Audit Exam 1 MC

In which of the following situations might an audit firm's independence be perceived as being compromised? 1. A fee is based upon whether the audit report leads to approval of the client's application for bank financing 2. A fee is to be established at a later date by the Bankruptcy Court 3. A fee is based upon the nature of the engagement as well as the actual time spent on the engagement 4. A fee is based on the fee charged by the client's former auditors

1. A fee is based upon whether the audit report leads to approval of the client's application for bank financing

The management of your audit client have contracts which make compensation highly dependent upon the level of reported profit. This is likely to: 1. Increase inherent risk 2. Reduce inherent risk 3. Increase control risk 4. Reduce control risk

1. Increase inherent risk

Which of the following circumstances would require the highest level of professional skepticism? 1. Testing existence of accrued liabilities for a company that has had record profits this year. 2. Testing of accounts payable at the end of the second quarter 3. Testing of fixed asset existence at the end of the third quarter 4. Routine control testing of cash reconciliations throughout the year.

1. Testing existence of accrued liabilities for a company that has had record profits this year.

Management assertions are 1. implied or expressed representations about the financial statements 2. stated in the footnotes to the financial statements 3. provided to the auditor in the assertions letter, but are not disclosed in the financial statements 4. explicitly expressed representations about the financial statements

1. implied or expressed representations about the financial statements

Which of the following statements is true? 1. A mandatory holiday policy can improve the control environment because employees who do not take holidays may become too tired 2. A mandatory holiday policy can improve the control environment because it increases the scope for cross-checking of employees' work 3. A mandatory holiday policy has no effect upon the control environment 4. It is against the law to have a mandatory holiday policy

2. A mandatory holiday policy can improve the control environment because it increases the scope for cross-checking of employees' work

What is the primary reason that the PCAOB has implemented mandatory partner rotation requirements for public company audits? 1. Assumptions that rotation will reduce reliance on management representations 2. Assumptions that rotation will improve auditor independence 3. Assumptions that rotation will reduce audit fees 4. Assumptions that rotation will reduce regulatory scrutiny of audit firms

2. Assumptions that rotation will improve auditor independence

Which of the following statements is true? 1. If control risk is zero the auditor need do relatively little substantive testing 2. Control risk can never be zero because the cost of eliminating all control risks would be prohibitive 3. There is an inverse relationship between control risk and the amount of substantive testing required 4. All the above statements are true

2. Control risk can never be zero because the cost of eliminating all control risks would be prohibitive

Which of the following circumstances would require the highest level of professional skepticism? 1. Testing of routine revenue during the year 2. Testing of routine revenue transactions during the last week of the year 3. Testing of internal controls at an interim period (e.g. during the third quarter) 4. Testing of cash receipts that occurred throughout the year

2. Testing of routine revenue transactions during the last week of the year

Which of the following types of evidence should the auditor consider to be the most reliable? 1. a sales invoice issued by the client and supported by a delivery receipt from an outside trucker 2. confirmation of an account payable balance mailed by and returned directly by a vendor to the auditor 3. a check issued by the company and bearing the payee's endorsement, that is included with the bank statements mailed directly to the auditor 4. a working paper prepared by the client's controller and reviewed by the client's accountant

2. confirmation of an account payable balance mailed by and returned directly by a vendor to the auditor

The Public Company Accounting Oversight Board does not: 1. perform inspections of the quality controls at audit firms that audit public companies. 2. establish auditing standards that must be followed by CPAs on all audits. 3. oversee auditors of public companies. 4. perform any of the above functions.

2. establish auditing standards that must be followed by CPAs on all audits.

When an auditor considers whether to accept a new client he/she would not generally: 1. review the client's previous financial statements 2. perform preliminary tests of the client's internal controls 3. communicate with the outgoing auditor 4. obtain external information about the client's business and industry

2. perform preliminary tests of the client's internal controls

A company may seek to improve corporate governance by ensuring that: 1. the CEO and chairman are the same individual in order to avoid confusion over who has ultimate responsibility for running the company 2. the CEO and chairman are different individuals in order to prevent one person having too much power 3. the CEO and chairman are different individuals in case one dies or becomes incapacitated due to ill health 4. company chairmen should not be outside directors

2. the CEO and chairman are different individuals in order to prevent one person having too much power

Which of the following statements is false? 1. There is an inverse relation between the extent of substantive testing and planned detection risk 2. For a given level of audit risk and inherent risk, there is a positive relation between the strength of internal controls and planned detection risk 3. A client with high inherent risk will also have high control risk 4. For a given level of audit risk and inherent risk, there is a positive relation between control risk and the extent of substantive testing

3. A client with high inherent risk will also have high control risk

Which of the following statements is true? 1. An auditor will normally follow up all positive and negative confirmation requests not returned 2. An auditor will normally follow up all negative confirmation requests not returned 3. An auditor will normally follow up all positive confirmation requests not returned 4. An auditor must always send confirmation letters when auditing accounts payable

3. An auditor will normally follow up all positive confirmation requests not returned

Which of the following statements about the existence and completeness assertions is not true? 1. Existence and completeness emphasize opposite audit concerns 2. Existence deals with overstatements and completeness deals with understatements 3. Existence deals with understatements and completeness deals with overstatements 4. Completeness deals with unrecorded transactions

3. Existence deals with understatements and completeness deals with overstatements

Which of the following assurance services provides a moderate level of assurance about the client's financial statements? A. Forecasts and projections B. Compliance C. Review D. Financial statement audit

3. Review

Which of the following statements is true? 1. An independent audit committee should not communicate with other directors on the board of directors 2. External auditors should only communicate with the internal auditors through the audit committee 3. The audit committee can act as intermediary between senior management, internal and external auditors 4. An audit committee is independent if it consists only of outside directors

3. The audit committee can act as intermediary between senior management, internal and external auditors

When considering internal control an auditor must be aware of the concept of reasonable assurance. Which of the following are part of the concept? 1. Employment of competent personnel provides complete assurance that the objectives of internal control will be achieved 2. Establishment and maintenance of an internal control structure is a responsibility of management not the auditor 3. The cost of internal control should not exceed the benefits expected to be derived from them 4. Segregation of incompatible duties provides some assurance that the internal control structure is effective

3. The cost of internal control should not exceed the benefits expected to be derived from them

Which of the following statements is true about the completeness and occurrence assertions? 1. Both assertions are relevant to classes of transactions and account balances. 2. If management asserts that recorded sales transactions represent exchanges of goods or services that actually took place, they are asserting to completeness. 3. Violations of the occurrence assertion relate to account overstatements. 4. The failure to record a sale that did occur is a violation of the occurrence assertion.

3. Violations of the occurrence assertion relate to account overstatements.

A 'gray' director is: 1. an independent non-executive director 2. an independent outside director 3. an outside director who may not be independent of management 4. an executive director who sits on the audit committee

3. an outside director who may not be independent of management

A formal organizational structure can strengthen the control environment by: 1. providing management with a higher level of ethical values 2. ensuring that accounting data are processed manually rather than using a computerized system 3. assigning responsibilities within each functional area 4. the use of internal control questionnaires

3. assigning responsibilities within each functional area

Merchandise should only be included in the inventory of the client company if the client: 1. has paid for the merchandise 2. has physical possession of the merchandise 3. holds legal title to the merchandise 4. holds the shipping documents for the merchandise

3. holds legal title to the merchandise

Auditing standards should be looked upon by practitioners as: 1. ideals to work towards, but which are not achievable. 2. maximum standards that denote excellent work. 3. minimum standards of performance that must be achieved on each audit engagement. 4. benchmarks to be used on all audits, reviews, and compilations.

3. minimum standards of performance that must be achieved on each audit engagement.

After testing a client's internal controls, an auditor has concluded that it is well designed and is functioning as intended. Under these circumstances the auditor would most likely 1. perform tests of controls to the extent outlined in the audit program 2. determine the control procedures that should prevent or detect errors and irregularities 3. not increase the extent of predetermined substantive tests 4. determine whether transactions are recorded to permit preparation of financial statements in conformity with accounting standards

3. not increase the extent of predetermined substantive tests

As auditor you become aware a few days after the start of the audit that you lack the independence required for this particular engagement. You should: 1. issue an opinion disclaimer 2. issue an adverse opinion 3. suggest that the client engage a different audit firm 4. rely on the independence of the internal audit department

3. suggest that the client engage a different audit firm

When the auditor's preliminary assessment of control risk is low, the auditor will: 1. increase sample sizes in that area 2. eliminate the need to gather evidence in that area 3. test the effectiveness of controls in that area 4. negotiate with management to determine which controls will be tested

3. test the effectiveness of controls in that area

Auditing standards require the auditor to gain an understanding of 1. the client's procedural manuals 2. the client's organization charts 3. the client's internal controls 4. all the above

3. the client's internal controls

Which of the following should not normally be included in the engagement letter for an audit? 1. A description of the responsibilities of client personnel to provide assistance 2. An estimate of the audit fee 3. A description of the limitations of an audit 4. A listing of the areas covered in the audit program

4. A listing of the areas covered in the audit program

Which of the following is not a factor that relates to opportunities to misappropriate assets? 1. Inadequate internal controls over assets. 2. Presence of large amounts of cash on hand. 3. Inappropriate segregation of duties or independent checks on performance. 4. Adverse relationships between management and employees.

4. Adverse relationships between management and employees.

Which of the following statements is true? 1. If internal controls are very strong the auditor may choose to do no substantive testing 2. If internal controls are very strong the auditor may choose to rely only on tests of controls 3. Auditors must always perform tests of control and substantive testing 4. If internal controls are very weak the auditor may choose to rely only on substantive testing

4. If internal controls are very weak the auditor may choose to rely only on substantive testing

Which of the following is an example of an 'audit confirmation'? 1. The auditor receives written notification from the company secretary stating that there is no outstanding litigation against the company 2. The auditor requests a copy of the audited financial statements from a subsidiary of the audit client 3. The auditor sends a letter to management asking them to confirm they are responsible for the preparation of the financial statements 4. None of the above

4. None of the above

Which of the following statements is true? 1. A positive confirmation request is one in which the respondent agrees with the client's recorded balance 2. A negative confirmation request is one in which the respondent disagrees with the client's recorded balance 3. A positive confirmation request is one in which the respondent replies that the value of the balance is positive 4. None of the above

4. None of the above

Which of the following statements is true? 1. An auditor may not refuse an audit engagement if approached by a prospective client because all companies must have annual audits 2. Prior to accepting an engagement, the auditor should not take into account information obtained during an audit of one of the potential client's competitors because of the duty of confidentiality 3. The audit engagement letter will often include a statement that some material misstatements may remain undiscovered after the audit is completed 4. None of the above

4. None of the above

Which of the following statements is false? 1. the remuneration (compensation) committee should be responsible for setting the remuneration of auditors 2. the nomination committee should be responsible for nominating the audit firm 3. the audit committee is responsible for supervising the work of the internal auditors 4. all of the above

4. all of the above

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the: 1. completeness assertion. 2. existence assertion. 3. cutoff assertion. 4. classification assertion.

4. classification assertion.

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate: A. Client acceptance B. Information C. Business D. Control

B. Information

Which of the following is not true regarding 'information risk'? A. Information risk can arise because the preparers of financial statements have incentives to report biased results B. More complex financial reports tend to increase information risk C. Information risk is always greater in industries that have high operating risks D. Information risk becomes particularly costly to a company that is trying to raise outside finance

B. More complex financial reports tend to increase information risk

What form of analytical procedure would most likely uncover the existence of obsolete merchandise? a. Inventory turnover ratio. b. Decrease in the ratio of gross profit to sales. c. Ratio of inventory to accounts payable. d. Comparison of inventory values to purchase invoices.

a. Inventory turnover ratio.

Proper separation of duties is useful to prevent various types of misstatements. Which of the following is not an essential separation of duties? a. Persons having access to cash should not have access to marketable securities b. Separate the credit granting function from the sales function c. Accounting personnel doing internal comparisons should be independent of those entering the original data d. Anyone responsible for inputting sales and cash receipts transactions information into the computer should be denied access to cash

a. Persons having access to cash should not have access to marketable securities

Which one of the following is not an external auditor's concern about a key authorization point in the sales cycle? a. The receiving room must have authorization before releasing items to the stores department b. Credit must be authorized before the sale order is processed c. Prices must be authorized d. None of the above. That is, all of these are key authorization points.

a. The receiving room must have authorization before releasing items to the stores department

If planned detection risk is reduced, the amount of substantive evidence the auditor collects will a. increase b. decrease c. remain unchanged d. be indeterminate

a. increase

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to: a. provide reasonable assurance that material misstatements will be detected b. be a guarantor of the fairness in the statements c. be equally responsible with management for the preparation of the financial statements d. be an insurer of the fairness in the statements

a. provide reasonable assurance that material misstatements will be detected

A well-designed system of internal control that is functioning effectively is most likely to detect an irregularity arising from a. the fraudulent action of an individual employee b. the fraudulent action of several employees c. informal deviations from the official organization chart d. management fraud

a. the fraudulent action of an individual employee

What is an 'accounting-based debt covenant'? a. A covenant signed between the auditor and client regarding the audit of the client's debts b. A contract signed between the client and a provider of debt finance c. A contract that determines the level of managerial compensation d. A covenant in which the client promises not to take on too much debt

b. A contract signed between the client and a provider of debt finance

For which of the following professional services must CPAs be independent? a. Management advisory services b. Audits of financial statements c. Preparation of tax returns d. All three of the above

b. Audits of financial statements

Which of the following best describes the reason why an external auditor reports on financial statements? a. A misappropriation of assets may exist, and it is more likely to be detected by independent auditors. b. Different interests may exist between the company preparing the statements and the persons using the statements. c. A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work. d. Poorly designed internal controls may be in existence.

b. Different interests may exist between the company preparing the statements and the persons using the statements.

________ is not a risk specific to the IT environments. a. Reliance on the functioning capabilities of hardware and software b. Increased human involvement c. Loss of data due to insufficient backup d. Unauthorized access

b. Increased human involvement

Of the following, the best statement of the external auditor's primary objective in reviewing internal control is that the review is intended to provide: a. reasonable protection against client fraud by client employees b. a basis for reliance on the control system and determining the scope of other auditing procedures c. a basis for constructive suggestions to the client for improving the accounting system d. a method for safeguarding assets, checking the accuracy and reliability of accounting data, promoting operational efficiency, and encouraging adherence to prescribed managerial policies

b. a basis for reliance on the control system and determining the scope of other auditing procedures

The auditor traces items from the source documents to the journals in order to satisfy the: a. existence objective b. completeness objective c. ownership objective d. valuation objective

b. completeness objective

The essence of the external auditor's attest function is to: a. assure the consistent application of correct accounting procedures b. determine whether the client's financial statements are fairly stated c. examine individual transactions so that the auditor may certify as to their validity d. detect collusion and fraud

b. determine whether the client's financial statements are fairly stated

The external auditor's test of controls are directed toward the control's a. efficiency b. effectiveness c. efficiency and effectiveness d. relevance to the internal audit

b. effectiveness

Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm. The PCAOB can: a. enforce preliminary action against accounting form (yes), report the matter to the Securities and Exchange Commission (yes), suspend the license to practice of the CPA guilty of the violation (yes) b. enforce preliminary action against accounting form (yes), report the matter to the Securities and Exchange Commission (yes), suspend the license to practice of the CPA guilty of the violation (no) c. enforce preliminary action against accounting form (yes), report the matter to the Securities and Exchange Commission (no), suspend the license to practice of the CPA guilty of the violation (no) d. enforce preliminary action against accounting form (no), report the matter to the Securities and Exchange Commission (no), suspend the license to practice of the CPA guilty of the violation (no)

b. enforce preliminary action against accounting form (yes), report the matter to the Securities and Exchange Commission (yes), suspend the license to practice of the CPA guilty of the violation (no)

In connection with a public offering of bonds, the bond underwriter of your audit client has asked you to furnish him with a review on the interim financial statements for the three months ended 31st March 2016. As auditor you expressed an unqualified opinion for the year end 31st December 2015. As part of your review of the interim financial statements, nothing has come to your attention that would indicate they are not properly presented. Under these circumstances, your response to the underwriter's request should be to a. give an opinion that the 31st March 2016 statements are fairly presented subject to year-end audit adjustments b. give negative assurance as to the 31st March 2016 financial statements c. inform the underwriters no review is possible without an audit d. provide an adverse opinion for the three months ended 31st March 2016.

b. give negative assurance as to the 31st March 2016 financial statements

A ________ total represents the summary total of codes from all records in a batch that do not represent a meaningful total. a. record b. hash c. output d. financial

b. hash

By determining whether "recorded acquisitions are for goods and services received", the auditor is able to satisfy the objective of: a. accuracy b. occurrence c. ownership d. completeness

b. occurrence

"The auditor should not assume that management is dishonest, but the possibility of dishonesty must be considered." This is an example of a. unprofessional behavior b. professional skepticism c. due diligence d. a rule in the Professional Code of Ethics

b. professional skepticism

Each key control that the auditor intends to rely on must be supported by sufficient a. tests of transactions b. tests of controls c. analytical review procedures d. re-performance procedures

b. tests of controls

The audit risk against which the auditor requires reasonable protection is a combination of (1) the risk that material errors will occur in the accounting process by which the financial statements are developed and (2) the risk that a. a company's system of internal control is not adequate to detect errors and irregularities b. those errors that occur will not be detected in the auditor's examination c. management may not possess an attitude that lacks integrity d. evidential matter is not competent enough for the auditor to form an opinion based on reasonable assurance

b. those errors that occur will not be detected in the auditor's examination

Which of the following is a component of general IT controls? a. Processing controls b. Output controls c. Back-up and contingency planning d. Input controls

c. Back-up and contingency planning

Which of the following best describes the Code of Professional Ethics? a. It provides a rigid code of rules that auditors must follow b. It is a set of guidelines that have general applicability but which do not attempt to prescribe rules that auditors should follow c. It is a mix of philosophical and practical statements concerning auditor ethics d. All of the above

c. It is a mix of philosophical and practical statements concerning auditor ethics

The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of services to that company? a. Reviews of quarterly financial statements b. Preparation of corporate tax returns c. Most consulting services d. Tax services

c. Most consulting services

Which of the following describes the process of implementing a new system in one part of the organization, while other locations continue to use the current system? a. Parallel testing b. Online testing c. Pilot testing d. Control testing

c. Pilot testing

Which of the following controls would be appropriate regarding the release of materials from a stockroom? a. Production employees request materials be delivered to their work areas as they need them. b. Stockroom employees deliver materials to work areas throughout the day to maintain acceptable levels of safety stock — no written records are maintained. c. Production employees submit approved requisition forms to the stockroom for materials needed. d. Production employees in need of materials should personally pick up needed materials from the stockroom.

c. Production employees submit approved requisition forms to the stockroom for materials needed.

Which of the following statements about planned detection risk (PDR) is false? a. PDR is dependent on the other three factors in the model; i.e., it will change only if another changes b. PDR determines the amount of evidence the auditor plans to collect, inversely with the size of PDR c. When PDR is changed from 5% to 10%, the required accumulation of evidence would be increased d. PDR is a measure of the risk that audit evidence will fail to detect errors exceeding a tolerable amount, should such errors exist

c. When PDR is changed from 5% to 10%, the required accumulation of evidence would be increased

According to the Principles section of the Code of Professional Conduct, all members: a. should be independent in fact and in appearance at all times. b. in public practice should be independent in fact and in appearance at all times. c. in public practice should be independent in fact and in appearance when providing auditing and other attestations services. d. in public practice should be independent in fact and in appearance when providing auditing, tax, and other attestation services.

c. in public practice should be independent in fact and in appearance when providing auditing and other attestations services.

The reliance placed on substantive tests in relation to the reliance placed on internal control varies in a relationship that is ordinarily: a. parallel b. direct c. inverse d. equal

c. inverse

The independent audit is important to financial statement users because it: a. determines the future management of the company whose financial statements are audited b. measures and communicates financial and business data included in financial statements c. involves the objective examination of and reporting on financial statements d. reports on the accuracy of all information in the financial statements

c. involves the objective examination of and reporting on financial statements

When determining whether independence is impaired because of an ownership interest in a client company, materiality will affect ownership: a. in all circumstances. b. only for direct ownership. c. only for indirect ownership. d. under no circumstances.

c. only for indirect ownership.

General IT controls include all of the following except: a. systems development. b. online security. c. processing controls. d. hardware controls.

c. processing controls.

The audit risk model is a. equally useful for planning, testing, and evaluating audit evidence b. useful in evaluating results but of limited use in planning c. useful in planning but of limited value in evaluating results d. useful when performing tests of balances, but of little value in either the planning or evaluation stages

c. useful in planning but of limited value in evaluating results

Which of the following types of evidence is rarely sufficient by itself to provide sufficient and persuasive evidence? a. Observation b. Inquiries of client c. Analytical procedures d. All of the above

d. All of the above

Which of the following statements is false? a. There are many ways an auditor can accumulate evidence to meet audit objectives b. The auditor must accumulate sufficient competent evidence c. The cost of accumulating evidence should be taken into account when deciding how much evidence is required d. Gathering evidence and reducing costs are equally important considerations that affect the auditor's approach

d. Gathering evidence and reducing costs are equally important considerations that affect the auditor's approach

The Sarbanes-Oxley Act requires which employees of an accounting firm to rotate off the engagement every five years? a. In-charge auditor (yes), lead audit partner (yes) b. In-charge auditor (no), lead audit partner (no) c. In-charge auditor (yes), lead audit partner (no) d. In-charge auditor (no), lead audit partner (yes)

d. In-charge auditor (no), lead audit partner (yes)

Which of the following is not a benefit of using IT-based controls? a. Ability to process large volumes of transactions b. Ability to replace manual controls with computer-based controls c. Reduction in misstatements due to consistent processing of transactions d. Reduction in internal control evaluation in setting control risk

d. Reduction in internal control evaluation in setting control risk

Which of the following services are allowed by the SEC whenever a CPA audits a public company? a. Internal audit outsourcing b. Legal services unrelated to the audit c. Appraisal or valuation services d. Services related to assessing the effectiveness of internal control over financial reporting

d. Services related to assessing the effectiveness of internal control over financial reporting

When is the external auditor responsible for detecting a financial reporting fraud? a. When the fraud does not result from collusion b. The auditor is never responsible for detecting fraud c. When the auditor judges the client's internal controls as weak d. When the application of auditing standards would uncover the fraud

d. When the application of auditing standards would uncover the fraud

Inherent risk is reduced where the likelihood of theft is low. The likelihood of theft is likely to be low in an account such as: a. inventory b. marketable securities c. cash d. accounts receivable

d. accounts receivable

An extensive understanding of the client's business and operations are essential for doing an adequate external audit. For a new client, most of this information is obtained: a. from the predecessor auditor b. from the stock exchange c. from the permanent file d. at the client's premises

d. at the client's premises

If a long-term note receivable is included in an accounts receivable listing, there is a violation of the a. completeness objective b. existence objective c. timing objective d. classification objective

d. classification objective

When the auditor identifies an area of the accounting system with missing controls, the auditor would modify the audit program in that area. This modification would: a. increase the amount of tests of controls b. increase the reliance on tests of controls c. cause the issuance of a qualified or adverse opinion d. eliminate the need for a test of controls

d. eliminate the need for a test of controls

The most common test of controls for separation of duties is: a. documentation b. confirmation c. examination d. observation

d. observation

Old and new systems operating simultaneously in all locations is a test approach known as: a. pilot testing. b. horizontal testing. c. integrative testing. d. parallel testing.

d. parallel testing.

A document identifying the description, supplier, quantity, and related information for goods and services the company intends to purchase is the a. purchases catalog b. purchase requisition c. receiving report d. purchase order

d. purchase order

An auditor will ordinarily a. take any means available to reduce audit risk to the lowest possible level b. set audit risk between 5% and 10% c. perform audit procedures first and set the audit risk level before forming an opinion and writing the report d. recognize that audit risks exist and deal with those risks in an appropriate manner

d. recognize that audit risks exist and deal with those risks in an appropriate manner

A major control available in a small company, which might not be feasible in a large company is a. a wider segregation of duties b. a voucher system c. fewer transactions to process d. the owner-manager's personal interest in the company and close supervision of employees

d. the owner-manager's personal interest in the company and close supervision of employees

When an analytical procedure reveals no unusual fluctuations, the implication is that: a. there are no material errors or irregularities b. there are no material errors c. there are no material irregularities d. the risk of a material error or irregularity is less

d. the risk of a material error or irregularity is less

When processing cash payments it is important for the audit client to have a method of cancelling the supporting documents to prevent their reuse as support for another check at a later time. A common method is to a. shred the documents so they can't be reused b. transfer possession of the documents to a bank vault such as a safety deposit box c. move the documents to a permanent off-site facility such as a warehouse d. write the check number on the supporting documents

d. write the check number on the supporting documents