A4

Question 1

The authority to accept incoming goods in receiving should be based on what document?

Answer 1

Approved Purchase order

Question 2

What is lapping?

Answer 2

When employee uses current remittances to conceal remittances that have been previously stolen.

Question 3

How would one prevent lapping?

Answer 3

Compare the dates checks are deposited per bank statements with the dates remittance credits are recorded

Question 4

Relating to the purchase process which department:

1. Prepares the purchase order
2. Matching receiving report and invoice with the purchase order
3. Making the payment

Answer 4

1. Purchasing dept prepares purchase order
2. AP dept match PO to receiving report to Vendor invoice
3. Treasurer makes payment

Question 5

Which department is responsible for negotiating terms with vendors and approving purchase orders?

Answer 5

Purchasing department

Question 6

In the purchase process - who is in control of mailing the check and remittance advice?

Answer 6

Treasurer (cash disbursement account)

Question 7

Which department is responsible to ensure that the invoice/receiving report/ and purchase order are in agreement before the voucher is submitted for payment?

Answer 7

AP dept

Question 8

When is a debit memo issued?

Answer 8

When nonconforming goods are returned to VENDOR (purchasing department will send this to the Accounting dept to ensure the AP balance is reduced appropriately)

Question 9

What is kiting?

Answer 9

When a check drawn on one bank is deposited into another bank and no record is made of the disbursement in the balance of the first bank

Question 10

How can one identify kiting looking at a bank schedule

Answer 10

identifying the transfers in which the receipt date per bank is recorded in the accounting period before the disbursement date

Question 11

What assertion(s) are associated with confirming with a third party that the agent is holding investment securities in clients name?

Answer 11

Existence
Rights and obligations

Question 12

A cashier who receives remittances from the mail room should also prepare what?

Answer 12

Daily deposit slip

Question 13

If there is substantial doubt about an entity’s ability to continue as going concern and is alleviated by mgmt’s plans - what report is issued and how is it modified?

Answer 13

Unmodified opinion with an additional section titled “Substantial Doubt About Entity’s ability to continue as a going concern.”

NO EOM

Question 14

What is the primary responsibility of a bank acting as a registrar of capital stock?

Answer 14

To verify that stock is issued only with proper authorization

Question 15

In an audit of an issuer - if there is substantial doubt about an entity’s ability to continue as a going concern and disclosures are adequate, what opinion can be issued?

Answer 15

Unqualified with explanatory paragraph

disclaimer

Question 16

When auditor believes substantial doubt in entity, what events could lead to this belief?

Answer 16

1. Plans to borrow money or restructure debt
2. Plan to sell assets
3. Plans to delay or reduce expenditures
4. Plans to increase ownership equity

Question 17

What are the two documents most likely to be generated by the revenue cycle?

Answer 17

Sales invoice and credit memos

Question 18

What is the primary reason that the auditor requests letters of inquiry be sent to a client’s attorneys is to provide what?

Answer 18

Corroboration of the information furnished by management about litigation, claims, and assessments

Question 19

What key factors and assumptions would an auditor consider for evaluating an accounting estimate?

Answer 19

Assumptions that are:
1. Significant to the accounting estimate
2. Sensitive to variations
3. Deviations from historical patterns
4. subjective and susceptible to misstatements and bias

Question 20

How would one test for unrecorded retirements of equipment?

Answer 20

Select items of equipment from accounting records and then locate them during the plant tour

Question 21

How would the auditor perform procedures to ensure the interest rate swap contract is properly stated at fair value on clients balance sheet?

Answer 21

Test the data used to arrive at the fair value of the interest rate swap contract

Question 22

If there are no significant deficiencies discovered in the audit, can the auditor disclose that there were none discovered?

Answer 22

No

Question 23

When the auditors scans clients investment records for period just before and after y/e to determine that transfers between categories of investments have been properly recorded. What assertions are tested?

Answer 23

Understandability of presentation and classification
Valuation and accuracy