Quiz
aud2ch12
Create a free account to finish this quiz
Save your progress and see your final score.
Already have an account? Sign in
Questions in this quiz (47)
1Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving
report.- ATrue
- BFalse
2Limiting access to blank documents, such as purchase orders, is part of the custody duty in the acquisition and expenditure
cycle.- ATrue
- BFalse
3A credit balance in a client's inventory records would suggest failure to record purchases.
- ATrue
- BFalse
4Comparing the results of a physical inventory count to the perpetual inventory records is considered a part of the recording
function.- ATrue
- BFalse
5the general ledger.
- ATrue
- BFalse
6The accounts payable trial balance should not include vendors with nonzero balances.
- ATrue
- BFalse
7The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving
reports is an example that satisfies the "accounting and posting" internal control objective for purchases.- ATrue
- BFalse
8Information gathering about the control structure often begins with an internal control questionnaire.
- ATrue
- BFalse
9The requirement that "perpetual inventory records must be updated as of the date goods are received" is an example of a
control that satisfies the "proper period" internal control objective.- ATrue
- BFalse
10If the auditor selects a sample of open accounts payable and vouches the details to supporting purchase documents, the
auditor is testing the objective of validity.- ATrue
- BFalse
11If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of
validity.- ATrue
- BFalse
12Auditors must place more emphasis on the existence and rights assertions when obtaining evidence about accounts payable.
- ATrue
- BFalse
13An auditor should not be concerned if a cross-reference of vendor addresses with employee addresses reveals that there
are matches.- ATrue
- BFalse
14When auditors trace the test counts they took at the physical inventory count to the final inventory summary, they are
gathering evidence on the completeness assertion.- ATrue
- BFalse
15Risk assessments and the results of any control testing are taken into account in selecting the nature, timing, and extent of
further substantive procedures.- ATrue
- BFalse
16What is the usual source of journal entries to record the purchase of inventory in the general ledger?
- ASales invoices updated with cost data from the inventory records department.
- BPurchase invoices updated with cost data from the inventory records department.
- CBid quotes updated with cost data from the inventory records department.
- DReceiving reports updated with cost data from the accounts payable department.
17Which of the following situations indicates a potential material weakness in internal control over acquisitions and
expenditures?- APurchase orders are not prepared for services that are acquired directly under authorization of department heads.
- BThe person who approves purchases also signs the cheques.
- CUnacceptable goods are not recorded on receiving reports.
- DThe person who signs the cheques also stamps "paid" on the vouchers.
18What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?
- APurchase requisitions and accounts payable entries.
- BReceiving reports and purchase orders.
- CPurchase requisitions and purchases orders.
- DPurchase orders and bid quotes.
19Martinez CA was auditing his client, Marvelous Retail Limited. He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports. This procedure was intended to satisfy which control objective?
- AAuthorization.
- BCompleteness.
- CValidity.
- DAccuracy.
20Which of the following internal control procedures is most likely to be used in order to maintain accurate inventory records?
- APerpetual inventory records are periodically compared with the current cost of individual inventory items.
- BA just-in-time inventory ordering system keeps inventory levels at a desired minimum.
- CRequisitions, receiving reports, and purchase orders are independently matched before payment is approved.
- DPeriodic inventory counts are used to adjust the perpetual inventory records.
21When auditing merchandise inventory at year-end, the auditor performs a purchase cutoff test to obtain evidence that ________.
- Aall goods purchased before year-end are received before the physical inventory count
- Bgoods held on consignment for customers are not included in the inventory balance
- Cthe stock of inventory on hand at year-end is neither pledged nor sold
- Dall goods owned at year-end are included in the inventory balance
22Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.
- Ahas been paid for
- Bis physically present in the warehouse
- Cis owned by the company (legal title has been transferred)
- Drelates to the shipping documents for the merchandise issued in the company's name
23Quantities recorded during the physical count of inventories are greater than the quantities in the perpetual records. This could be the result of a failure to record ________.
- Asales
- Bsales discounts
- Cpurchases
- Dpurchase discounts
24Mary Monitor CA noted that ABC Co. Ltd. received goods prior to year-end and included them in the physical inventory but did not record them in the accounting records. In this case, which of the following adjustments should be made?
- ADebit Purchases, credit Cost of Goods Sold.
- BNo adjustment is necessary.
- CDebit Inventory, credit Accounts Payable.
- DDebit Cost of Goods Sold, credit Accounts Payable.
25"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test
which control objective?- AEnvironment.
- BAccuracy.
- CAccounting and posting.
- DProper period recording.
26To determine whether accounts payable is complete, an auditor performs a test to verify that all merchandise received is
recorded. The population of documents for this test consists of all ________.- Apayment vouchers
- Breceiving reports
- Cpurchase requisitions
- Dvendor's invoices
27The statement that items on the accounts payable register must be supported by a completed voucher package containing a
services purchase order and evidence the service was provided is a specific example of which control objective?- AEnvironment.
- BValidity.
- CCompleteness.
- DAccounting and posting.
28The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory
records is ________.- Aaccuracy
- Bcompleteness
- Cvalidity
- Dclassification
29Which control objective is associated with observing the inventory record-keeping personnel as they perform their work?
- AAuthorization.
- BCompleteness.
- CEnvironment.
- DAccuracy.
30Brown CA was auditing her client Red Manufacturing Company. She selected a sample of inventory item recorded as issues
in the perpetual records and vouched them to production requisitions. Brown's audit procedure was intended to satisfy which control objective?- AValidity.
- BCompleteness.
- CAuthorization.
- DAccuracy.
31In assessing control risk for purchases, an auditor vouches a sample of entries in the accounts payable trial balance to the
supporting documents. Which account assertion would this test of controls most likely support?- ACompleteness.
- BExistence or occurrence.
- CValuation or allocation.
- DPresentation
32A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an
auditor would probably ________.- Ainsist that the client perform physical counts of inventory items several times during the year
- Bapply gross profit tests to ascertain the reasonableness of the physical counts
- Cincrease the extent of tests of controls of the inventory cycle
- Dask the client to schedule the physical inventory count at the end of the year and with a large number of test counts
33Which of the following procedures is an auditor most likely to perform in searching for unrecorded payables?
- AReconcile receiving reports with related cash payments made just prior to year-end.
- BCompare the ratio of accounts payable to purchases with the prior year's ratio.
- CVouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders.
- DCompare cash payments occurring after the balance sheet date with the accounts payable trial balance.
34Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
- AReviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.
- BInvestigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether receiving reports support them.
- CExamining unusual relationships between monthly accounts payable balances and recorded cash
payments. - DReconciling vendors' statements to the file of receiving reports to identify items received just prior to the
balance sheet date.
35When confirming accounts payable, emphasis should be put on what kind of accounts?
- AAccounts with small or zero balances.
- BAll accounts should be equally emphasized.
- CAccounts with large balances.
- DAccounts listed in the accounts payable subsidiary ledger.
36The auditor decided to test accounts payable by sending confirmations to selected vendors. The auditor's best approach in
selecting the vendor accounts to confirm is to __________.- Aselect vendor accounts with large balances
- Bselect vendor accounts at random in order to apply a statistical sampling procedure
- Cselect vendor accounts with small or zero balances
- Dselect vendor accounts that are past due
37When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate
population most likely would be ________.- Avendors with whom the entity has previously done business
- Bamounts recorded in the accounts payable subsidiary ledger
- Cpayees of cheques drawn in the month after the year-end
- Dinvoices filed in the company's open invoice file
38When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items
in the inventory warehouse, the auditor is collecting evidence to support which assertion?- APresentation.
- BValuation.
- CCompleteness.
- DExistence.
39Rather than counting the entire inventory at year-end, a company may make periodic, or cycle counts, of selected inventory
items at various times during the year. Which of the following is necessary if the auditor plans to observe inventories at
interim dates?- AComplete recounts by independent teams are performed.
- BPerpetual inventory records are maintained.
- CUnit cost records are integrated with production accounting records.
- DInventory balances are rarely at low levels.
40Audit procedures used in the observation of a client's physical inventory count are designed primarily to ________.
- Atest and observe the client's physical count of inventory
- Bindependently verify the physical counts recorded by the client
- Cassist the client in taking test counts of year-end inventory
- Ddetermine whether inventory contains obsolete goods
41In "Retread Tires", J. Lock stole money by selling the company's new tires and replacing them with retread tires. The key
weakness in the control system that failed to prevent or detect this scheme to continue was that ________.- ALock often prepared purchase orders
- BLock was the chief accountant
- Cthe president of the company signed cheques without reviewing any supporting documentation
- Dno one noticed the invoices for the retread tires
42In "Amortize the ‘Drum' Slowly", Candid Production overvalued net assets by taking too little amortization. Which of the
following was the lesson for the auditors in this case?- ACheck the client's calculations regardless of how simple they appear.
- BUnderstand special industry accounting before accepting an engagement.
- CMaintain professional skepticism when evaluating a client's accounting estimates.
- DAlways investigate a client's background before accepting an engagement.
43A good environmental control over purchases and payables would be to have ________.
- Athe accounting department independent of the sales department
- Bthe purchasing department independent of the receiving department
- Cthe sales department independent of the shipping department
- Dthe information systems department independent of the accounting department
44The statement that "all purchase orders must be supported by properly approved purchase requisitions" is a specific example
of which general objective?- AValuation.
- BCompleteness.
- CAuthorization.
- DClassification.
45A company's internal control system requires that an approved payables voucher, supported by a purchase order and a
receiving report, accompany every cheque requisition. To determine whether cheques are being issued for unauthorized
expenditures, an auditor is most likely to select items for testing from the population of all ________.- Apurchase orders
- Bcancelled cheques
- Creceiving reports
- Dapproved vouchers
46An auditor wants to perform tests of controls on a client's cash disbursement procedures. If the control procedures leave no
audit trail or documentary evidence, the auditor is most likely to test the procedures by ________.- Aconfirmation and observation
- Bobservation and inquiry
- Canalytical procedures and confirmation
- Dinquiry and analytical procedures
47Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the
equipment (fixed asset) account are not understated?- AAmortization expense.
- BGain on disposal of equipment.
- CAccounts payable.
- DRepairs and maintenance expense.
Information
- Description
- Auditing 2 Quiz on aud2ch12, created by Anniela Luna on 08/03/2015.
- Author
- Anniela Luna
- Language
- English
- Views
- 0
- Tags
- Rating
- No ratings yet Rate this quiz