A4 - Audit Evidence - Audit Procedures by Transaction Cycle

Question 1

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the checks also:

Answer 1

Is responsible for mailing the checks.

Question 2

The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may:

Answer 2

Be unaware of all the financial relationships that the bank has with the client.

Question 3

Sound internal control dictates that, immediately upon receiving checks from customers by mail, a responsible employee should:

Answer 3

Prepare a duplicate listing of checks received.

Question 4

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is:

Answer 4

Stamped “Paid” by the check signer.

Question 5

The objective of auditing procedures applied to segment information is to provide the auditor with reasonable basis for concluding whether:

Answer 5

The information is presented in conformity with the GAAP rules on segment information.

Question 6

To determine whether internal control relative to the revenue cycle of a wholesaling entity is operating effectively in minimizing the failure to prepare sales invoices, an auditor most likely would select a sample of transactions from the population represented by the:

Answer 6

Shipping document file.

Question 7

Tracing copies of computer-prepared sales invoices to copies of the corresponding computer-prepared shipping documents provides evidence that:

Answer 7

Sales billed to customers were actually shipped

Question 8

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:

Answer 8

Shipping documents to the sales invoices.

Question 9

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs:

Answer 9

Tests of controls and limited tests of current year property and equipment transactions.

Question 10

A weakness in internal control over recording retirements of equipment may cause an auditor to:

Answer 10

Select certain items of equipment from the accounting records and locate them in the plant.

Question 11

When an auditor does NOT receive replies to positive requests for year-end accounts receivable confirmations, the auditor most likely would:

Answer 11

Ask the client to contact the customers to request that the confirmations be returned. (Especially after the auditor has followed up a second/third time)

Question 12

Determining that proper amounts of depreciation are expensed provides assurance about management’s assertion of:

Answer 12

Valuation, allocation, and accuracy

Question 13

The auditor’s inventory observation test counts are traced to the client’s inventory listing to test for what financial statement assertion?

Answer 13

Completeness

Question 14

What procedure would be most appropriate for testing the completeness assertion as it applies to inventory?

Answer 14

Performing cutoff procedures for shipping and receiving. This provides assurance that goods in transit (shipped or received) are appropriately included or excluded.

Question 15

An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s assertions about:

Answer 15

Valuation and allocation.