An unrecorded check issued during the last week of the year would most likely be
discovered by the auditor when the
a) check register for the last month is reviewed.
b) cutoff bank statement is reconciled.
c) bank confirmation is reviewed.
d) search for unrecorded liabilities is performed.
b) cutoff bank statement is reconciled.
To gather evidence regarding the bank's balance in a bank reconciliation, an
auditor would examine all of the following except the
a) cutoff bank statement.
b) general ledger.
c) bank confirmation.
d) year-end bank statement.
b) general ledger.
It is not necessary to send confirmations on accounts that a company represents
as closed during the year to get the bank to confirm zero
balances. (True/False)
False
The company's bank reconciliation is a critical means by which an auditor
completes audit procedures over the cash balance in the financial
statements. (True/False)
True
,Fraud risk factors are events or conditions that indicate which of the following:
a) An incentive or pressure to perpetrate fraud.
b) An opportunity to carry out a fraud.
c) An attitude or rationalization that justifies a fraudulent action.
d) All of these are correct.
d) All of these are correct. (opportunity, rationalization, motive)
The accountants who record cash receipts and credits to customer accounts
should not handle the cash. (True/False)
True
If control risk is assessed very low, the substantive audit procedures on account
balances must be expanded.
(True/False)
False
In the revenue and collection cycle, the order of the activities in the cycle is best
illustrated by
a) Delivering goods, billing customer, credit granting, collection activities.
b) Processing customer orders, granting credit, delivering goods, and billing
customers.
c) Credit granting, billing customers, delivering goods, cash receipts.
d) Customer ordering, delivering goods, credit granting, billing customers.
b) Processing customer orders, granting credit, delivering goods, and billing
customers.
When auditing the revenue and collection cycle, auditors normally select balances
to confirm from the
a) Cash receipts listing.
b) Accounts receivable listing.
c) Sales journal.
d) General ledger.
,b) Accounts receivable listing.
An auditor noted that client sales increased 10 percent for the year. At the same
time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent
to 40 percent and year-end accounts receivable had increased by 8 percent.
Based on this information, the auditor is most likely concerned about
a) Improper sales cutoff.
b) Fictitious sales.
c) Improper credit approvals.
d) Unrecorded costs.
b) Fictitious sales.
An auditor noted that client sales increased 10 percent for the year. At the same
time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent
to 40 percent and year-end accounts receivable had increased by 8 percent.
Based on this information, the auditor interviewed the sales manager, who stated
that the increase in sales without a corresponding increase in cost of goods sold
was due to a price increase enacted by the company during the year. How would
the auditor test the sales manager's representation?
a) Vouch vender invoices to payments made after year-end.
b) Perform additional inquiries with sales personnel.
c) Send confirmations asking customers about unit prices paid for product.
d) Obtain copies of all price lists in use during the year and vouch the prices to
sales invoices.
d) Obtain copies of all price lists in use during the year and vouch the prices to
sales invoices.
A client has a separate sales group for its largest "preferred" customers, a select
group of customers who normally make purchases in excess of $250,000 and
often have accounts receivable balances in excess of $1 million. Which of the
following audit procedures would the auditor most likely perform?
a) Inquire of the sales manager regarding the accounts receivable terms.
b) Prepare a schedule of purchases and payments for these customers.
, c) Send out positive confirmations on a large sample of these customers.
d) Send out negative confirmations on a large sample of these customers.
c) Send out positive confirmations on a large sample of these customers.
Which of the following might be detected by auditors' cutoff review and
examination of sales journal entries for several days prior to the balance sheet
date?
a) Misappropriating merchandise.
b) Lapping year-end accounts receivable.
c) Kiting bank balances.
d) Inflating sales for the year.
d) Inflating sales for the year.
In the audit of accounts receivable, the most important emphasis should be on
the
a) Existence assertion.
b) Completeness assertion.
c) Rights and obligations assertion.
d) Presentation and disclosure assertion.
a) Existence assertion.
1. The entity has legal right to property and equipment acquired during the year.
d. Examine deeds and title insurance certificates.
2. Recorded property and equipment represent assets that actually exist at the
balance-sheet date.
g. Physically examine all major property and equipment additions.
3. Net property and equipment are properly valued at the balance-sheet date.
b. Review the provision for depreciation expense and determine whether
depreciable lives and methods used in the current year are consistent with those
used in the prior year.
discovered by the auditor when the
a) check register for the last month is reviewed.
b) cutoff bank statement is reconciled.
c) bank confirmation is reviewed.
d) search for unrecorded liabilities is performed.
b) cutoff bank statement is reconciled.
To gather evidence regarding the bank's balance in a bank reconciliation, an
auditor would examine all of the following except the
a) cutoff bank statement.
b) general ledger.
c) bank confirmation.
d) year-end bank statement.
b) general ledger.
It is not necessary to send confirmations on accounts that a company represents
as closed during the year to get the bank to confirm zero
balances. (True/False)
False
The company's bank reconciliation is a critical means by which an auditor
completes audit procedures over the cash balance in the financial
statements. (True/False)
True
,Fraud risk factors are events or conditions that indicate which of the following:
a) An incentive or pressure to perpetrate fraud.
b) An opportunity to carry out a fraud.
c) An attitude or rationalization that justifies a fraudulent action.
d) All of these are correct.
d) All of these are correct. (opportunity, rationalization, motive)
The accountants who record cash receipts and credits to customer accounts
should not handle the cash. (True/False)
True
If control risk is assessed very low, the substantive audit procedures on account
balances must be expanded.
(True/False)
False
In the revenue and collection cycle, the order of the activities in the cycle is best
illustrated by
a) Delivering goods, billing customer, credit granting, collection activities.
b) Processing customer orders, granting credit, delivering goods, and billing
customers.
c) Credit granting, billing customers, delivering goods, cash receipts.
d) Customer ordering, delivering goods, credit granting, billing customers.
b) Processing customer orders, granting credit, delivering goods, and billing
customers.
When auditing the revenue and collection cycle, auditors normally select balances
to confirm from the
a) Cash receipts listing.
b) Accounts receivable listing.
c) Sales journal.
d) General ledger.
,b) Accounts receivable listing.
An auditor noted that client sales increased 10 percent for the year. At the same
time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent
to 40 percent and year-end accounts receivable had increased by 8 percent.
Based on this information, the auditor is most likely concerned about
a) Improper sales cutoff.
b) Fictitious sales.
c) Improper credit approvals.
d) Unrecorded costs.
b) Fictitious sales.
An auditor noted that client sales increased 10 percent for the year. At the same
time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent
to 40 percent and year-end accounts receivable had increased by 8 percent.
Based on this information, the auditor interviewed the sales manager, who stated
that the increase in sales without a corresponding increase in cost of goods sold
was due to a price increase enacted by the company during the year. How would
the auditor test the sales manager's representation?
a) Vouch vender invoices to payments made after year-end.
b) Perform additional inquiries with sales personnel.
c) Send confirmations asking customers about unit prices paid for product.
d) Obtain copies of all price lists in use during the year and vouch the prices to
sales invoices.
d) Obtain copies of all price lists in use during the year and vouch the prices to
sales invoices.
A client has a separate sales group for its largest "preferred" customers, a select
group of customers who normally make purchases in excess of $250,000 and
often have accounts receivable balances in excess of $1 million. Which of the
following audit procedures would the auditor most likely perform?
a) Inquire of the sales manager regarding the accounts receivable terms.
b) Prepare a schedule of purchases and payments for these customers.
, c) Send out positive confirmations on a large sample of these customers.
d) Send out negative confirmations on a large sample of these customers.
c) Send out positive confirmations on a large sample of these customers.
Which of the following might be detected by auditors' cutoff review and
examination of sales journal entries for several days prior to the balance sheet
date?
a) Misappropriating merchandise.
b) Lapping year-end accounts receivable.
c) Kiting bank balances.
d) Inflating sales for the year.
d) Inflating sales for the year.
In the audit of accounts receivable, the most important emphasis should be on
the
a) Existence assertion.
b) Completeness assertion.
c) Rights and obligations assertion.
d) Presentation and disclosure assertion.
a) Existence assertion.
1. The entity has legal right to property and equipment acquired during the year.
d. Examine deeds and title insurance certificates.
2. Recorded property and equipment represent assets that actually exist at the
balance-sheet date.
g. Physically examine all major property and equipment additions.
3. Net property and equipment are properly valued at the balance-sheet date.
b. Review the provision for depreciation expense and determine whether
depreciable lives and methods used in the current year are consistent with those
used in the prior year.
