audit exam 2 QuizCircle the letter of the Answer that corresponds to the displayed Question.Top of Form1.An auditor selects items from the client's inventory listing and identifies the items in the warehouse. This procedure is most likely related to:A. provides strong evidence to existence and quality of inventoryB. TrueC. designed to allow the more experienced team members to share insights and exchange ideas about how and where the entity's financial statements might be susceptible to material misstatement due to fraud, to discuss how to design proceduresD. existenceBottom of FormTop of Form2.An auditor's engagement letter most likely will includeA. management's acknowledgement of its responsibility for maintaining effective internal controlB. HR policies and practicesC. practice of recording transfer as a deposit in one accounting period and as a disbursement in a subsequent accounting period causing total cash to be inflatedD. refers to the process of assigning transactions occurring near the balance sheet date to the proper accounting periodBottom of FormTop of Form3.What is least likely to be required on an audit?A. competence and objectivityB. make a legal determination of whether fraud has occurredC. determine the adequacy of internal control over cashD. Overstatement because net income would be overstated alsoBottom of FormTop of Form4.General objective of observe the client's physical inventoryA. provides evidence to the existence assertion, establishes valuation, provide evidence about cut off of purchases and salesB. accounts receivable subsidiary ledgerC. understating the sales journalD. custody of work in process and finished goods is properly maintainedBottom of FormTop of Form5.Most of the independent auditor's work in formulating an opinion on financial statements consists ofA. completenessB. establishes existence, rights, and valuation, and provides evidence of cutoffC. obtaining and examining evidenceD. the inference drawn from receiving no reply may not be correct

Bottom of FormTop of Form6.What is not an advantage of establishing an enterprise risk mgmt system within an organization?A. significant deficiencies and material weaknesses to mgmt and those charged with governanceB. nature of services offered, qualifications of firm's personnel, anticipated feesC. The controller should have control of the accounting functions and the treasurer should ahve control of cash receipt functions.D. eliminates all risksBottom of FormTop of Form7.purpose of bank transfer scheduleA. to trace bank transfers to disclose overstatement of cash balances resulting from kitingB. competence and objectivityC. Are prelistings made of all cash receipts?D. segregation of incompatible duties across several peopleBottom of FormTop of Form8.What is an audit confirmation request?A. material error, material fraud, and certain illegal actsB. existenceC. confirm the number of shares owned that are held by an independent custodianD. written communication received by the auditors directly from a party outside the client organization, affirms the existence of, and rights to, an amount recorded in the client's accounting recordsBottom of FormTop of Form9.What would the auditors most likely perform to test controls relating to management's assertion about the completeness of cash receipts for cash sales a retail outlet?A. cutoff bank statement, year end bank statement, bank confirmationB. inspect the shipping records documenting the merchandise sold to debtorsC. preventativeD. observe the consistency of the employees' use of cash registers and tapesBottom of FormTop of Form10.Upon receipt of customer's checks in the mail room,a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:A. designed to disclose kiting whereby a check drawn on one bank is not recorded as a disbursement as of the balance sheet date, although the deposit of the check in another bank is properly recordedB. designed to disclose kiting whereby a check drawn on one bank is not recorded as a disbursement as of the balance sheet date, although the deposit of the check in another bank is properly recordedC. Review amounts of accounts which have been written off as uncollectible prior to year end.D. accounts receivable bookkeeper to update the subsidiary accounts receivable recordsBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.search for unrecorded liabilitiesA. prior to the balance sheet date-interim period the auditor shouldB. What procedure is least likely to be performed before the balance sheet date?C. audit objective of confirming accounts receivable and notes receivable by direct communication with debtorsD. a four column bank reconciliation will generally assist an auditor in detecting:Bottom of FormTop of Form12.search for significant deficiencies in the operation of internal controlA. In obtaining an understanding of a nonissuer's internal control in a financial statement audit, an auditor is not obligated to:B. What is most likely to be presumed to represent a fraud risk on an audit?C. Proper separation of duties reduces the opportunities for persons to be in positions to both:D. Audit evidence concerning the separation of duties ordinarily is best obtained by:Bottom of FormTop of Form13.credit managerA. B&M auditors have been accepted as the auditors of 3W. What are B&M's responsibilities with regard to contacting 3W's predecessor auditors?B. audit committee natureC. functions of controller:D. What employee should report to the CFO?Bottom of FormTop of Form14.members of the board of directors who are not officers or employeesA. COSOB. The best control to prevent lapping isC. The audit committee of a company must be made ofD. What is least likely to be considered an inherent risk relating to receivables and revenue?Bottom of FormTop of Form15.access to securities requires the signatures and presence of 2 designated officialsA. the objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded and that:B. It is important for the auditor to consider the competence of the audit client's employees because their competence bears directly and importantly upon the:C. What best describes what is meant by the term fraud risk factor?D. What procedure is most likely to give the greatest assurance that securities held as investments are safeguarded?Bottom of FormTop of Form16.practice of recording transfer as a deposit in one accounting period and as a disbursement in a subsequent accounting period causing total cash to be inflatedA. Tests of controls do not addressB. Major controls over cashC. pad a cash position:D. Materiality can best be described asBottom of FormTop of Form17.the auditor must adequately plan the work and must properly supervise any assistantsA. If the objective of an auditor's test of details is to detect a possible understatement of sales, the auditor most likely would trace transactions from the:B. The best control to prevent lapping isC. Foreign Corrupt Practices Act of 1977D. PCAOB first standard of field workBottom of FormTop of Form18.persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, seller's price is fixed or determinable, collectibility is reasonably assuredA. What condition most likely would pose the greatest risk in accepting a new audit engagementB. major controls over accounts receivableC. What is the criteria according to the SEC Staff Accounting Bulletin No. 104 that must be met for revenue recognition?D. What circumstance would permit an independent auditor to accept an engagement after the close of the fiscal year?Bottom of FormTop of Form19.theft of cash register salesA. What is an example of misappropriation of of assets relating to sales?B. What characteristics should an audit confirmation response possess if a CPA firm is to consider it to be valid evidence?C. tests of controlsD. Checks to replenish fund should be drawn payable toBottom of FormTop of Form20.bank or petty cash custodianA. negative confirmation requestB. Checks to replenish fund should be drawn payable toC. What would provide the most assurance concerning valuation of A/R?D. What should not appear in an internal control questionnaire relating to cash disbursements?Bottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.An auditor has accounted for a sequence of inventory tags and is now tracing information on a representative number of tags to the inventory summary sheets. Which assertion does this procedure relate to most directly?

Top of Form1.auditor's responsibility for detectionA. perpetual inventory systemB. The controller should have control of the accounting functions and the treasurer should ahve control of cash receipt functions.C. cannot obtain absolute assurance but only reasonable assurance that material misstatements in the financial statements will be detectedD. report the finding to the appropriate representative of the client with the recommendation that it be pursued to a conclusionBottom of FormTop of Form2.To gather evidence regarding the balance per bank reconciliation the auditors would least likely examine:A. the general ledgerB. material misstatements may exist in the financial statementsC. overriding controls or directing employees to carry out fraudD. existence, completeness, and valuationBottom of FormTop of Form3.objectives of COSOA. operating effectivenessB. reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws and regulationsC. determine the adequacy of internal control over cashD. completenessBottom of FormTop of Form4.The primary purpose of procedures performed to obtain an understanding of internal control in a financial statement audit is to provide an auditor with:A. to determine that transactions were properly authorized and recorded and are adequately disclosed in the financial statementsB. knowledge necessary to plan the auditC. perpetual inventory systemD. obtaining an understanding of internal control, performing tests of controls, performing substantive testsBottom of FormTop of Form5.auditor's responsibility for detecting fraudA. observation and inquiryB. client's business risk and CPA's business riskC. handling cash and maintaining cash records, opening incoming mail, credit and collection, reviewing and mailing customer statements, approval of adjustment credits and write off of uncollectible accountsD. to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraudBottom of FormTop of Form6.What is required documentation in an audit in accordance with auditing standards?A. Are prelistings made of all cash receipts?B. provided for internal control provisions that require all publicly held companies to maintain an adequate system of internal control. violations of act can result in fines up 1 mill and imprisonment of members of mgmtC. An audit plan documenting the procedures to be used to reduce audit riskD. several overpayments are made for goods received from a supplierBottom of FormTop of Form7.an auditor selected items for test counts while observing a client's physical inventory. The auditor then traced the test counts to the client's inventory listing. This procedure most likely obtained evidence of:A. operating effectivenessB. the auditor's responsibility for ensuring that those charged with governance are aware of any significant deficiencies or material weaknesses in internal control that come to the auditor's attentionC. completenessD. human errorsBottom of FormTop of Form8.tests of controlsA. internal control is strongB. designed to proved the auditors with assurance that prescribed internal control policies and procedures are in use and operating effectivelyC. salesD. may be answered without adequate thought give to question, questions may not fit client's internal control structureBottom of FormTop of Form9.A local gas station has one clerk that accepts cash payments for gas and rings them up on the cash register. What would be the best control to provide assurance that the cashier isn't keeping some of the cash?A. search for unrecorded liabilitiesB. engagement letterC. Review amounts of accounts which have been written off as uncollectible prior to year end.D. Compare cash register totals to a total that is automatically generated by each gas pumpBottom of FormTop of Form10.prior to the balance sheet date-interim period the auditor shouldA. valuationB. Responsibility for the performance of each duty must be fixedC. auditors were not appointed by the client until after the physical inventory had been taken.D. test of internal controls, audit of assets and related accounts, record liabilitiesBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.all inventory owned by the client is on hand at the time of the countA. In an audit of inventories, an auditor is least likely to verify that:B. substantive proceduresC. negative confirmation requestD. purpose of bank transfer scheduleBottom of FormTop of Form12.KitingA. A CPA's understanding of internal control in a financial statement audit of a nonissuer:B. The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist when in fact such misstatement does exist is referred to as:C. Jones embezzeled $50,000 from his company's account in Bank A. At year end he hid the shortage by making a deposit on 12/31 in Bank A, drawn on Bank B. He has not recorded the transaction. This is an example of:D. an auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and:Bottom of FormTop of Form13.detection riskA. What factor most likely would cause an auditor to decline a new audit engagement?B. An auditor is most likely to inspect loan agreements under which an entity's inventories are pledged to support management's financial statement assertions about:C. Functions of treasurer:D. Adequate planning and design of an audit is necessary for an auditor to restrict which type of audit risk?Bottom of FormTop of Form14.cutoff bank statement, year end bank statement, bank confirmationA. An auditor is most likely to learn of slow moving inventory throughB. What circumstance would an auditor most likely consider a risk factor relating to misstatements arising from fraudulent financial reporting?C. To gather evidence regarding the balance per bank reconciliation, an auditor could examine all of the following:D. type of control for monthly reconciliation of bank accountsBottom of FormTop of Form15.preparation is time consuming, weakness in structure is not always obviousA. disadvantages of flowchartB. What is the best protection for a company that wishes to prevent the lapping of trade accounts receivable?C. What are the 3 ways in which the auditors may respond to fraud risks in an audit?D. A proper separation of duties requires that an individual:Bottom of FormTop of Form16.includes accounting systems and methods and records to record, process, summarize, and report entity's transactionsA. Adequate planning and design of an audit is necessary for an auditor to restrict which type of audit risk?B. objective of tracing all bank transfers during the last week of the audit year and the first week of the following yearC. general objective: vouch selected purchases of securities to broker's advicesD. the accounting info system characteristicsBottom of FormTop of Form17.used to determine the effectiveness of IC procedures are controls actually working properlyA. type of control for management review of budget/actual informationB. tests of controlsC. the accounting info system includesD. fraudulent financial reportingBottom of FormTop of Form18.designed to detect material misstatement in specific financial statement amountsA. In obtaining an understanding of a nonissuer's internal control in a financial statement audit, an auditor is not obligated to:B. An auditor is most likely to verify the interest earned on bond investments byC. substantive proceduresD. Because of the risk of material misstatements due to fraud, an audit of financial statements in accordance with auditing standards should be planned and performed with an attitude ofBottom of FormTop of Form19.Have customers send payments directly to the company's depository bankA. What is the best protection for a company that wishes to prevent the lapping of trade accounts receivable?B. To provide assurance that each voucher is submitted and paid only once, the auditors most likely would examine a sample of paid vouchers and determine whether each voucher is:C. Assertion and procedure for cost of inventories is properly calculatedD. If internal control is well designed, the same employee may be permitted toBottom of FormTop of Form20.stores or warehouseA. misappropriation of assetsB. An auditor tests an entity's policy of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of:C. What circumstance would an auditor most likely consider a risk factor relating to misstatements arising from fraudulent financial reporting?D. To adequately provide for the segregation of duties, purchase requisitions should be initiated by what department?Bottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.An auditor selects items from the client's inventory listing and identifies the items in the warehouse. This procedure is most likely related to:

Top of Form1.direction of testingA. verify existence and completenessB. the company trades or holds a large number of securitiesC. prenumbered, voided should be defaced, protection machine should be used to print amount, signers should be authorized by BOD, documents supporting should be perforatedD. Are financial reporting operations controlled by and limited to one location?Bottom of FormTop of Form2.primary objective of using a standard confirmation form to confirm account balance informationA. consider the organizational level to which the internal auditors report the results of their workB. verify year end cash and liability balance informationC. obtaining and examining evidenceD. search for unrecorded liabilitiesBottom of FormTop of Form3.When documenting the understanding of a client's internal control, the independent auditor sometimes uses a systems flowchart, which can best be described as:A. designed to detect material misstatements in the financial statements, consists of analytical procedures and detail tests of transactionsB. to eliminate misunderstandings between the CPA firm and the clientC. management is interested in maintaining the entity's earnings trend by using aggressive accounting practicesD. symbolic representation of a system or series of sequential processesBottom of FormTop of Form4.What is most likely to be an example of fraudulent financial reporting relating to sales?A. establish existence of assets, does not establish rightsB. recording sales when the customer is likely to return the goodsC. detailed list of proceduresD. reperformanceBottom of FormTop of Form5.The auditors are concerned about source documents that reflect valid transactions that have not been recorded in the journals. What procedure would be most effective?A. Vouch from journals to source documentsB. a letter from the auditors to company mgmt that specifies the responsibilities of both the company and the auditors in completing the audit and the timing for its completionC. The billing dept supervisor matches prenumbered shipping documents with entries in the sales journalD. Responsibility for the performance of each duty must be fixedBottom of FormTop of Form6.Sound internal control procedures dictate that defective merchandise returned by customers should be presented initially to theA. valuationB. receiving clerkC. integrity and ethical values, management philosophy, active participation by BOD and audit committee, assignment of authority and responsibility, HR policies and proceduresD. human errorsBottom of FormTop of Form7.If an independent audit leading to an opinion on financial statements causes the auditor to believe that a material misstatement due to fraud exists they should firstA. audit procedures that are effective for detecting an error may be ineffective for detecting fraud that is concealed through collusionB. control environmentC. existenceD. consider the implications for other aspects of the audit and discuss the matter with appropriate levels of mgmtBottom of FormTop of Form8.To test the effectiveness of controls an auditor ordinarily selects tests from a variety of techniques including:A. reperformanceB. inflated sales for the yearC. auditors were not appointed by the client until after the physical inventory had been taken.D. bill of ladingBottom of FormTop of Form9.What would most likely reduce the risk of diversion of customer receipts by a client's employees?A. used to assess the quality of internal control over timeB. tour the client's facilities and review the general recordsC. is responsible for mailing checksD. a bank lock box systemBottom of FormTop of Form10.What is confirmed on the standard form used for cash balances at financial institutions?A. intentional misstatements, omissions of amoutns or disclosures in the financial statementsB. test controls for all significant accountsC. loans payableD. a combination of the 2 forms. positive used for large balances and negative used for small balancesBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.AvoidanceA. Management of Warren company has decided to respond to a particular risk by hedging the risk with future contracts. This is an example of:B. the accounting info system includesC. disadvantages of questionnaireD. What is most likely to be an example of fraudulent financial reporting relating to sales?Bottom of FormTop of Form12.knowledge necessary to determine the nature, timing, and extent of further audit proceduresA. a primary objective of procedures performed to obtain an understanding of internal control is to provide the auditors withB. When outside firms of nonaccountants specializing in the taking of PI are used to count, list , price and subsequently compute the total $ amt of inventory on hand, the auditor will:C. An auditor is most likely to inspect loan agreements under which an entity's inventories are pledged to support management's financial statement assertions about:D. auditor's responsibility for detectionBottom of FormTop of Form13.request the client to schedule the physical inventory client to schedule the physical inventory count at the end of the yearA. a client maintains perpetual inventory records in both quantities and dollars. If the assessed risk of material misstatement is high, an auditor will probably:B. In assessing whether to accept a client for an audit engagement, a CPA should consider theC. Purchase cutoff procedures should be designed to test whether all inventory:D. In obtaining an understanding of a nonissuer's internal control in a financial statement audit, an auditor is not obligated to:Bottom of FormTop of Form14.The CPA firm drafts the engagement letter which is signed by both representatives of the CPA firm and client prior to beginning the engagementA. It is important for the auditor to consider the competence of the audit client's employees because their competence bears directly and importantly upon the:B. What is an audit confirmation request?C. Who prepares engagement letter and when?D. assessment based on expectation that controls are absent or unlikely to be effective or evaluating effectiveness is not efficient results inBottom of FormTop of Form15.rights and obligations and existenceA. type of control for monthly reconciliation of bank accountsB. 2 assertions for which confirmation of accounts provides primary evidence are:C. What should be included as part of inventory costs of a manufacturing company?D. The primary objective of tests of details of transactions performed as substantive procedures is to:Bottom of FormTop of Form16.valuationA. Under what circumstances is observation of physical inventory impossible?B. employees other than the a/r personnel should perform the following functions:C. An auditor would most likely analyze inventory turnover rates to obtain evidence about:D. Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents to related sales invoices?Bottom of FormTop of Form17.age, turnoverA. after year end to audit report date the auditor shouldB. lapping increases _______ and decreases ________C. primary objective of preparing a four column proof of cashD. objectivityBottom of FormTop of Form18.an unrecorded deposit made at the beginning of the month, the amount was withdrawn late in the month again with no book entryA. What are the purposes of the consideration of IC required by GAAS?B. a four column bank reconciliation will generally assist an auditor in detecting:C. To determine that all sales have been recorded, the auditors would select a sample of transactions from the:D. controls over financial reportingBottom of FormTop of Form19.valuationA. In testing controls over cash disbursements, the auditors most likely would determine that the person who signs checks also:B. tracing from source documents to journals most directly addresses which financial statement assertion?C. an auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and:D. If internal control is well designed, the same employee may be permitted toBottom of FormTop of Form20.a bank transfer scheduleA. the most practical and effective audit procedure for detecting lapping isB. What procedure or document is most effective for detecting kiting?C. In obtaining an understanding of a nonissuer's internal control in a financial statement audit, an auditor is not obligated to:D. methods of documentationBottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.type of control for supervisory approval of time cards

Top of Form1.With respect to the auditor's planning of a year-end audit, what statement is always true?A. to trace bank transfers to disclose overstatement of cash balances resulting from kitingB. integrity and ethical valuesC. observing the employees as they apply specific controlsD. It is an acceptable practice to carry out part of the audit at interim datesBottom of FormTop of Form2.type of control for monthly reconciliation of bank accountsA. the auditor's responsibility for ensuring that those charged with governance are aware of any significant deficiencies or material weaknesses in internal control that come to the auditor's attentionB. want the client to schedule the physical inventory count at the end of the yearC. rights and obligations; select a sample of recorded items and examine supporting vendors invoices and contractsD. detectiveBottom of FormTop of Form3.As part of the understanding internal control in planning an audit of a nonissuer, an auditor does not need to:A. It is an acceptable practice to carry out part of the audit at interim datesB. the auditor's responsibility for ensuring that those charged with governance are aware of any significant deficiencies or material weaknesses in internal control that come to the auditor's attentionC. obtain knowledge about the operating effectiveness of internal controlD. concealment of cash shortage by delaying the proper recording of payments to a customers accountBottom of FormTop of Form4.What would least likely be considered an objective of internal control?A. procedures to help ensure that mgmt directives are carried outB. detecting mgmt fraudC. Observe merchandise and raw materials during the client's physical inventory takingD. valuationBottom of FormTop of Form5.what is least likely to be a test of controlsA. exam for proper cut off of revenues and expenses and complete testing of internal controls and assetsB. observation of confirmationsC. preparing bank reconciliationsD. Review amounts of accounts which have been written off as uncollectible prior to year end.Bottom of FormTop of Form6.Assertion and procedure for recorded inventory quantities include all products on handA. detectiveB. verify year end cash and liability balance informationC. may be answered without adequate thought give to question, questions may not fit client's internal control structureD. completeness and cutoff; select a sample of items during the physical inventory count and determine that they have been included on count sheetsBottom of FormTop of Form7.General objective of observe the client's physical inventoryA. provides evidence to the existence assertion, establishes valuation, provide evidence about cut off of purchases and salesB. search for unrecorded liabilitiesC. because the danger that fictitious inventory tags might be created by dishonest client personnel after the auditors have completed their observation of the physical inventoryD. conceals cash shortage in bank, transfer brings account into agreement with booksBottom of FormTop of Form8.primary objective of obtaining bank cutoff statementsA. prior year checks listed in the cutoff statement to the year end outstanding checklistB. verify reconciling items on the year end bank reconciliationC. petty cash requirementsD. prenumbered, voided should be defaced, protection machine should be used to print amount, signers should be authorized by BOD, documents supporting should be perforatedBottom of FormTop of Form9.What is a step in an auditor's decision to rely on the internal controls?A. substitutionB. refers to the process of assigning transactions occurring near the balance sheet date to the proper accounting periodC. to determine whether the financial statements fairly reflect the financial position, operating results, and cash flows of the businessD. identify specific controls that are likely to detect or prevent material misstatements and perform tests of controlsBottom of FormTop of Form10.There is a presumption that auditors will confirm A/R unless the auditors assessment of material misstatement is low andA. accounts receivable are immaterial, or the use of confirmations would be ineffectiveB. more efficient mannerC. confirm a/r on a surprise basis using positive confirmation, compare customer remittance advices, verify propriety of noncash credits to AR, perform surprise inspection of deposits, foot cash receipts journal, reconcile balance per customerD. its quality has a major effect on the nature, timing, and extent and nature of the audit procedures necessary to complete the audit.Bottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.integrity and ethical values, management philosophy, active participation by BOD and audit committee, assignment of authority and responsibility, HR policies and proceduresA. lappingB. Internal control can provide only reasonable assurance of achieving entity objectives. One factor limiting the likelihood of achieving those objectives in a small entity is that:C. objectivityD. the control environment includesBottom of FormTop of Form12.more evidence is needed to evaluate effectiveness of design and operations of IC, auditor conducts tests of controls to evaluate effectiveness of controls, then evaluates results and reassess control risks, then develops substantive testsA. Use analytical procedures to calculate theB. Foreign Corrupt Practices Act of 1977C. assessment based on expectations that control procedures have been designed to detect or prevent material misstatements, assessed level at which reliance may be tentatively placed on IC as a result:D. Jones embezzeled $50,000 from his company's account in Bank A. At year end he hid the shortage by making a deposit on 12/31 in Bank A, drawn on Bank B. He has not recorded the transaction. This is an example of:Bottom of FormTop of Form13.authorization from company officialA. Assertion and procedure for the entity has legal title to inventoriesB. the objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded and that:C. writeoffs of uncollectible notes or accounts receivable should require prior:D. objectives of observing taking of inventoryBottom of FormTop of Form14.HR policies and practicesA. kitingB. What is considered an environmental control factor?C. risk assessment includesD. general objective of locate on the client's premises a sample of equipment items listed in the subsidiary plan and equipment ledgerBottom of FormTop of Form15.the detailed plan of audit procedures to be performed in the course of the auditA. The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist when in fact such misstatement does exist is referred to as:B. an auditor is required to establish an understanding with the client regarding the services to be performed for each engagement. This understanding generally includes:C. An audit program isD. When perpetual inventory records are maintained, is it necessary for a physical inventory to be taken at the balance sheet date?Bottom of FormTop of Form16.report the finding to the appropriate representative of the client with the recommendation that it be pursued to a conclusionA. An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete inventory to address:B. Moor, CPA, discovers a likely fraud during an audit but concludes that its effects, if any, could cont be so material as to affect the opinion. Moor should:C. control activities includesD. type of control for dual signatures for checksBottom of FormTop of Form17.detectiveA. type of control for annual physical inventoryB. risk assessment includesC. When perpetual inventory records are maintained, is it necessary for a physical inventory to be taken at the balance sheet date?D. monitoring includesBottom of FormTop of Form18.accounts receivable bookkeeper to update the subsidiary accounts receivable recordsA. components of internal controlB. The results of the consideration of internal control are least likely to affect the auditors' decision pertaining to:C. Who prepares engagement letter and when?D. Upon receipt of customer's checks in the mail room,a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:Bottom of FormTop of Form19.reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws and regulationsA. What is the control that is most likely to prevent the concealment of a cash shortage resulting from the improper write off of a trade account receivableB. objectives of COSOC. What statement describes why a properly planned and performed audit may not detect a material misstatement due to fraud?D. type of control for annual physical inventoryBottom of FormTop of Form20.petty cash requirementsA. type of control for monthly reconciliation of bank accountsB. What employee should report to the CFO?C. an auditor ordinarily should request to review the predecessor's audit documentation relating toD. Imprest system should be used forBottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.When the auditors discover an overstatement of accounts payable, they would most likely also expect to find an overstatement of:Bottom of Form

Top of Form1.If the objective of an auditor's test of details is to detect a possible understatement of sales, the auditor most likely would trace transactions from the:A. mgmt review of weekly performance reportsB. Verify the company owns the security, check the accuracy of the accrual, and require no adjustmentC. shipping documents to the sales invoicesD. over recorded sales due to a lack of control over the sales entry functionBottom of FormTop of Form2.What is most likely to be an overall response to fraud risks identified in an audit?A. completeness and cutoff; select a sample of items during the physical inventory count and determine that they have been included on count sheetsB. integrity of management, disagreements of predecessor auditor with management as to acct principles, auditing procedures, and reason for changing auditorsC. recording of fictitious contracts with customers and recording revenue before a contract is executedD. Use less predictable audit proceduresBottom of FormTop of Form3.In assessing whether to accept a client for an audit engagement, a CPA should consider theA. reperformanceB. accounts receivable bookkeeper to update the subsidiary accounts receivable recordsC. completenessD. client's business risk and CPA's business riskBottom of FormTop of Form4.Internal control is a function of management, and effective control is based upon the concept of charge and discharge of responsibility and duty. What is one of the overriding principles of internal control?A. intentional misstatements, omissions of amoutns or disclosures in the financial statementsB. Responsibility for the performance of each duty must be fixedC. Vouch from journals to source documentsD. completenessBottom of FormTop of Form5.When the auditors are performing a first time internal control audit in accordance with the SOX act and PCAOB standards they must:A. human errorsB. search for unrecorded liabilitiesC. test controls for all significant accountsD. aimed at avoiding the occurrence of misstatements in financial statementsBottom of FormTop of Form6.auditor's responsibility for detecting fraudA. send additional requests with return receipt requested, telephone to ascertain the balance or the reason for failure to respond, examine the duplicate invoices, shipping records, purchase orders, and any payments made subsequent bs dateB. a letter from the auditors to company mgmt that specifies the responsibilities of both the company and the auditors in completing the audit and the timing for its completionC. facts that might bear on the integrity of mgmtD. to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraudBottom of FormTop of Form7.component for management surveys customers about their satisfaction with the company's serviceA. checks dated prior to year end to the outstanding checks listed on the year end bank reconciliationB. monitoringC. suggest the auditor obtain the client's permission to discuss the reasonsD. want the client to schedule the physical inventory count at the end of the yearBottom of FormTop of Form8.type of control for segregation of duties over purchasingA. preventativeB. used to determine the effectiveness of IC procedures are controls actually working properlyC. orders from customers should be recorded and reviewed by as sales order dept, numerically controlled sales orders should be prepared for all orders received, orders should be approved by credit deptD. An auditor should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statementsBottom of FormTop of Form9.inherent limitations of internal controlA. effective separation of duties may not be feasible.B. misunderstanding of instructions, mistakes by judgment, mistakes caused by carelessness, distraction, or fatigue, sep of duties circumvented by collusion, mgmt override of internal controlC. fraudulent financial reporting and misappropriation of assetsD. knowledge necessary to plan the auditBottom of FormTop of Form10.An auditor would most likely analyze inventory turnover rates to obtain evidence about:A. may agree to report control deficiencies that are significant as well as other matters to mgmt and the BODB. valuationC. previous experience with the entity, inquiries of appropriate mgmt and staff, inspection of documents and records, observation of entity's activities and operationsD. TrueBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.valuationA. As part of the understanding internal control in planning an audit of a nonissuer, an auditor does not need to:B. A security owned by a company is from another company that recently declared bankruptcy. What is the auditor's primary concern with the investment?C. The auditors are concerned about transactions that have been recorded in the journals that are not valid. Which procedure would be most effective?D. In obtaining an understanding of a nonissuer's internal control in a financial statement audit, an auditor is not obligated to:Bottom of FormTop of Form12.its quality has a major effect on the nature, timing, and extent and nature of the audit procedures necessary to complete the audit.A. An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merch. What procedure provides the greatest assurance that this control is operating effectively?B. What are the purposes of the consideration of IC required by GAAS?C. If the independent auditor decides that it is efficient to consider how the work performed by the internal auditors may affect the nature, timing, and extent of audit procedures, they should assess the internal auditors':D. In designing written audit plans, an auditor should select specific audit procedures that relate primarily to theBottom of FormTop of Form13.periodic inventory counts are used to adjust the perpetual inventory recordsA. What control most likely would be used to maintain accurate inventory records?B. an auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and:C. Why is the observation of physical inventory a mandatory auditing procedure?D. existence, rightsBottom of FormTop of Form14.prevent reuseA. Purchase cutoff procedures should be designed to test whether all inventory:B. Tracing copies of shipping documents to sales invoices will provide evidence that all:C. a primary objective of procedures performed to obtain an understanding of internal control is to provide the auditors withD. Documents supporting petty cash requirements should perforated toBottom of FormTop of Form15.designed to detect material misstatements in the financial statements, consists of analytical procedures and detail tests of transactionsA. Tracing from source documents to journals most directly testsB. substantive testsC. The accounting functions and the cash receipts functions should be handled by which departments?D. an auditor ordinarily should request to review the predecessor's audit documentation relating toBottom of FormTop of Form16.checks dated prior to year end to the outstanding checks listed on the year end bank reconciliationA. a primary use by the auditor of a bank cutoff statement is to compare:B. What best describes what is meant by the term fraud risk factor?C. The best control to prevent lapping isD. Upon receipt of customer's checks in the mail room,a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:Bottom of FormTop of Form17.It is an acceptable practice to carry out part of the audit at interim datesA. With respect to the auditor's planning of a year-end audit, what statement is always true?B. An entity's ongoing monitoring activities include:C. If an independent audit leading to an opinion on financial statements causes the auditor to believe that a material misstatement due to fraud exists they should firstD. Early appointment of the auditor enables preliminary work to be performed by the auditor that benefits the client because it permits the audit to be performed in aBottom of FormTop of Form18.age of accounts receivable and the turnover of accounts receivableA. What is meant by making a proper year end cut off?B. Use analytical procedures to calculate theC. In testing controls over cash disbursements, the auditors most likely would determine that the person who signs checks also:D. component for management periodically evaluates the threats to preparing reliable financial statementsBottom of FormTop of Form19.TrueA. tracing from source documents to journals most directly addresses which financial statement assertion?B. What is meant by making a proper year end cut off?C. Confirmation in writing from the holder of the note is ordinarily considered as an acceptable alternative to inspection of the note. True or false?D. When the work performed by internal auditors may have an effect on the nature, timing, and extent of the CPA's procedures, the CPA should consider the competence and objectivity of the internal auditors. Relative to objectivity, the CPA should:Bottom of FormTop of Form20.Review amounts of accounts which have been written off as uncollectible prior to year end.A. What is considered an environmental control factor?B. An auditor is auditing year 2 of a new client. The auditor did not observe the counting of year 1 ending inventory and has ? ab the validity of the year 1 beginning inventory figure. inventory is material. the auditor will:C. an auditor confirm a representative number of open accounts receivable as of 12/31 and investigates respondents' exceptions and comments. by this procedure, the auditor is most likely to learn what?D. What procedure is least likely to help auditors to assess the adequacy of management's accounting estimate of the allowance for doubtful accounts?Bottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.To test the effectiveness of controls an auditor ordinarily selects tests from a variety of techniques including:

Top of Form1.In assessing the competence and objectivity of an entity's internal auditor, an independent auditor is least likely to consider information obtained from:A. inherent riskB. existenceC. want the client to schedule the physical inventory count at the end of the yearD. the results of analytical proceduresBottom of FormTop of Form2.the organization established by congress to narrow the options in cost accounting that are available under generally accepted account principles is the:A. theft of an entity's assets also referred to as defalcations committed usually by employees against the entityB. to the auditor's officeC. Cost Accounting Standards BoardD. intentional misstatements, omissions of amoutns or disclosures in the financial statementsBottom of FormTop of Form3.The auditors suspect that a client's cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover the embezzlement scheme, the auditors most likely would compare the:A. handling cash and maintaining cash records, opening incoming mail, credit and collection, reviewing and mailing customer statements, approval of adjustment credits and write off of uncollectible accountsB. cash is properly classified and adequately disclosed in financial statementsC. details of the bank deposit slips with details of credits to customer accountsD. cannot obtain absolute assurance but only reasonable assurance that material misstatements in the financial statements will be detectedBottom of FormTop of Form4.An audit plan isA. designed to detect material misstatements in the financial statements, consists of analytical procedures and detail tests of transactionsB. The auditor's judgementC. respond fully to successor's inquiries because of the confidential client relationshipD. documentation that provides an overview of the company and a general plan for the audit work to be accomplished, timing of the work, and other matters of concern to the auditBottom of FormTop of Form5.Moor, CPA, discovers a likely fraud during an audit but concludes that its effects, if any, could cont be so material as to affect the opinion. Moor should:A. detection riskB. preparation of a shipping documentC. report the finding to the appropriate representative of the client with the recommendation that it be pursued to a conclusionD. Are prelistings made of all cash receipts?Bottom of FormTop of Form6.When perpetual inventory records are maintained, is it necessary for a physical inventory to be taken at the balance sheet date?A. a physical inventory at least once a year is generally essential regardless of whether perpetual inventories are maintained.B. auditor documents conclusion and goes to extensive substantive testing does not perform test of controlsC. symbolic representation of a system or series of sequential processesD. risk assessmentBottom of FormTop of Form7.monitoring includesA. continuous monitoring of customer complaints, reviewing reasonableness of mgmt reports, periodic audits by internal auditorsB. completenessC. determine the adequacy of internal control over cashD. several overpayments are made for goods received from a supplierBottom of FormTop of Form8.COSOA. management may establish appropriate controls but not act on themB. to aid corporate mgmt in efficient administration by investigating and reporting upon compliance with company policies, reliability of acct and statistical records and reports, adequacy of IC, efficiency of operating proceduresC. maintains accounting records, reconciles bank statements, etc. never handles cashD. a process designed to provide reasonable assurance regarding the achievement of objectivesBottom of FormTop of Form9.The accounting functions and the cash receipts functions should be handled by which departments?A. The controller should have control of the accounting functions and the treasurer should ahve control of cash receipt functions.B. reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws and regulationsC. obtain knowledge about the operating effectiveness of internal controlD. the planned assessed level of control riskBottom of FormTop of Form10.Controls over financial reporting are often classified as preventative, detective, or corrective. What would be an example of a detective control?A. preparing bank reconciliationsB. the detailed plan of audit procedures to be performed in the course of the auditC. valuationD. the results of analytical proceduresBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.management's acknowledgement of its responsibility for maintaining effective internal controlA. audit committee natureB. An auditor's engagement letter most likely will includeC. procedures for detecting lappingD. What employee should report to the CFO?Bottom of FormTop of Form12.existence or occurrenceA. The best way to verify the amounts of dividend revenue received during the year is:B. A secondary result of the auditor's understanding of internal control in an audit of nonissuer's financial statements is that the understanding may:C. the organization established by congress to narrow the options in cost accounting that are available under generally accepted account principles is the:D. An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of followup on errors reported by the customers. This test of controls most likely is performed to support mgmt's financial statement assertions of:Bottom of FormTop of Form13.provides strong evidence to existence and quality of inventoryA. Why is the observation of physical inventory a mandatory auditing procedure?B. What is the purpose of the team meeting on fraud risk?C. component for entry into the warehouse is strictly controlled by security personnelD. an auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and:Bottom of FormTop of Form14.salesA. At the completion of the audit, the auditors are least likely to knowB. What is least likely to be considered an inherent risk relating to receivables and revenue?C. What is most likely to be an example of fraudulent financial reporting relating to sales?D. a client's physical count of inventories was lower than the inventory quantities per the perpetual records. This situation could be the result of the failure to record:Bottom of FormTop of Form15.mgmt review of weekly performance reportsA. What is the criteria according to the SEC Staff Accounting Bulletin No. 104 that must be met for revenue recognition?B. What would not be considered an inherent limitation of the potential effectiveness of an entity's internal control?C. Risk assessment characteristicsD. An entity's ongoing monitoring activities include:Bottom of FormTop of Form16.Responsibility for the performance of each duty must be fixedA. The best control to prevent lapping isB. An auditor may compensate for a weakness in internal control by increasing the extent ofC. When the work performed by internal auditors may have an effect on the nature, timing, and extent of the CPA's procedures, the CPA should consider the competence and objectivity of the internal auditors. Relative to objectivity, the CPA should:D. Internal control is a function of management, and effective control is based upon the concept of charge and discharge of responsibility and duty. What is one of the overriding principles of internal control?Bottom of FormTop of Form17.auditors were not appointed by the client until after the physical inventory had been taken.A. general objective: vouch selected purchases of securities to broker's advicesB. concealment of a cash shortage:C. Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents to related sales invoices?D. Under what circumstances is observation of physical inventory impossible?Bottom of FormTop of Form18.Verify the company owns the security, check the accuracy of the accrual, and require no adjustmentA. What control most likely would be used to maintain accurate inventory records?B. AU 311, Planning and Supervision, states that the auditor should establish an overall audit strategy and an audit plan. What audit standard is most closely related to this requirement?C. A company owns a large amount of debt securities that pay interest twice a year. On the financial statements the company accrued the 5 months of interest it was due as interest receivable. The auditor should:D. Adequate planning and design of an audit is necessary for an auditor to restrict which type of audit risk?Bottom of FormTop of Form19.accounts are collected by the balance sheet dateA. primary objective of preparing a four column proof of cashB. Confirmation in writing from the holder of the note is ordinarily considered as an acceptable alternative to inspection of the note. True or false?C. For what purposes do the auditors make and record test counts of inventory quantities during their observation of the taking of the physical inventory?D. An inappropriate audit procedure relative to accounts receivable is to determine that theBottom of FormTop of Form20.control activitiesA. What procedure is least likely to be performed before the balance sheet date?B. component for invoices are reviewed for accuracy before they are mailed to customersC. When the auditors are performing a first time internal control audit in accordance with the SOX act and PCAOB standards they must:D. What should be included as part of inventory costs of a manufacturing company?Bottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.An auditor has accounted for a sequence of inventory tags and is now tracing information on a representative number of tags to the inventory summary sheets. Which assertion does this procedure relate to most directly?

Top of Form1.primary objective of using a standard confirmation form to confirm account balance informationA. factors often observed in circumstances where frauds have occurredB. verify year end cash and liability balance informationC. an unrecorded deposit made at the beginning of the month, the amount was withdrawn late in the month again with no book entryD. work performed by internal auditors may be a factor in determining the nature timing and extent of the independent auditor's proceduresBottom of FormTop of Form2.When scheduling audit work, the auditor's are most likely to confirm accounts receivable balances at an interim date ifA. integrity and ethical valuesB. accounts receivable bookkeeper to update the subsidiary accounts receivable recordsC. because the danger that fictitious inventory tags might be created by dishonest client personnel after the auditors have completed their observation of the physical inventoryD. internal control is strongBottom of FormTop of Form3.What should be included as part of inventory costs of a manufacturing company?A. systems approach focuses on testing controls to make sure they are effective, while the substantive approach is the detailed testing of specific accounts for accuracyB. direct labor, raw materials, and factory overheadC. tailor made for engagement, requires a detailed analysis and thus forces auditor to understand functioning of internal controlD. used to establish written understanding with the client regarding the services to be performed, including the objectives of engagement, mgmt responsibilities, the auditors responsibilities, and limitations of engagementBottom of FormTop of Form4.The best way to verify the amounts of dividend revenue received during the year is:A. the inference drawn from receiving no reply may not be correctB. continuous monitoring of customer complaints, reviewing reasonableness of mgmt reports, periodic audits by internal auditorsC. Verify the company owns the security, check the accuracy of the accrual, and require no adjustmentD. verification by reference to dividend record booksBottom of FormTop of Form5.What is least likely to be included in an auditor's inquiry of mgmt while obtaining info to identify the risks of material misstatement due to fraud?A. members of the board of directors who are not officers or employeesB. inflated sales for the yearC. Are financial reporting operations controlled by and limited to one location?D. monitoringBottom of FormTop of Form6.What element underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reportingA. materiality and audit riskB. The controller should have control of the accounting functions and the treasurer should ahve control of cash receipt functions.C. TrueD. quality of the internal auditor's documentationBottom of FormTop of Form7.Materiality can best be described asA. The billing dept supervisor matches prenumbered shipping documents with entries in the sales journalB. identify related party transactionsC. the amount at which judgments based on the financial statements may be alteredD. inquiries of client vendorsBottom of FormTop of Form8.components of internal controlA. completeness and cutoff; select a sample of items during the physical inventory count and determine that they have been included on count sheetsB. trace from source documents to journalsC. actual control riskD. the control environment, risk assessment, accounting info system, control activities, and monitoringBottom of FormTop of Form9.advantages of questionnaireA. permits the examination of many checks listed as outstanding in the bank reconciliation and establishes a collectibility of customer checks included in undeposited receipts on the balance sheet dateB. misunderstanding of instructions, mistakes by judgment, mistakes caused by carelessness, distraction, or fatigue, sep of duties circumvented by collusion, mgmt override of internal controlC. easy to complete, comprehensive list of questions makes it unlikely that important portions of internal control will be overlookedD. to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraudBottom of FormTop of Form10.competenceA. separation of recordkeeping for receivables from custody of cashB. evaluate whether controls operated effectivelyC. education level, professional experience, and professional certificationsD. Are prelistings made of all cash receipts?Bottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.assessing the allowance for uncollectible accounts for reasonablenessA. Tracing copies of shipping documents to sales invoices will provide evidence that all:B. Assertion and procedure for the major categories of inventories and their basis of valuation are adequately reported in the financial statementsC. Tests of controls are used to test whether controls are:D. What would most likely give the most assurance concerning the valuation assertion about accounts receivable?Bottom of FormTop of Form12.Verify the company owns the security, check the accuracy of the accrual, and require no adjustmentA. To test the effectiveness of controls an auditor ordinarily selects tests from a variety of techniques including:B. A company owns a large amount of debt securities that pay interest twice a year. On the financial statements the company accrued the 5 months of interest it was due as interest receivable. The auditor should:C. An auditor is auditing year 2 of a new client. The auditor did not observe the counting of year 1 ending inventory and has ? ab the validity of the year 1 beginning inventory figure. inventory is material. the auditor will:D. substantive testsBottom of FormTop of Form13.sales of merchandise are improperly billed to customers prior to delivery, with the goods being held by the seller. overstate revenues and net incomeA. There is a presumption that auditors will confirm A/R unless the auditors assessment of material misstatement is low andB. What is meant by a "bill and hold" scheme?C. Vouching from journals to source documents most directly tests:D. auditor's responsibility for detectionBottom of FormTop of Form14.valuationA. what is not an assertion tested in an audit of trading securities?B. general objective of obtain a listing of inventory and reconcile the total to the general ledgerC. the control environment includesD. In assessing the competence and objectivity of an entity's internal auditor, an independent auditor is least likely to consider information obtained from:Bottom of FormTop of Form15.well kept records of perpetual inventory are maintainedA. A washing machine manufacturer puts bar codes on all boxes containing washing machines. The bar codes are scanned prior to shipping. This is indicative of what type of system?B. Instead of taking a physical inventory count on the balance sheet date, the client may take physical counts prior to the year end of internal control is adequate and:C. objectives of COSOD. If the perpetual inventory records show lower quantities of inventory than the physical count, an explanation of the difference might be unrecordedBottom of FormTop of Form16.how controls were originatedA. Use analytical procedures to calculate theB. Tests of controls do not addressC. Proper separation of duties reduces the opportunities for persons to be in positions to both:D. The auditors are concerned about transactions that have been recorded for improper amounts. Which procedure would be most effective?Bottom of FormTop of Form17.The auditor must adequately plan the work and must properly supervise any assistantsA. 2 assertions for which confirmation of accounts provides primary evidence are:B. tests of controlsC. To gather evidence regarding the balance per bank reconciliation, an auditor could examine all of the following:D. AU 311, Planning and Supervision, states that the auditor should establish an overall audit strategy and an audit plan. What audit standard is most closely related to this requirement?Bottom of FormTop of Form18.detection riskA. The scope and nature of an auditor's contractual obligation to a client is ordinarily set forth in theB. The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist when in fact such misstatement does exist is referred to as:C. What is one of the most conclusive forms of evidence in establishing the existence of accounts receivable?D. Proper authorization of write offs of uncollectible accounts should be approved in which department?Bottom of FormTop of Form19.stores or warehouseA. What are the 3 ways in which the auditors may respond to fraud risks in an audit?B. auditor's responsibility for detecting fraudC. To adequately provide for the segregation of duties, purchase requisitions should be initiated by what department?D. purpose of bank transfer scheduleBottom of FormTop of Form20.purchased and received before year end was recordedA. During the audit of financial statements, an internal auditor may provide direct assistance to an independent CPA in:B. The primary purpose of procedures performed to obtain an understanding of internal control in a financial statement audit is to provide an auditor with:C. Purchase cutoff procedures should be designed to test whether all inventory:D. type of control for supervisory approval of time cardsBottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.Tracing from source documents to journals most directly tests

Top of FormAn auditor selects items from the client's inventory listing and identifies the items in the warehouse. This procedure is most likely related to:A. provides strong evidence to existence and quality of inventoryB. TrueC. designed to allow the more experienced team members to share insights and exchange ideas about how and where the entity's financial statements might be susceptible to material misstatement due to fraud, to discuss how to design proceduresD. existenceBottom of FormTop of Form2.An auditor's engagement letter most likely will includeA. management's acknowledgement of its responsibility for maintaining effective internal controlB. HR policies and practicesC. practice of recording transfer as a deposit in one accounting period and as a disbursement in a subsequent accounting period causing total cash to be inflatedD. refers to the process of assigning transactions occurring near the balance sheet date to the proper accounting periodBottom of FormTop of Form3.What is least likely to be required on an audit?A. competence and objectivityB. make a legal determination of whether fraud has occurredC. determine the adequacy of internal control over cashD. Overstatement because net income would be overstated alsoBottom of FormTop of Form4.General objective of observe the client's physical inventoryA. provides evidence to the existence assertion, establishes valuation, provide evidence about cut off of purchases and salesB. accounts receivable subsidiary ledgerC. understating the sales journalD. custody of work in process and finished goods is properly maintainedBottom of FormTop of Form5.Most of the independent auditor's work in formulating an opinion on financial statements consists ofA. completenessB. establishes existence, rights, and valuation, and provides evidence of cutoffC. obtaining and examining evidenceD. the inference drawn from receiving no reply may not be correctBottom of FormTop of Form6.What is not an advantage of establishing an enterprise risk mgmt system within an organization?A. significant deficiencies and material weaknesses to mgmt and those charged with governanceB. nature of services offered, qualifications of firm's personnel, anticipated feesC. The controller should have control of the accounting functions and the treasurer should ahve control of cash receipt functions.D. eliminates all risksBottom of FormTop of Form7.purpose of bank transfer scheduleA. to trace bank transfers to disclose overstatement of cash balances resulting from kitingB. competence and objectivityC. Are prelistings made of all cash receipts?D. segregation of incompatible duties across several peopleBottom of FormTop of Form8.What is an audit confirmation request?A. material error, material fraud, and certain illegal actsB. existenceC. confirm the number of shares owned that are held by an independent custodianD. written communication received by the auditors directly from a party outside the client organization, affirms the existence of, and rights to, an amount recorded in the client's accounting recordsBottom of FormTop of Form9.What would the auditors most likely perform to test controls relating to management's assertion about the completeness of cash receipts for cash sales a retail outlet?A. cutoff bank statement, year end bank statement, bank confirmationB. inspect the shipping records documenting the merchandise sold to debtorsC. preventativeD. observe the consistency of the employees' use of cash registers and tapesBottom of FormTop of Form10.Upon receipt of customer's checks in the mail room,a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:A. designed to disclose kiting whereby a check drawn on one bank is not recorded as a disbursement as of the balance sheet date, although the deposit of the check in another bank is properly recordedB. designed to disclose kiting whereby a check drawn on one bank is not recorded as a disbursement as of the balance sheet date, although the deposit of the check in another bank is properly recordedC. Review amounts of accounts which have been written off as uncollectible prior to year end.D. accounts receivable bookkeeper to update the subsidiary accounts receivable recordsBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.search for unrecorded liabilitiesA. prior to the balance sheet date-interim period the auditor shouldB. What procedure is least likely to be performed before the balance sheet date?C. audit objective of confirming accounts receivable and notes receivable by direct communication with debtorsD. a four column bank reconciliation will generally assist an auditor in detecting:Bottom of FormTop of Form12.search for significant deficiencies in the operation of internal controlA. In obtaining an understanding of a nonissuer's internal control in a financial statement audit, an auditor is not obligated to:B. What is most likely to be presumed to represent a fraud risk on an audit?C. Proper separation of duties reduces the opportunities for persons to be in positions to both:D. Audit evidence concerning the separation of duties ordinarily is best obtained by:Bottom of FormTop of Form13.credit managerA. B&M auditors have been accepted as the auditors of 3W. What are B&M's responsibilities with regard to contacting 3W's predecessor auditors?B. audit committee natureC. functions of controller:D. What employee should report to the CFO?Bottom of FormTop of Form14.members of the board of directors who are not officers or employeesA. COSOB. The best control to prevent lapping isC. The audit committee of a company must be made ofD. What is least likely to be considered an inherent risk relating to receivables and revenue?Bottom of FormTop of Form15.access to securities requires the signatures and presence of 2 designated officialsA. the objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded and that:B. It is important for the auditor to consider the competence of the audit client's employees because their competence bears directly and importantly upon the:C. What best describes what is meant by the term fraud risk factor?D. What procedure is most likely to give the greatest assurance that securities held as investments are safeguarded?Bottom of FormTop of Form16.practice of recording transfer as a deposit in one accounting period and as a disbursement in a subsequent accounting period causing total cash to be inflatedA. Tests of controls do not addressB. Major controls over cashC. pad a cash position:D. Materiality can best be described asBottom of FormTop of Form17.the auditor must adequately plan the work and must properly supervise any assistantsA. If the objective of an auditor's test of details is to detect a possible understatement of sales, the auditor most likely would trace transactions from the:B. The best control to prevent lapping isC. Foreign Corrupt Practices Act of 1977D. PCAOB first standard of field workBottom of FormTop of Form18.persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, seller's price is fixed or determinable, collectibility is reasonably assuredA. What condition most likely would pose the greatest risk in accepting a new audit engagementB. major controls over accounts receivableC. What is the criteria according to the SEC Staff Accounting Bulletin No. 104 that must be met for revenue recognition?D. What circumstance would permit an independent auditor to accept an engagement after the close of the fiscal year?Bottom of FormTop of Form19.theft of cash register salesA. What is an example of misappropriation of of assets relating to sales?B. What characteristics should an audit confirmation response possess if a CPA firm is to consider it to be valid evidence?C. tests of controlsD. Checks to replenish fund should be drawn payable toBottom of FormTop of Form20.bank or petty cash custodianA. negative confirmation requestB. Checks to replenish fund should be drawn payable toC. What would provide the most assurance concerning valuation of A/R?D. What should not appear in an internal control questionnaire relating to cash disbursements?Bottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.An auditor has accounted for a sequence of inventory tags and is now tracing information on a representative number of tags to the inventory summary sheets. Which assertion does this procedure relate to most directly?Top of Form1.Tests of controls do not addressA. subcommittee of BOD, at least 3 independent outside directors, should not receive consulting, advisory, or other compensation from company, must be financially literateB. perpetrate and conceal errors or fraudC. discover misstatements after they have occurredD. how controls were originatedBottom of FormTop of Form2.The auditors suspect that a client's cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover the embezzlement scheme, the auditors most likely would compare the:A. integrity and ethical valuesB. direct participation by the owner in key record keeping and control activities of the businessC. It is an acceptable practice to carry out part of the audit at interim datesD. details of the bank deposit slips with details of credits to customer accountsBottom of FormTop of Form3.audit planA. confirm the number of shares owned that are held by an independent custodianB. make inquiries of the predecessor auditor after obtaining the consent of the prospective clientC. an overview of the engagement outlines the nature and characteristics of the client, its environment and the overall audit strategyD. risk assessmentBottom of FormTop of Form4.What procedure is least likely to help auditors to assess the adequacy of management's accounting estimate of the allowance for doubtful accounts?A. valuationB. Review amounts of accounts which have been written off as uncollectible prior to year end.C. fraudulent financial reporting and misappropriation of assetsD. missappropriate assetsBottom of FormTop of Form5.controlA. Checks should be sequentially numbered and the numerical sequence should be accounted for by the person preparing bank reconciliationsB. access to securities requires the signatures and presence of 2 designated officialsC. more efficient mannerD. determine the adequacy of internal control over cashBottom of FormTop of Form6.objectives of observing taking of inventoryA. receiving clerkB. determine credibility of inventory quantities, observe that quantity information is correct, quality or condition of inventory, personnel adherence to instruction s for taking inventory, adequacy of storage facilitiesC. sales of merchandise are improperly billed to customers prior to delivery, with the goods being held by the seller. overstate revenues and net incomeD. systems approach focuses on testing controls to make sure they are effective, while the substantive approach is the detailed testing of specific accounts for accuracyBottom of FormTop of Form7.Proper authorization of write offs of uncollectible accounts should be approved in which department?A. CFOB. concealment of cash shortage by delaying the proper recording of payments to a customers accountC. cutoff bank statement, year end bank statement, bank confirmationD. reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws and regulationsBottom of FormTop of Form8.Hall company had large amounts of funds to invest on a temporary basis. The BOD decided to purchase securities and derivatives and assigned the future purchase and sale decisions to a responsible financial executive. The best person:A. more efficient mannerB. an investment committee of the BODC. subcommittee of BOD, at least 3 independent outside directors, should not receive consulting, advisory, or other compensation from company, must be financially literateD. refers to the process of assigning transactions occurring near the balance sheet date to the proper accounting periodBottom of FormTop of Form9.to test the existence assertion for recorded receivables, the auditors would select a sample from theA. separate ledgerB. a graphic representation of internal control structure, unlikely that important portions of internal control will be overlooked, avoids long wording descriptionC. verify year end cash and liability balance informationD. accounts receivable subsidiary ledgerBottom of FormTop of Form10.A client's physical count of inventories was higher than the inventory quantities per the perpetual records. This situation could be the result of the failure to record:A. an unrecorded deposit made at the beginning of the month, the amount was withdrawn late in the month again with no book entryB. includes accounting systems and methods and records to record, process, summarize, and report entity's transactionsC. purchasesD. checks dated prior to year end to the outstanding checks listed on the year end bank reconciliationBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.chart of accounts, manual of accounting policies, procedures for communicating policiesA. the accounting info system includesB. type of control for supervisory approval of time cardsC. An auditor wishes to evaluate the design and perform tests of controls over a client's cash disbursements procedures. If the controls leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:D. advantages of flowchartBottom of FormTop of Form12.Remedy of the limitations resulting from accepting the engagement after the close of the end of the year, such as those relating to the existence of physical inventoryA. the auditor's analytical procedures will be facilitated if the client:B. Tracing from source documents to journals most directly testsC. What circumstance would permit an independent auditor to accept an engagement after the close of the fiscal year?D. At the completion of the audit, the auditors are least likely to knowBottom of FormTop of Form13.sale in the current periodA. An auditor is auditing year 2 of a new client. The auditor did not observe the counting of year 1 ending inventory and has ? ab the validity of the year 1 beginning inventory figure. inventory is material. the auditor will:B. Confirmation in writing from the holder of the note is ordinarily considered as an acceptable alternative to inspection of the note. True or false?C. The 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 count at year end was not recorded as:D. What alternative auditing procedures may be undertaken in connection with the confirmation of accounts receivable where customers having substantial balances fail to reply after second request forms have been mailed to them?Bottom of FormTop of Form14.facts that might bear on the integrity of mgmtA. Who prepares engagement letter and when?B. management has the ability to perpetrate fraud byC. What should auditors obtain from the predecessor auditors before accepting an audit engagementD. With respect to the auditor's planning of a year-end audit, what statement is always true?Bottom of FormTop of Form15.Inspect contracts and agreements to determine whether any inventory is pledged as collateral or subject to any liensA. What audit procedure probably provides the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?B. Assertion and procedure for recorded inventory quantities include all products on handC. When a primary risk related to an audit is possible overstated inventory, the assertion most directly related is:D. What factor most likely would cause an auditor to decline a new audit engagement?Bottom of FormTop of Form16.It is an acceptable practice to carry out part of the audit at interim datesA. With respect to the auditor's planning of a year-end audit, what statement is always true?B. Internal control can provide only reasonable assurance of achieving entity objectives. One factor limiting the likelihood of achieving those objectives in a small entity is that:C. For what purposes do the auditors make and record test counts of inventory quantities during their observation of the taking of the physical inventory?D. When perpetual inventory records are maintained in quantities and in dollars, and internal control over inventory is weak, the auditor would probably:Bottom of FormTop of Form17.tailor made for engagement, requires a detailed analysis and thus forces auditor to understand functioning of internal controlA. type of control for segregation of duties over purchasingB. auditors consideration of internal control-2nd standard of field workC. advantages of written narrativeD. Alpha Co. uses its sales invoices for posting perpetual inventory records. Inadequate internal control over the invoicing function allows goods to be shipped that are not invoiced. The inadequate controls could cause an:Bottom of FormTop of Form18.risk that organization's objectives will not be achieved, basis for determining how risks should be managedA. Risk assessment characteristicsB. positive confirmation requestC. In the confirmation of accounts receivable, the auditor will most likely:D. Billy Jo is responsible for custody of the finished goods in the warehouse. If his company wishes to maintain strong internal control, what responsibility is incompatible to his job?Bottom of FormTop of Form19.control environmentA. To gather evidence regarding the balance per bank reconciliation, an auditor could examine all of the following:B. the most practical and effective audit procedure for detecting lapping isC. component for management has prepared and distributed an organization chartD. advantages of flowchartBottom of FormTop of Form20.control activitiesA. When an entity uses a trust company as custodian of its trading securities, the possibility of concealing the fraud most likely will be reduced if:B. AU 311, Planning and Supervision, states that the auditor should establish an overall audit strategy and an audit plan. What audit standard is most closely related to this requirement?C. What is not an advantage of establishing an enterprise risk mgmt system within an organization?D. component for budgets and forecasts are used by the production depts to control expensesBottom of FormEXTRA CREDIT: Give the Answer that corresponds to the displayed Question.Top of Form21.type of control for adjustment of perpetual inventory records to physical counts

Top of Form1.what is an internal control weaknesses for a company whose inventory of supplies consists of a large number of individual items?A. a bank lock box systemB. provide reasonable assurance that the company's objectives will be achievedC. may agree to report control deficiencies that are significant as well as other matters to mgmt and the BODD. The storekeeper is responsible for maintenance of perpetual inventory recordsBottom of FormTop of Form2.audit objectivesA. control, existence, completeness, presentation and disclosure, rights and obligationsB. evaluate whether controls operated effectivelyC. valuationD. may agree to report control deficiencies that are significant as well as other matters to mgmt and the BODBottom of FormTop of Form3.objective of internal auditorsA. comparing recorded cash receipts in detail against items making up the bank deposit as shown on duplicate deposit slips validated by the bankB. material misstatements may exist in the financial statementsC. to aid corporate mgmt in efficient administration by investigating and reporting upon compliance with company policies, reliability of acct and statistical records and reports, adequacy of IC, efficiency of operating proceduresD. designed to allow the more experienced team members to share insights and exchange ideas about how and where the entity's financial statements might be susceptible to material misstatement due to fraud, to discuss how to design proceduresBottom of FormTop of Form4.Tests of controls are least likely to conclude:A. designed to disclose kiting whereby a check drawn on one bank is not recorded as a disbursement as of the balance sheet date, although the deposit of the check in another bank is properly recordedB. management is interested in maintaining the entity's earnings trend by using aggressive accounting practicesC. existence, completeness, and valuationD. inquiries of client vendorsBottom of FormTop of Form5.Imprest system should be used forA. detectiveB. assessing the allowance for uncollectible accounts for reasonablenessC. valuationD. petty cash requirementsBottom of FormTop of Form6.An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of followup on errors reported by the customers. This test of controls most likely is performed to support mgmt's financial statement assertions of:A. consider the organizational level to which the internal auditors report the results of their workB. determine credibility of inventory quantities, observe that quantity information is correct, quality or condition of inventory, personnel adherence to instruction s for taking inventory, adequacy of storage facilitiesC. existence or occurrenceD. because the danger that fictitious inventory tags might be created by dishonest client personnel after the auditors have completed their observation of the physical inventoryBottom of FormTop of Form7.In an audit of inventories, an auditor is least likely to verify that:A. all inventory owned by the client is on hand at the time of the countB. requires a reply from the client's customer in every caseC. conceals cash shortage in bank, transfer brings account into agreement with booksD. monitoringBottom of FormTop of Form8.What element underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reportingA. be able to issue an unqualified opinion on the ending balance sheetB. sales of merchandise are improperly billed to customers prior to delivery, with the goods being held by the seller. overstate revenues and net incomeC. a letter from the auditors to company mgmt that specifies the responsibilities of both the company and the auditors in completing the audit and the timing for its completionD. materiality and audit riskBottom of FormTop of Form9.component for management periodically evaluates the threats to preparing reliable financial statementsA. Either trace from source documents to journals or vouch from journals to source documentsB. the planned assessed level of control riskC. the securities are authenticD. risk assessmentBottom of FormTop of Form10.substantive proceduresA. obtaining and examining evidenceB. cannot obtain absolute assurance but only reasonable assurance that material misstatements in the financial statements will be detectedC. the trust company has no direct contact with the entity employees responsible for maintaining investment accounting records.D. designed to detect material misstatement in specific financial statement amountsBottom of FormCircle the letter of the Question that corresponds to the displayed Answer.Top of Form11.valuationA. An entity's ongoing monitoring activities include:B. What is not an ad