rima123
Sep 27, 2009, 04:06 PM
1. In general, revenue is recongnized when:
a. Goods are shipped
b. It is realized and earned
c. It is recorded in the sales journal
d. It is received in cash.
2. What is channel stuffing?
a. A company records revenue before delivery terms can be arranged.
b. A company records revenue on goods that will be shipped overseas/
c. A company induces distributors to buy substantially more inventory than they can promptly resell.
d. A company alters the terms and conditions of recorded sales to entices customers to accept delivery of goods.
3. At which point in an ordinary sales transcation of a wholesaling business would a lack of specific authorization be of least concern to the auditor?
a. Granting of credit
b. Shipment of goods
c. Determination of discounts
d. Selling of goods for cash
4. An auditor tests an entity’s policy of obtaining credit approval before shipping goods to customers in support of management financial statement assertion of”
a. Valuation and allocation
b. Completeness
c. Existence or occurrence
d. Rights and obligations
5. Tracing shipping documents to prenumbered sales invoices provides evidence that:
A . No duplicate shipments or billings occurred
b. shipments to customers were properly invoiced
c. all goods ordered by customers were shipped
d. all prenumbered sales invoices wre accounted for.
6. For effective internal control, the billing function should be performed by the
a. Accounting department
b. Sales department
c. Shipping department
d. Credit and collection department
7. Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. An auditor will most likely use:
a. The positive form to confirm all balances regardless of size
b. A combination of the two forms, with the positive form used for large balances and the negative form used for the small balances
c. A combination of the two forms, with the positive form used for trade receivable and the negative form for other receivable.
d. The positive form when controls related to receivable are satisfactory, and the negative form when controls related to receivable are unsatisfactory.
8. An aged trial balance of AR is usually used by the auditor to
A. Verify the validity of recorded receivable.
B. Ensure that all account are promptly credited
C. Evaluate the results of compliance tests
D. Evaluate the provision for bad debts
9. The occurrence assertion for accounts payable includes:
a. Determining whether all accounts payable are recorded
b. Determining whether all accounts payable actually are liabilities
c. … Determining whether all accounts payable actually Are recorded in the proper period
d. Determining whether all accounts payable actually Are properly classified in the financial statements.
10. To determine whether AP are complete , an auditor performs a test to verify that all merchandise received is recorded. The population of documents for this test consists of all:
a. Payment vouchers
b. Receiving reports
c. Purchase requisitions
d. Vendor invoices
11. An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all:
a. Merchandise received
b. Vendor invoices
c. Canceled checks
d. Receiving reports
12. Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?
A. Reconcile receiving reports with related cash payments made just prior to year end
B. Contrast the ratio of accounts payable to purchases with the prior year’s ratio
C. Vouch a sample of creditor balance to supporting invoices, receiving reports, and purchase orders.
D. Compare cash payments occurring after the balance sheet date with the AP trial balance
13. The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because:
a. Accrued liabilities usually pertain to service of a continuing nature, while AP are the result of completed transacations
b. Accrued liabitlity balances are less material than AP balances
c. Evidence supporting accrued liabilitites is nonexistent, while evidence supporting accounts payable is readily available.
d. Accrued liabilities at year end will become Accounts Payable during the following year.
14. Which of the following procedures relating to the examination of AP could the auditor delegate entirely to the client’s employees?
a. Test footings in the AP ledger
b. Reconcile unpaid invoices to vendors statements
c. Prepare a schedule of AP
d. Mail confirmation for selected account balances/
15. With respect to small companay’s system of purchasing supplies, an auditor’s primary concern should be to obtain satisfaction that supplies ordered and paid for have been:
a. Requested and approved by authorized individuals who have no incompatible duties
b. Received, counted, and checked to quantities and amounts on purchase orders and invoices
c. Properly recorded as assets and systematically amortized over the estimated useful life of the supplies.
d. Used in the course of business and solely for business purpose during the year under audit.
16. Substantive tests to examine the occurrence assertion for AP include:
a. Testing a sample of vouchers for authorized purchase orders
b. Tracing sample of vouchers to the purchases journal
c. Comparing dates on vouchers to dates in the purchases journal
d. Recomputing the mathematical accuracy of a sample of vendor invoices.]
17. The audit of year-end physical inventories should include steps to verify that the client’s purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical account at year-end was not recorded as a.:
a. Sale in the subsequent period
b. Purchase in the current period
c. Sale in the current period
d. Purchase return in the subsequent period
18. Which of the following auditing procedures would most likely provide assurance about a manufacturing entity’s inventory valuation?
a. Testing the entity’s computation of standard overhead rates
b. Obtaining confirmation of inventories pledged under loan agreement
c. Reviewing shipping and receiving cutoff activities for inventories
d. Tracing test counts to the entity’s inventory listing
19. A client’s physical count of inventories was lower than the inventory quantities shown in its perpetual records. This situation could be the result of the failure to record:
a. Sales
b. Sales returns
c. Purchases
d. Purchase discounts
20. For several years a client’s physical inventory count has been lower than what was shown on the books at the time of the count so that downward adjustments to the inventory account were required. Contributing to the inventory problem could be weaknesses in internal controls that led to the failure to record some:
a. Purchases returned to vendors.
b. Sales returns received
c. Sales discounts allowed
d. Cash purchases.
21. An auditor selected items for test counts while observing a client’s physical inventory. The auditor then traced the test counts to the clients inventory listing. This procedure most likely obtained evidence concerning management’s assertion of
a. Rights and obligations
b. Completeness
c. Existence
d. Valuation
22. An auditor would most likely make inquiries of production and sales personnel concerning possible obsolete or slow –moving inventory to support management’s financial statement assertion of
a. Valuation
b. Rights and obligations
c. Existence
d. Completeness
23. An auditor generally tests physical security controls over inventory by
a./ test counts and cutoff procedures
b. examination and reconciliation
c. inspection and recomputation
d. inquiry and observation\
24. Which of the following is not one of the independent auditor’s objectives regarding the examination of inventories.
a. Verifying that inventory counted is owned by the client
b. Verifying that the client has used proper inventory pricing
c. Ascertaining the physical quantities of inventory on hand
d. Verifying that all inventory owned by the client is on hand at the time of the count/
25. Several years ago Conway, inc. secured a conventional real estate mortgage loan. Which f the following audit procedures would be least likely performed by an auditor examining the mortgage balance?
a. Examine the current year’s canceled checks.
b. Review the mortgage amortization schedule
c. Inspect public records of lien balances
d. Recomputed mortgage interest expense
26. The auditor program for the examination of long term debt should include steps that require the
a. verification of the existence of the bondholders
b. Examination of any bond trust indenture.
c. inspection of the AP subsidiary ledger.
d. investigation of credits to the bond interest income account
27. Reviewing notes paid or renewed after the balance sheet date to determine if there are unrecorded liablitities at year end can be used to test the assertion of:
A. Existence
B. Completeness
C. Rights and obligations
D. Valuation and allocation
28. A substantive strategy is typlically used to audit stockholder’s equity because
a. The number of transactions is small
b. Controls over stockholders equity transactions are typically weak
c. A reliance strategy is most efficient
d. A substantive strategy was likely used in prior years.
29. In connection with the examination of bonds payable, an auditor would expect to find in a trust indenture.
a. The issue date and maturity date of the bond
b. The names of the original subscribers to the bond issue
c. The yield to maturity of the bond issued.
d. The company’s debt to equity ratio at the time of issuance.
30. In auditing long term bonds payable, an auditor would most likely:
a. Perform analytical procedures on the bond premium and discount accounts
b. Examine documentation of assets purchased with bond proceeds for liens.
c. Compare interest expense with the bonds payable amount for reasonableness
d. Confirm the existence of individual bondholders at year end.
31. Which audit procedure is most closely related to managements assertion regarding presentation and disclosure of liablitities?
a. Tracing cash received from a bond issue to the accounting records
b. Confirmation with the bond trustee of amounts owed on a private placement of bonds
c. Reviewing the renewal of a note payable immediately after the balance sheet
d. Inspection of public records of ien balance.s
32. An audit of stockholder equity should ordinarily include:
a. Tracing individual dividend payments to the capital stocks records
b. Reviewing minutes of board meetings to determine the number of shares outstanding
c. Confirming shares outstanding with state officials
d. Determining that dividend declarations comply with debt agreements.
33.
33. In confirming with an outside agent, such as financial institution that the agent is holding investment securities in the client’s name, an auditor most likely gathers evidence in support of management’s financial statement assertions of:
a. Existence
b. Rights and obligations
c. Completeness
d. All of the above
34. An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily to:
a. Verify the cash balance reported on the bank confirmation inquiry form
b. Verify reconciling items on the clients bank reconciliation
c. Detect lapping
d. Detect kitting
35. To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except the:
a. Cutoff bank statement
b. Year-end bank statement
c. Bank confirmation
d. General ledger.
36. A company has additional temporary funds to invest. The board of directors decided to purchase marketable securities and assigned the future purchase and sale decisions to a responsible financial executive. The best person(s) to make periodic reviews of the investment activity should be:
a. An investment committee of the board of director
b. The chief operating officer
c. The corporate controller
d. The treasurer
37. Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?
a. The cashier posts the receipts to the AR subsidiary ledger cards
b. The cashier makes the daily deposit at the local bank
c. The cashier prepares the daily deposit
d. The cashier endorses he checks
38. Which of the following is not one of the auditor primary objective in a an examination of marketable securities.
a. To determine whether securities are authentic.
b. To determine whether securities are the property of the client
c. To determine whether securities are actually exist
d. To determine whether securities are properly classified on the balance sheet.
a. Goods are shipped
b. It is realized and earned
c. It is recorded in the sales journal
d. It is received in cash.
2. What is channel stuffing?
a. A company records revenue before delivery terms can be arranged.
b. A company records revenue on goods that will be shipped overseas/
c. A company induces distributors to buy substantially more inventory than they can promptly resell.
d. A company alters the terms and conditions of recorded sales to entices customers to accept delivery of goods.
3. At which point in an ordinary sales transcation of a wholesaling business would a lack of specific authorization be of least concern to the auditor?
a. Granting of credit
b. Shipment of goods
c. Determination of discounts
d. Selling of goods for cash
4. An auditor tests an entity’s policy of obtaining credit approval before shipping goods to customers in support of management financial statement assertion of”
a. Valuation and allocation
b. Completeness
c. Existence or occurrence
d. Rights and obligations
5. Tracing shipping documents to prenumbered sales invoices provides evidence that:
A . No duplicate shipments or billings occurred
b. shipments to customers were properly invoiced
c. all goods ordered by customers were shipped
d. all prenumbered sales invoices wre accounted for.
6. For effective internal control, the billing function should be performed by the
a. Accounting department
b. Sales department
c. Shipping department
d. Credit and collection department
7. Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. An auditor will most likely use:
a. The positive form to confirm all balances regardless of size
b. A combination of the two forms, with the positive form used for large balances and the negative form used for the small balances
c. A combination of the two forms, with the positive form used for trade receivable and the negative form for other receivable.
d. The positive form when controls related to receivable are satisfactory, and the negative form when controls related to receivable are unsatisfactory.
8. An aged trial balance of AR is usually used by the auditor to
A. Verify the validity of recorded receivable.
B. Ensure that all account are promptly credited
C. Evaluate the results of compliance tests
D. Evaluate the provision for bad debts
9. The occurrence assertion for accounts payable includes:
a. Determining whether all accounts payable are recorded
b. Determining whether all accounts payable actually are liabilities
c. … Determining whether all accounts payable actually Are recorded in the proper period
d. Determining whether all accounts payable actually Are properly classified in the financial statements.
10. To determine whether AP are complete , an auditor performs a test to verify that all merchandise received is recorded. The population of documents for this test consists of all:
a. Payment vouchers
b. Receiving reports
c. Purchase requisitions
d. Vendor invoices
11. An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all:
a. Merchandise received
b. Vendor invoices
c. Canceled checks
d. Receiving reports
12. Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?
A. Reconcile receiving reports with related cash payments made just prior to year end
B. Contrast the ratio of accounts payable to purchases with the prior year’s ratio
C. Vouch a sample of creditor balance to supporting invoices, receiving reports, and purchase orders.
D. Compare cash payments occurring after the balance sheet date with the AP trial balance
13. The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because:
a. Accrued liabilities usually pertain to service of a continuing nature, while AP are the result of completed transacations
b. Accrued liabitlity balances are less material than AP balances
c. Evidence supporting accrued liabilitites is nonexistent, while evidence supporting accounts payable is readily available.
d. Accrued liabilities at year end will become Accounts Payable during the following year.
14. Which of the following procedures relating to the examination of AP could the auditor delegate entirely to the client’s employees?
a. Test footings in the AP ledger
b. Reconcile unpaid invoices to vendors statements
c. Prepare a schedule of AP
d. Mail confirmation for selected account balances/
15. With respect to small companay’s system of purchasing supplies, an auditor’s primary concern should be to obtain satisfaction that supplies ordered and paid for have been:
a. Requested and approved by authorized individuals who have no incompatible duties
b. Received, counted, and checked to quantities and amounts on purchase orders and invoices
c. Properly recorded as assets and systematically amortized over the estimated useful life of the supplies.
d. Used in the course of business and solely for business purpose during the year under audit.
16. Substantive tests to examine the occurrence assertion for AP include:
a. Testing a sample of vouchers for authorized purchase orders
b. Tracing sample of vouchers to the purchases journal
c. Comparing dates on vouchers to dates in the purchases journal
d. Recomputing the mathematical accuracy of a sample of vendor invoices.]
17. The audit of year-end physical inventories should include steps to verify that the client’s purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical account at year-end was not recorded as a.:
a. Sale in the subsequent period
b. Purchase in the current period
c. Sale in the current period
d. Purchase return in the subsequent period
18. Which of the following auditing procedures would most likely provide assurance about a manufacturing entity’s inventory valuation?
a. Testing the entity’s computation of standard overhead rates
b. Obtaining confirmation of inventories pledged under loan agreement
c. Reviewing shipping and receiving cutoff activities for inventories
d. Tracing test counts to the entity’s inventory listing
19. A client’s physical count of inventories was lower than the inventory quantities shown in its perpetual records. This situation could be the result of the failure to record:
a. Sales
b. Sales returns
c. Purchases
d. Purchase discounts
20. For several years a client’s physical inventory count has been lower than what was shown on the books at the time of the count so that downward adjustments to the inventory account were required. Contributing to the inventory problem could be weaknesses in internal controls that led to the failure to record some:
a. Purchases returned to vendors.
b. Sales returns received
c. Sales discounts allowed
d. Cash purchases.
21. An auditor selected items for test counts while observing a client’s physical inventory. The auditor then traced the test counts to the clients inventory listing. This procedure most likely obtained evidence concerning management’s assertion of
a. Rights and obligations
b. Completeness
c. Existence
d. Valuation
22. An auditor would most likely make inquiries of production and sales personnel concerning possible obsolete or slow –moving inventory to support management’s financial statement assertion of
a. Valuation
b. Rights and obligations
c. Existence
d. Completeness
23. An auditor generally tests physical security controls over inventory by
a./ test counts and cutoff procedures
b. examination and reconciliation
c. inspection and recomputation
d. inquiry and observation\
24. Which of the following is not one of the independent auditor’s objectives regarding the examination of inventories.
a. Verifying that inventory counted is owned by the client
b. Verifying that the client has used proper inventory pricing
c. Ascertaining the physical quantities of inventory on hand
d. Verifying that all inventory owned by the client is on hand at the time of the count/
25. Several years ago Conway, inc. secured a conventional real estate mortgage loan. Which f the following audit procedures would be least likely performed by an auditor examining the mortgage balance?
a. Examine the current year’s canceled checks.
b. Review the mortgage amortization schedule
c. Inspect public records of lien balances
d. Recomputed mortgage interest expense
26. The auditor program for the examination of long term debt should include steps that require the
a. verification of the existence of the bondholders
b. Examination of any bond trust indenture.
c. inspection of the AP subsidiary ledger.
d. investigation of credits to the bond interest income account
27. Reviewing notes paid or renewed after the balance sheet date to determine if there are unrecorded liablitities at year end can be used to test the assertion of:
A. Existence
B. Completeness
C. Rights and obligations
D. Valuation and allocation
28. A substantive strategy is typlically used to audit stockholder’s equity because
a. The number of transactions is small
b. Controls over stockholders equity transactions are typically weak
c. A reliance strategy is most efficient
d. A substantive strategy was likely used in prior years.
29. In connection with the examination of bonds payable, an auditor would expect to find in a trust indenture.
a. The issue date and maturity date of the bond
b. The names of the original subscribers to the bond issue
c. The yield to maturity of the bond issued.
d. The company’s debt to equity ratio at the time of issuance.
30. In auditing long term bonds payable, an auditor would most likely:
a. Perform analytical procedures on the bond premium and discount accounts
b. Examine documentation of assets purchased with bond proceeds for liens.
c. Compare interest expense with the bonds payable amount for reasonableness
d. Confirm the existence of individual bondholders at year end.
31. Which audit procedure is most closely related to managements assertion regarding presentation and disclosure of liablitities?
a. Tracing cash received from a bond issue to the accounting records
b. Confirmation with the bond trustee of amounts owed on a private placement of bonds
c. Reviewing the renewal of a note payable immediately after the balance sheet
d. Inspection of public records of ien balance.s
32. An audit of stockholder equity should ordinarily include:
a. Tracing individual dividend payments to the capital stocks records
b. Reviewing minutes of board meetings to determine the number of shares outstanding
c. Confirming shares outstanding with state officials
d. Determining that dividend declarations comply with debt agreements.
33.
33. In confirming with an outside agent, such as financial institution that the agent is holding investment securities in the client’s name, an auditor most likely gathers evidence in support of management’s financial statement assertions of:
a. Existence
b. Rights and obligations
c. Completeness
d. All of the above
34. An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily to:
a. Verify the cash balance reported on the bank confirmation inquiry form
b. Verify reconciling items on the clients bank reconciliation
c. Detect lapping
d. Detect kitting
35. To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except the:
a. Cutoff bank statement
b. Year-end bank statement
c. Bank confirmation
d. General ledger.
36. A company has additional temporary funds to invest. The board of directors decided to purchase marketable securities and assigned the future purchase and sale decisions to a responsible financial executive. The best person(s) to make periodic reviews of the investment activity should be:
a. An investment committee of the board of director
b. The chief operating officer
c. The corporate controller
d. The treasurer
37. Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?
a. The cashier posts the receipts to the AR subsidiary ledger cards
b. The cashier makes the daily deposit at the local bank
c. The cashier prepares the daily deposit
d. The cashier endorses he checks
38. Which of the following is not one of the auditor primary objective in a an examination of marketable securities.
a. To determine whether securities are authentic.
b. To determine whether securities are the property of the client
c. To determine whether securities are actually exist
d. To determine whether securities are properly classified on the balance sheet.