Audit Exam 3 Review (Chapters 10-13)

Which of the following assertions are NOT tested during the auditor's observation of the physical inventory.

Presentation

What is the purpose of the auditors in making and recoding test counts of inventory quantities during their observation of the taking of the physical inventory?

Test counts will be compared to quantities in the completed inventory listing.

Key controls relating to property, plant and equipment include all of the following except:

Department heads have the authority to determine if an item is a capital or a revenue expenditure.

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

Obtain direct knowledge that the inventory exists.

Which of the following would indicate the need for positive account receivable confirmations?

A population consisting of 10 accounts, all with large balances.

Which of the following is false regarding the audit of accounts receivable?

Confirmation requests should be signed by the auditor.

The auditor has not received a response to his positive confirmation and the client's customer has not made a payment on the account. The auditor most likely would:

Examine shipping documents.

Confirmation of accounts receivable tests the assertion of:

Existence

An auditor should perform alternative procedures to substantiate the existence of accounts receivable when:

No reply to a positive confirmation request is received.

What best describes the auditor's responsibility for the client's physical inventory plan?

The auditor should review the client's plan to determine if instructions are adequate.

As one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client's treasurer has signed the request, it should be mailed by:

The client's treasurer

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Of the following, which combination is it most likely that the auditors will use?

The positive form used for large balances and the negative form for the small balances.

Why does the auditor examine the repair and maintenance account.

To identify expensed items that should have been capitalized.

To determine if all shipments were billed the auditor would:

Trace the shipping document to a valid sales invoice.