing a "proof of cash" for the entire audit period.

5. The auditing firm's computer-assisted audit specialist obtained an electronic billing file from the company and checked the accuracy of the summarized billings file.

Recalculation Recalculation is a means for checking the accuracy of a report or file.

Which of the following is most likely to be an example of fraudulent financial reporting relating to sales? Inaccurate billing due to a lack of controls. Lapping of accounts receivable. Misbilling a client due to a data input error. Recording sales when the customer is likely to return the goods.

Recording sales when the customer is likely to return the goods.

Which of the following accounts should be reviewed by the auditors to gain reasonable assurance that additions to property, plant, and equipment are not understated? Depreciation. Accounts Payable. Cash. Repairs.

Repairs.

6. The auditor obtained the company's aging of accounts receivable and independently created the aging of certain accounts.

Reperformance By creating an aging of certain accounts independent of the client, the auditor has reperformed this step.

An expenditure for equipment was improperly expensed.

Review expenditures charged to a repairs and maintenance account for the year just completed.

Cooper, CPA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent real estate taxes. Internal control at the municipality is weak. To determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely: Send positive confirmation requests. Send negative confirmation requests. Examine evidence of subsequent cash receipts. Inspect the internal records, such as copies of the tax invoices that were mailed to the residents.

Send positive confirmation requests.

Goods shipped to customers do not agree with goods ordered by customers.

Shipping clerks compare goods received from the warehouse with approved sales orders.

For the audit of a continuing nonpublic client, the emphasis of the testing for property accounts is on: All transactions resulting in the ending balance. Tests of controls over disposals. Transactions that occurred during the year. Performing analytical procedures on beginning balances of the accounts.

Transactions that occurred during the year.

When perpetual inventory records are maintained in quantities and in dollars, and internal control over inventory is weak, the auditor would probably: Want the client to schedule the physical inventory count at the end of the year. Insist that the client perform physical counts of inventory items several times during the year. Increase the extent of tests for unrecorded liabilities at the end of the year. Have to disclaim an opinion on the income statement for that year.

Want the client to schedule the physical inventory count at the end of the year.

During the inventory count an auditor selects items and determines that the proper description and quantity were recorded by the client. This procedure is most closely related to:

completeness

recorded inventory quantities include all products on hand

completeness; select a sample of items during the physical inventory count and determine that they have been included on count sheets

Requested responses directly from customers as to amounts due.

confirmation ; substantive procedure

If the misstatements identified by the confirmation process are in total immaterial, the auditors may still conclude that the account is materially overstated.

correct

Overall, positive confirmation requests are ordinarily considered to result in more reliable evidence than negative requests.

correct

An audit of the balance in the accounts payable account is ordinarily not designed to: Detect accounts payable that are substantially past due. Verify that accounts payable were properly authorized. Ascertain the reasonableness of recorded liabilities. Determine that all existing liabilities at the balance sheet date have been recorded.

detect accounts payable that are substantially past due

Compared a sample of sales invoices to credit files to determine whether the customers were on the approved customer list.

reperformance; test of controls

A purchase was recorded before year-end which should have been recorded after year-end and payment of it has not yet occurred.

reviewing receiving reports issued shortly before and after year-end

Which of the following procedures is least likely to be completed before the balance sheet date? Confirmation of receivables. Search for unrecorded liabilities. Observation of inventory. Review of internal accounting control over cash disbursements.

search for unrecorded liabilities

A test of the completeness of recorded sales involves tracing a sample of ___________ to recorded sales.

shipping documents

Vouching from the purchases journal to the supporting documents provides evidence with respect to the existence assertion for purchases.

true

InventoryValuation and Allocation A- Examine invoices from suppliers. B- Examine invoices paid subsequent to year-end and trace to subsidiary ledger. C- Select items from inventory listing and locate the items in the warehouse. D- Select items located in the inventory warehouse and trace to inventory listing. E- Trace sales invoices and shipping documents just before year-end to customer accounts.

A

Invoices are sent for shipped goods and are recorded in the sales journal, but are not posted to any customer account.

Control amounts posted to the accounts receivable ledger are compared with control totals of invoices

Which of the following is least likely to be considered an inherent risk relating to receivables and revenues? Restrictions placed on sales by laws and regulations. Decline in sales due to economic declines. Decline in sales due to product obsolescence.

Decline in sales due to product obsolescence.

Treetop Corporation acquired a building and arranged mortgage financing during the year. Verification of the related mortgage acquisition costs would be least likely to include an examination of the related: Deed. Canceled checks. Closing statement. Interest expense.

Deed.

1. During the physical inventory count, the auditor requested that certain material containers be opened to ensure they were not empty.

Inspection This procedure is used to ensure that a closed container contained the appropriate material noted on the inventory.

A recorded purchase of equipment was part of a fraud scheme (including false documentation from purchase order through a fraudulent equipment receiving report). No equipment was received and the cash payment was misappropriated.

Physically examine recorded assets as of year-end.

Analysis of which account is least likely to reveal evidence relating to recorded retirement of equipment? Accumulated depreciation. Insurance expense. Property, plant, and equipment. Purchase returns and allowances.

Purchase returns and allowances.

the existence of an unrecorded accrued payable not due for payment for several months.

Reviewing union contracts.

The existence of related party payables.

Reviewing unusual transactions during the year.

Which of the following is not an overall test of the annual provision for depreciation expense? Compare rates used in the current year with those used in prior years. Test computation of depreciation provisions for a representative number of units. Test deductions from accumulated depreciation for assets purchased during the year. Perform analytical procedures.

Test deductions from accumulated depreciation for assets purchased during the year.

Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because: This is a duplication of cutoff tests. Accounts payable balances at the balance sheet date may not be paid before the audit is completed. Correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment. There is likely to be other reliable external evidence available to support the balances.

There is likely to be other reliable external evidence available to support the balances.

The auditor's analytical procedures will be facilitated if the client: Uses a standard cost system that produces variance reports. Segregates obsolete inventory before the physical inventory count. Corrects material weaknesses in internal control before the beginning of the audit. Reduces inventory balances to the lower of cost or market.

Uses a standard cost system that produces variance reports.

To assure accountability for fixed-asset retirements, management should implement an internal control that includes: Continuous analysis of miscellaneous revenue to locate any cash proceeds from the sale of plant assets. Periodic inquiry of plant executives by internal auditors as to whether any plant assets have been retired. Utilization of serially numbered retirement work orders. Periodic observation of plant assets by the internal auditors.

Utilization of serially numbered retirement work orders.

Instead of taking a physical inventory count on the balance-sheet date, the client may take physical counts prior to the year-end if internal control is adequate and:

Well-kept records of perpetual inventory are maintained.

Identify the control that is most likely to prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable: Write-offs must be approved by a responsible official after review of credit department recommendations and supporting evidence. Write-offs must be approved by the accounts receivable department. Write-offs must be authorized by the shipping department. Write-offs must be supported by an aging schedule showing that only receivables overdue by several months have been written off.

Write-offs must be approved by a responsible official after review of credit department recommendations and supporting evidence.

6. Communications to audit committees or others with equivalent authority and responsibility regarding fraud and noncompliance with laws and regulations by clients

Yes Any fraud or noncompliance with laws and regulations by clients can have a significant bearing on whether or not the successor auditor decides to accept the audit engagement. This information may also affect the successor auditor's assessment of inherent or control risk (the risk of material misstatement).

9. The predecessor auditor's understanding as to the reasons for the change of auditors

Yes The client may tell the successor auditor one version of the story; the predecessor auditor can provide the other side. If the reason for the change in auditors would significantly increase audit risk or liability to the successor auditor's firm, he may decide not to accept the engagement.

1. Information that might bear on the integrity of management

Yes The predecessor auditor may have information about the integrity of management that would sway the successor auditor's decision on whether or not to accept the audit engagement.

5. Disagreements with management as to accounting principles, auditing procedures, or other similarly significant matters

Yes This information can be solicited in a letter to the predecessor auditor. Depending on the information received, the successor auditor may be made aware of inherent risk factors for the audit, or he may decide not to accept the engagement.

Examined invoice to obtain evidence in support of the ending recorded balance of a customer.

inspection of records or documents; substantive procedures

Examined a sample of sales invoices to see if they were initialized by the credit manager indicating credit approval.

inspections of records or documents; test of controls

c. In testing controls over cash disbursements, the auditors most likely would determine that the person who signs checks also: Reviews the monthly bank reconciliation. Returns the checks to accounts payable. Is denied access to the supporting documents. Is responsible for mailing the checks.

is responsible for mailing the checks

Hwang purchased land for a new plant that it intends to construct. A portion of the cost was a commission paid to a real estate agent. That commission was capitalized as part of the cost of the land.

no adjusting entry

An inability to locate assets may reveal to the auditors that unrecorded retirements have occurred.

true

Examining selected cash disbursements in the period subsequent to the year-end is the best audit procedure for determining the existence of unrecorded liabilities. All liabilities must eventually be paid, and will therefore be reflected in the accounts when paid if not when incurred. By close study of payments made subsequent to the balance sheet date, the auditors may find items that should have appeared in the balance sheet.

true

Serially numbered retirement work orders provide a systematic means of assuring that units of plant and equipment are not retired without authorization by management. Retirement work orders also provide the accounting department with the information necessary to record the retirement of equipment in the accounting records. The alternative procedures suggested are not satisfactory. Some retirements of plant asset do not involve cash receipts. The inquiries and observations by internal auditors would come after the fact of asset retirements.

true

When checks are signed they should not be returned to the accounting department. This control is used so as to avoid a situation in which the accounts payable department fabricates documents, and then collects the checks. Not returning the checks makes it more difficult for this sort of fraud in that the perpetrator must also establish a "safe" address for the check to be mailed to. Answer (Reviews the monthly bank reconciliation.) is incorrect because control is stronger if individuals who are otherwise independent of the cash function prepare and review the monthly bank reconciliation. Answer (Returns the checks to accounts payable.) is incorrect because, as discussed, the checks should not be returned to accounts payable. Answer (Is denied access to the supporting documents.) is incorrect because the individual signing the checks needs access to the supporting documents so he or she can determine whether the expenditure is proper.

true

primary use of standard confirmation form to verify year end cash and liability balance information

true

the primary objective of search for large checks to directors, officers and employee is to identify related party transactions

true

An auditor selects items from the client's inventory listing and identifies the items in the warehouse. This procedure is most likely related to:

existence

Questioned management about likely total uncollectible accounts.

inquiry; substantive procedure

Examine invoices paid subsequent to year-end and trace to subsidiary ledger

A/P - Completeness

A bill of lading acknowledges the receipt of goods and sets forth provisions of the transportation agreement.

true

Direct labor, raw materials, and factor overhead are all included in inventory costs of a manufacturing company.

true

Since the internal control is described as being weak, the CPAs will generally insist upon a physical count at year-end.

true

Vouch fixed asset acquisitions to purchase invoices

Fixed Assets -- Rights & Obligations

Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious transactions

Sales invoices are compared with shipping documents and approved customer orders before invoices are mailed.

Shortly prior to year-end, an employee stole goods received from a vendor before a receiving report had been prepared, payment for the goods was made prior to year-end.

Vouching cash disbursements recorded prior to year-end.

The existence of a fictitious account payable in an audit in which accounts payable are not confirmed

Vouching selected accounts on the year-end trial balance of accounts payable.

Most __________ represent obligations payable sometime during the succeeding period for services of a continuing nature received before the balance sheet date.

accrued liabilities

k. The auditors who physically examine securities should insist that a client representative be present in order to: Detect fraudulent securities. Lend authority to the auditors' directives. Acknowledge the receipt of securities returned. Coordinate the return of securities to the proper locations.

acknowledge the receipt of securities returned

An ___________ of customers' accounts receivable should be prepared at regular intervals for use by the credit department in carrying out its collection program.

aged trial balance

j. Hall Company had large amounts of funds to invest on a temporary basis. The board of directors decided to purchase securities and derivatives and assigned the future purchase and sale decisions to a responsible financial executive. The best person or persons to make periodic reviews of the investment activity would be:

an investment committee of the board of directors

Compared total bad debts this year with the totals for the previous two years.

analytical procedure; substantive procedure

Under which of the following scenarios would an auditor most likely utilize data analytics as an audit procedure:

as a means to identify anomalies

Customers' checks are misappropriated after being forwarded to the cashier for deposit.

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.

6. The auditor suspects that selected employees of the entity received unauthorized raises from the entity's payroll supervisor, who has access to payroll records. (Select only 1 procedure.)

Vouch data in the payroll register to documented authorized pay rates in the human resources department's files.

Which of the following is least likely to be among the auditors' objectives in the audit of inventories and cost of goods sold? Determine that the valuation of inventories and cost of goods sold is arrived at by appropriate methods. Determine the existence of inventories and the occurrence of transactions affecting cost of goods sold. Establish that the client includes only inventory on hand at year-end in inventory totals. Establish the completeness of inventories.

Establish that the client includes only inventory on hand at year-end in inventory totals.

Invoices are sent for shipped goods, but are not recorded in the sales journal.

Daily sales summaries are compared with control totals of invoices.

Customers' checks are credited to incorrect customer accounts.

Monthly statements are mailed to all customers with outstanding balances.

"Lapping" of accounts receivable.

Tracing remittance advices to postings in the accounts receivable records.

Examine invoices from suppliers

Inventory - Valuation & Allocation

9. The details of invoices for equipment repairs were not clearly identified or explained to the accounting department employees. The auditor suspects that the bookkeeper incorrectly recorded the repairs as fixed assets. (Select only 1 procedure.)

Scan the debits to the fixed asset accounts and vouch selected amounts to vendors' invoices and management's authorization.

Watched the accounting clerk record the daily deposit of cash receipts.

observation; test of controls

When a primary risk related to an audit is possible overstated inventory, the assertion most directly related is:

existence

A piece of equipment was stolen from the warehouse.

Physically examine recorded assets as of year-end.

Establish the completeness of recorded accounts payable.

Vouch purchases recorded after year-end.

A machine was sold for cash which was recorded, but the retirement was not recorded.

Analyze the Miscellaneous Revenue account for the year just completed.

Customers' checks are misappropriated before being forwarded to the cashier for deposit.

Monthly statements are mailed to all customers with outstanding balances.

Invoices for goods sold are posted to incorrect customer accounts.

Monthly statements are mailed to all customers with outstanding balances.

A lien exists on certain equipment.

Review fire insurance policies.

Inventory need not be on hand at year-end. For example, purchases in transit on which title has passed to the client should also be included.

true

Writing checks prior to year-end, but not mailing them until a week thereafter.

Review of the bank cutoff statement.

the entity has legal title to inventories

rights and obligations; select a sample of recorded items and examine supporting vendor's invoices and contracts

Excessive recurring losses on assets retired show that the depreciation expense recognized during the actual useful lives of the assets has been less than the real cost of using the assets.

true

a primary objective of preparing a bank transfer schedule is to detect kiting

true

Goods are removed from inventory for unauthorized orders.

Approved sales orders are required for goods to be released from the warehouse.

Ordinarily, the most significant assertion relating to accounts payable is: Completeness Existence. Presentation. Valuation.

Completeness

Determine that the valuation of warranty loss reserves is measured in accordance with GAAP.

Test the computations made by the client to set up the accrual.

Trace sales invoice & shipping docs just before year-end to customer account transactions

A/R Completeness

The purchased land was in part financed through obtaining a loan from a financial institution. Interest on that loan is being capitalized as part of the cost of the land.

Yes adjusting entry

d. To gather evidence regarding the balance per bank in a bank reconciliation, the auditors would examine any of the following except: Cutoff bank statement. Year-end bank statement. Bank confirmation. General ledger.

general ledger

Which of the following statements is not typical of property, plant, and equipment as compared to most current asset accounts? A property, plant, and equipment cutoff error near year-end has a more significant effect on net income. Relatively few transactions occur in property, plant, and equipment during the year. The assets involved with property, plant, and equipment ordinarily have relatively longer lives. Property, plant, and equipment accounts typically have a higher dollar value.

A property, plant, and equipment cutoff error near year-end has a more significant effect on net income.

Audit of which of the following accounts is most likely to reveal evidence relating to recorded retirements of equipment? Accumulated depreciation. Cost of goods sold. Purchase returns and allowances. Purchase discounts.

Accumulated depreciation.

Which of the following is an internal control weakness related to factory equipment? Checks issued in payment of purchases of equipment are not signed by the controller. All purchases of factory equipment are required to be made by the department in need of the equipment. Factory equipment replacements are generally made when estimated useful lives, as indicated in depreciation schedules, have expired. Proceeds from sales of fully depreciated equipment are credited to other income.

All purchases of factory equipment are required to be made by the department in need of the equipment.

Customers' checks are properly credited to customer accounts and are properly deposited, but errors are made in recording receipts in the cash receipts journal.

An employee other than the bookkeeper periodically prepares a bank reconciliation.

7. The auditor scanned the repairs and maintenance account for unusually large amounts.

Analytical AU-C 520.04 states that analytical procedures are "evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data. Analytical procedures also encompass such investigation, as is necessary, of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount."

The auditors should confirm accounts receivable unless the auditors' assessment of the risk of material misstatement is low: And accounts receivable are immaterial, or the use of confirmations would be ineffective. And accounts receivable are composed of large accounts. And the effectiveness of confirmations is absolutely determined. Or accounts receivable are from extremely reputable customers.

And accounts receivable are immaterial, or the use of confirmations would be ineffective.

7. The entity's cash receipts of the first few days of the subsequent year were properly deposited in its general operating account after the year-end. However, the auditor suspects that the entity recorded the cash receipts in its books during the last week of the year under audit. (Select only 1 procedure.)

Compare the details of the cash receipts journal entries with the details of the corresponding daily deposit slips.

10. The auditor suspects that a lapping scheme exists because an accounting department employee who has access to cash receipts also maintains the accounts receivable ledger and refuses to take any vacation or sick days. (Select only 2 procedures.)

Compare the details of the cash receipts journal entries with the details of the corresponding daily deposit slips. Send requests to confirm the entity's accounts receivable on a surprise basis at an interim date.

Which assertion relating to sales is most directly addressed when the auditors compare a sam ple of shipping documents to related sales invoices? Existence or occurrence. Completeness. Rights and obligations. Presentation and disclosure.

Completeness.

In an audit, the valuation of year-end accounts payable is most likely addressed by: Confirmation. Examination of cash disbursements immediately prior to year-end. Examination of cash disbursements immediately subsequent to year-end. Analytical procedures applied to vouchers payable at year-end.

Confirmation.

1. Which of the following would the reviewer not inquire about in a review engagement?

Control procedures in place over financial reporting A review consists primarily of asking questions of management and applying analytical procedures. It does not consist of audit procedures such as procedures to determine if control procedures are operating as designed. (AR-C 90.39)

e. You have been assigned to the year-end audit of a financial institution and are planning the timing of audit procedures relating to cash. You decide that it would be preferable to: Count the cash in advance of the balance sheet date in order to disclose any kiting operations at year-end. Coordinate the count of cash with the cutoff of accounts payable. Coordinate the count of cash with the count of marketable securities and other negotiable assets. Count the cash immediately upon the return of the confirmation letters from the financial institution.

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

Credit sales are made to individuals with unsatisfactory credit ratings.

Customer orders are compared with an approved customer list.

Fixed Assets Rights and obligations A- Interview plant manager regarding fixed asset additions during the year. B- Recalculate partial year depreciation for fixed asset acquisition. C- Trace fixed asset item to fixed asset master control listing. D- Vouch fixed asset acquisitions to purchase invoices. E- Vouch fixed asset acquisitions to related cash disbursement.

D

The use of data analytics in auditing large populations of data: A- Makes the audit cost less and provides stronger audit evidence. B- Is a waste of time if internal controls are strong. C- Is an inappropriate audit procedure and will not provide useful information to the auditor. D- Is similar to performing analytical review procedures as both are efforts to identify anomalies in populations or accounts that require additional audit follow-up

D

Accounts Receivable Completeness A- Review confirmation of accounts receivable balances and agree to accounts receivable subledger. B- Review list of accounts written off during year. C- Review schedule of bad debt expense. D- Trace individual customer account transactions to sales invoice E- Trace sales invoice and shipping documents just before year-end to customer account transactions.

E

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities? Examine confirmation requests returned by creditors whose accounts appear on a subsidiary trial balance of accounts payable. Examine unusual relationships between monthly accounts payable balances and recorded purchases. Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded. Examine selected cash disbursements in the period subsequent to year-end.

Examine selected cash disbursements in the period subsequent to year-end.

8. The auditor suspects that vouchers were prepared and processed by an accounting department employee for merchandise that was neither ordered nor received by the entity. (Select only 1 procedure.)

Examine the supporting purchase orders and receiving reports for selected paid vouchers.

Which of the following would most likely be detected by an auditor's review of the client's sales cutoff? Excessive goods returned for credit. Unrecorded sales discounts. Lapping of year-end accounts receivable. Inflated sales for the year.

Inflated sales for the year

Which of the following would provide the most assurance concerning the valuation of accounts receivable? Trace amounts in the accounts receivable subsidiary ledger to details on shipping documents. Compare receivable turnover ratios to industry statistics for reasonableness. Inquire about receivables pledged under loan agreements.

Inquire about receivables pledged under loan agreements.

4. The auditor sent a letter to the company's outside attorney accompanied by management's request for information concerning pending or threatened litigation, claims, and assessments.

Inquiry AU-C 250.A17 states that a letter of audit inquiry to the client's attorney is the auditor's primary means of obtaining corroboration of the information furnished by management concerning litigation, claims, and assessments.

3. The auditor obtained a copy of the company's accounting manual and read the section on inventory to prepare for the physical inventory observation.

Inspection Inspection generally involves a much more detailed evaluation of documents and material than an observation. In this instance, the auditor is inspecting the accounting records in detail prior to the observation.

To strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic: Increase in insurance coverage. Inspection of equipment and reconciliation with accounting records. Verification of liens, pledges, and collateralizations. Accounting for work orders.

Inspection of equipment and reconciliation with accounting records.

4. Any information which the client has specifically requested not be discussed with the successor auditor

No The Rules of the Code of Professional Conduct preclude an auditor from disclosing confidential information obtained in the course of an engagement unless the client specifically consents. If the client has limited the predecessor auditor's response to certain items or topics, the successor auditor should inquire as to the reasons and consider the implications of the limitation in deciding whether or not to accept the engagement.

f. Which of the following procedures would the auditors most likely perform to test controls relating to management's assertion about the completeness of cash receipts for cash sales at a retail outlet? Observe the consistency of the employees' use of cash registers and tapes. Inquire about employees' access to recorded but undeposited cash. Trace deposits in the cash receipts journal to the cash balance in the general ledger. Compare the cash balance in the general ledger with the bank confirmation request.

Observe the consistency of the employees' use of cash registers and tapes.

2. An auditor suspects that the controller wrote several checks and recorded the cash disbursements just before year-end but did not mail the checks until after the first week of the subsequent year. (Select only 1 procedure.)

Obtain the cutoff bank statement and compare the cleared checks to the year-end bank reconciliation.

2. Which of the following is not a review requirement?

Permission to contact the predecessor auditor or reviewer A successor accountant is not required to communicate with a predecessor accountant in connection with acceptance of a compilation or review engagement, but he or she may believe it is beneficial to obtain information that will assist in determining whether to accept the engagement. (AR-C 90.A10)

Which of the following explanations most likely would satisfy an auditor who questions management about significant debits to the accumulated depreciation accounts? The estimated remaining useful lives of plant assets were revised upward. Plant assets were retired during the year. The prior year's depreciation expense was erroneously understated. Overhead allocations were revised at year-end.

Plant assets were retired during the year.

The receiving department is least likely to be responsible for the: Determination of quantities of goods received . Detection of damaged or defective merchandise. Preparation of a shipping document. Transmittal of goods received to the store's department.

Preparation of a shipping document.

1. The auditor suspects that a kiting scheme exists because an accounting department employee who can issue and record checks seems to be leading an unusually luxurious lifestyle. (Select only 1 procedure.)

Prepare a bank transfer schedule.

A search for overstated property, plant, and equipment purchases would most likely include: Accounts receivable. Property, plant, and equipment. Purchase discounts. Repairs and maintenance expense.

Property, plant, and equipment.

For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the: Receiving report and the purchase order. Receiving report and the voucher. Vendor's packing slip and the purchase order. Vendor's packing slip and the voucher.

Receiving report and the purchase order.

A client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner? Footing the purchases journal. Reconciling vendors' monthly statements with subsidiary payable ledger accounts. Tracing totals from the purchases journal to the ledger accounts. Sending written quarterly confirmation to all vendors.

Reconciling vendors' monthly statements with subsidiary payable ledger accounts.

i. In order to guard against the misappropriation of company-owned marketable securities, which of the following is the best course of action that can be taken by a company with a large portfolio of marketable securities? Require that one trustworthy and bonded employee be responsible for access to the safekeeping area where securities are kept. Require that employees who enter and leave the safekeeping area sign and record in a log the exact reason for their access. Require that employees involved in the safekeeping function maintain a subsidiary control ledger for securities on a current basis. Require that the safekeeping function for securities be assigned to a bank or stockbroker that will act as a custodial agent.

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

A purchase prior to year-end was improperly recorded in the following year.

Review transactions recorded shortly after year-end.

An effective procedure for identifying unrecorded retirements of equipment is to: Foot related property records. Recalculate depreciation on the related equipment. Select items of equipment in the accounting records and then locate them in the plant. Select items of equipment and then locate them in the accounting records.

Select items of equipment in the accounting records and then locate them in the plant.

When confirming accounts payable, the approach is most likely to be one of: Selecting the accounts with the largest balances at year-end, plus a sample of other accounts. Selecting the accounts of companies with whom the client has previously done the most business, plus a sample of other accounts. Selecting a random sample of accounts payable at year-end. Confirming all accounts.

Selecting the accounts of companies with whom the client has previously done the most business, plus a sample of other accounts.

4. The auditor discovered an unusually large receivable from one of the entity's new customers. The auditor suspects that the receivable may be fictitious because the auditor has never heard of the customer and because the auditor's initial attempt to confirm the receivable has been ignored by the customer. (Select only 2 procedures.)

Send a second request for confirmation of the receivable to the customer and make inquiries of a reputable credit agency concerning the customer's creditworthiness. Examine the entity's shipping documents to verify that the merchandise that produced the receivable was actually sent to the customer.

The least likely approach in auditing management's estimate relating to an accrued liability is to: Independently develop an estimate of the amount to compare to management's estimate. Review and test management's process of developing the estimate. Review subsequent events or transactions bearing on the estimate. Send confirmations relating to the estimate.

Send confirmations relating to the estimate.

12. The auditor suspects that the entity's controller has overstated sales and accounts receivable by recording fictitious sales to regular customers in the entity's books. (Select only 2 procedures.)

Send requests to confirm the entity's accounts receivable on a surprise basis at an interim date. Examine the entity's shipping documents to verify that the merchandise that produced the receivable was actually sent to the customer.

Goods ordered by customers are shipped, but are not billed to anyone.

Shipping documents are compared with sales invoices when goods are shipped.

To determine that all sales have been recorded, the auditors would select a sample of transactions from the: Shipping documents file. Sales journal. Accounts receivable subsidiary ledger. Remittance advices.

Shipping documents file.

b. 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: Supported by a vendor's invoice. Stamped "paid" by the check signer. Prenumbered and accounted for. Approved for authorized purchases.

Stamped "paid" by the check signer.

3. Which of the following would the reviewer not have to inquire about in a review engagement?

The integrity of management The integrity of management, principally determined through correspondence with the predecessor auditor, is important in an audit, not a review. The integrity of management also speaks to the inherent risk of material misstatement of the financial statements and the control environment. A review is not concerned with audit risk (inherent, control, and detection risk) and it does not contemplate obtaining an understanding of the entity's internal control. (AR-C 90.A92)

Which of the following is an example of misappropriation of assets relating to sales? Accidentally recording cash that represents a liability as revenue. Holding the sales journal open to record next year's sales as having occurred in the current year. Intentionally recording cash received from a new debt agreement as revenue. Theft of cash register sales.

Theft of cash register sales.

Customers' checks are received for less than the customers' full account balances, but the customers' full account balances are credited.

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.

Different customer accounts are each credited for the same cash receipt.

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete inventory to address:

Valuation

A property acquisition was capitalized for an improper amount due and the wrong amount was paid due to a transposition input error.

Vouch recorded additions to equipment accounts for the year just completed.

The cost of repairing a machine was improperly capitalized.

Vouch recorded additions to equipment accounts for the year just completed.

Prior to year-end a bookkeeper, ordered goods, but had them delivered to her home. The company paid for these goods after year-end.

Vouching cash disbursements recorded after year-end.

7. Communications to management and those charged with governance regarding significant deficiencies and material weaknesses in internal control

Yes Information regarding significant deficiencies and material weaknesses in internal control has a direct bearing on audit risk.

3. Permission to review the working papers

Yes The client must first agree to a review of the working papers through a consent and acknowledgment letter to the predecessor auditor. The predecessor auditor may decide which working papers may be reviewed and which may be copied.

a. All receivables that should be recorded are recorded as of year end b. Recorded receivables are at appropriate net realizable values. c. recorded receivable exist d. The client has rights to recorded year-end receivables e. The presentation and disclosure of receivables are adequate.

a. trace a sample of sale invoices from late in december to the sale journal and to postings in accounts receivable and sales accounts b. review the aged trial balance for significant past due accounts c. vouch year-end accounts receivables balances to supporting docs. Existences, Rights D. vouch year-end accounts receivable balances to supporting documents. Existence, Rights e. review drafts of financial statements. Disclosure

Subsequent to the land purchase, Hwang purchased certain equipment from a vendor who had filed for bankruptcy. Hwang's management believes that the equipment was purchased for an amount equal to approximately half what at least one other supplier sells it for. Hwang recorded the transaction at its cost.

no adjusting entry

an existing building on the land was torn down to allow construction of a new building on the land. The cost of the demolition was capitalized as part of the cost of the new building.

no adjusting entry

the major categories of inventories and their basis of valuation are adequately reported in the financial statements

presentation and disclosure; review drafts of the financial statements

g. Reconciliation of the bank account should not be performed by an individual who also: Processes cash disbursements. Has custody of securities. Prepares the cash budget. Reviews inventory reports.

processes cash disbursements

Tracing __________ for several days before and after year-end to recorded purchases is designed to test the proper cutoff of purchase transactions.

receiving doucments

A property, plant and equipment cutoff error has less of an effect, not more, on net income. This is because the only effect on income is the small amount of depreciation involved.

true

A sale either shouldn't be recorded or a proper allowance for returns should be established when a customer is likely to return the goods. Thus, simply recording the sale is an example of fraudulent financial reporting when the customer is likely to return the goods. Answers (Inaccurate billing due to a lack of controls.) and (Misbilling a client due to a data input error.) are examples of errors, while answer (Lapping of accounts receivable.) is an example of misappropriation of assets.

true

Accounts payable confirmations are ordinarily sent to suppliers with whom the client has done the most business. This is because the largest potential for an understatement may exist due to the client having established high levels of credit. A sample of other accounts will ordinarily also be selected.

true

Analytical procedures will be facilitated when a client uses a standard cost system that produces variance reports. Such reports will allow the auditors to identify significant deviations from expected values.

true

Answer (Assess the allowance for uncollectible accounts for reasonableness.) is correct because receivables are valued at net realizable value, and assessing the allowance for uncollectible accounts for reasonableness will help the auditor determine the proper amount. Answer (Trace amounts in the accounts receivable subsidiary ledger to details on shipping documents.) is incorrect because the limited information in the accounts receivable ledger will not make possible tracing details to the shipping documents—also, the shipping documents may not even capture the total sales price that is included in the accounts receivable ledger. Answer (Compare receivable turnover ratios to industry statistics for reasonableness.) is incorrect because while comparing turnover ratios may provide some information on the collectibility of receivables, it is very imprecise. Answer (Inquire about receivables pledged under loan agreements.) is incorrect because it relates to presentation and disclosure more directly than valuation.

true

Answer (Delivery has occurred or is scheduled to occur in the near future.) is not among the SEC criteria because of the portion of the answer that states "scheduled to occur in the near future." Ordinarily delivery must have occurred. Answers (Collectibility is reasonably assured.), (Persuasive evidence of an arrangement exists.) and (The seller's price to the buyer is fixed or determinable.) all describe circumstances required to recognize revenue.

true

Assets purchased during the year should not result in deductions from the accumulated depreciation account.

true

Auditors audit estimates through (1) independently developing an estimate, (2) reviewing management's process, and (3) reviewing subsequent events. There often is no one to send a confirmation related to the estimate.

true

Auditors will usually find in the client's possession externally created evidence such as vendors' invoices and statements that substantiate the accounts payable. No such external evidence is on hand to support accounts receivable.

true

Because a significant portion of the search for unrecorded liabilities deals with transactions recorded after year-end, it is least likely to be completed before the balance sheet date.

true

Because an understatement of liabilities overstates income, auditors are ordinarily most concerned with the completeness assertion for payables. Note, however, that in circumstances in which a client may be motivated to understate income (e.g., to minimize taxes), existence becomes a bigger concern.

true

Because of the liquidity of many securities, the auditor should insist that a client representative be present in order to acknowledge the receipt of securities returned. In the event of subsequent "disappearance" of a security the auditor will not be a suspect.

true

Because the proper recording of a retirement requires elimination of the accumulated depreciation related to the retired equipment, review of this account is most likely to provide evidence about a recorded retirement.

true

Comparing shipping documents to related sales invoices addresses the completeness assertion relating to sales. More specifically, it addresses whether all items that have been shipped have been recorded as sales.

true

Comparing the recorded amount of dividend revenue with dividend record books (published by investment advisory services) provides evidence of the amount of dividend revenue that should have been received during the year. It is virtually impossible to confirm the receipt of dividends with the company paying those dividends.

true

Detecting overstated sales is a primary reason the auditors' review of a client's sales cutoff. For example, shipments made in the first part of January may be improperly included in the December sales total.

true

Each vendor's invoice should be compared with the receiving report (to determine that it was received) and the purchase order (to determine that it was ordered). (2) Receiving report and the voucher is incomplete because of the omission of the purchase order. (3) Vendor's packing slip and the purchase order and (4) Vendor's packing slip and the voucher are incorrect because the receiving report, prepared by the company itself, provides better evidence of what has been received than the vendor's packing slip.

true

Having the securities held in safekeeping by a bank or stockbroker provides strong internal control because they are not available to employees responsible for maintaining the accounting records of the securities. Thus the separation of the custody of securities from the accounting function is complete.

true

Theft of cash register sales is an example of misappropriation of assets. Answer (Accidentally recording cash that represents a liability as revenue.) is an example of an error while answers (Holding the sales journal open to record next year's sales as having occurred in the current year.) and (Intentionally recording cash received from a new debt agreement as revenue.) are examples of fraudulent financial reporting.

true

In recording expenditures on property, plant, and equipment, the logical choice usually is between a revenue expenditure and a capital expenditure. If the outlay is judged to be a revenue expenditure (rightly or wrongly), it will probably be recorded in the Repairs and Maintenance account. If items that should be capitalized are erroneously charged to Repairs and Maintenance, the result will be an understatement of property, plant, and equipment. Consequently, the auditors can gain evidence that additions to property, plant, and equipment are not understated by reviewing the Repairs and Maintenance account. The other alternatives suggested in the question are not plausible. An erroneous debit to cash would be disclosed quickly because of the disagreement between cash receipts and the cash being deposited daily in the bank. A debit to Accounts Payable would lead to protests from creditors. A debit to Depreciation Expense would be a conspicuous error because of the timing of the entry and the lack of a related credit to Accumulated Depreciation.

true

Lapping will result in a delay in the recording of specific remittance credits in the financial records, but the checks will be deposited in the bank as they are received. Therefore, a comparison of the checks deposited to the credits to customer accounts will likely uncover the scheme.

true

Of the choices, existence is most directly related to overstated inventory because inclusion of inventory items that do not exist in inventory totals results in an overstated inventory.

true

Ordinarily, the emphasis for testing property accounts is on transactions that occurred during the year because the account turns over so slowly. Note, however, that audits performed under PCAOB AS 2110 also require consideration of internal control over property, plant and equipment.

true

Over-recorded sales due to a lack of control over the sales entry function relates to control risk not inherent risk. The other three replies all relate to inherent risk.

true

Receivables should be confirmed unless the combined assessment of inherent risk and controls risk is at the low level, receivables are immaterial, or the existence of circumstances in which the use of confirmations would be ineffective.

true

The Cost Accounting Standards Board was established by Congress to narrow the options in cost accounting that are available under generally accepted accounting principles.

true

The audit of intangible assets typically involves both vouching the cost of assets and testing the allocation of that cost.

true

The auditor would send positive confirmations rather than negative confirmations because the fact that the balances are delinquent may indicate that amounts are in dispute. Examining subsequent cash receipts, answer (Examine evidence of subsequent cash receipts.), is unlikely to be effective since many of the accounts will not have been collected. Inspection of internal records, answer (Inspect the internal records, such as copies of the tax invoices that were mailed to the residents.), is likely to result in less credibility evidential matter than confirming the accounts.

true

The auditors do not have as an objective the determination of whether accounts payable are past due.

true

The best procedure to determine valuation of payables is confirmation. Examination of cash disbursements in the subsequent period is more directed towards completeness of payables. Analytical procedures may be useful but would not be as effective as confirmation with respect to the valuation assertion.

true

The general ledger will not have information on the balance per bank. The cutoff bank statement, year-end bank statement and bank confirmation will all include information on the balance per bank.

true

The goal is to determine the population to be sampled from to determine that all sales have been recorded; therefore, the sample should be taken from a population of source documents, here the shipping documents file. None of the other three answers represent source documents that may be sampled from to determine that all sales have been recorded.

true

The individual who reconciles the bank account should not be involved in the processing of cash receipts or disbursements. Therefore, answer (Processes cash disbursements.) is correct. All of the other functions are compatible with reconciliation responsibilities

true

The individual who signs the checks should ordinarily be provided with supporting documents that provide support for the disbursement. That individual should then manually or electronically "cancel" the documents so that the amount isn't paid a second time.

true

The investment committee of the board of directors is not involved in the routine of making buy and sell decisions and can therefore review the transactions objectively. On the other hand, the chief operating officer, the controller, and the treasurer may be closely associated on a daily basis with the financial executive responsible for the investment decisions.

true

The most efficient way in which the duplicate recording of a purchase transaction may be detected is by reconciling the related payable accounts with vendors' statements.

true

The objective is to determine the population the auditors would sample from to test the existence assertion for recorded receivables. The direction of testing should be from the accounts receivable subsidiary ledger to the available support, such as sales invoices, bills of lading, sales orders, and customers' orders.

true

The primary objective of the CPAs' observation of inventories is to provide sufficient competent evidence as to the existence of the inventory and the controls over the inventory-taking process

true

The professional standards allow auditors to use physical counts prior to year-end when a client has well-kept perpetual (computerized or non-computerized) inventory records.

true

The purchase of factory equipment should be made by the purchasing department regardless of which unit of the company will use the equipment. The purchasing department has the expertise and the established procedures and documents to ensure that all purchases are made in accordance with company policy.

true

The use of cash registers and tapes helps assure that all sales of a retail store are recorded.

true

Unless all negotiable assets are verified at one time, an opportunity exists for a dishonest officer or employee to conceal a shortage by transferring it from one asset category to another a step ahead of the auditors. For example, marketable securities could be pledged as collateral for a loan. The cash thus obtained could be included with other cash being counted by the auditors. After the cash count, the cash derived from the securities could be removed and used to redeem the pledged securities which would then be available for counting by the auditors. Of course, this type of manipulation could hardly be carried on unless there were weaknesses in internal control.

true

Write-offs of receivables should be approved by a responsible officer after a review of the account by the credit department. Answer (Write-offs must be approved by the accounts receivable department.) is incorrect because accounts receivable, a recordkeeping function, should not authorize such entries. Answer (Write-offs must be authorized by the shipping department.) is incorrect because other procedures (e.g., a review of shipping documents) may be used to determine that the goods were received and because the shipping department would have no other information on whether the receivable is likely to be collectible. Answer (Write-offs must be supported by an aging schedule showing that only receivables overdue by several months have been written off.) is incorrect because the account need not be overdue by several months as a "current" receivable may become worthless due to, for example, a bankruptcy.

true

a primary objective of four column proof of cash is to reconcile disbursement and cash receipts totals between rank records and company records

true

primary objectives for bank cut-offs statements are to verify reconciling items on the year-end bank reconciliation

true

An auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and:

valuation

An auditor most likely would analyze inventory turnover rates to obtain evidence about:

valuation

inventories are reduced, when appropriate, to replacement cost or net realizable value

valuation; examine current vendor's price lists

cost of inventories is properly calculated

valuation; select a sample of recorded items and examine supporting vendor invoices and contracts

l. The best way to verify the amounts of dividend revenue received during the year is: Recomputation. Verification by reference to dividend record books. Correct Confirmation with dividend-paying companies. Examination of cash disbursements records.

verification by reference to dividend record books

Hwang cut down a number of trees on the land and sold the wood. Other income was recorded on the transaction for the amount of the cash received.

yes adjusting entry