(A4)M1-M6

Question 1

as it pertains to the revenue cycle, a shipping document provides evidence of what?

Answer 1

that a sale occurred

Question 2

if a client is recording fictitious sales, what document(s) is likely to be missing?

Answer 2

shipping documents. the client will record a fake sale and create a fake invoice as well, but it is unlikely that an accompanying shipping document will exist

Question 3

when are confirmations of receivables not required?

Answer 3

when the balance is immaterial

Question 4

which two documents are most likely to be produced by the revenue cycle application?

Answer 4

credit memo and sales invoice

Question 5

what would an auditor’s review of a client’s sales cut-off detect?

Answer 5

unrecorded sales at YE and sales recorded in wrong period

Question 6

procedures to test existence and occurrence

Answer 6

observation, inspection, examination, vouching

Question 7

procedures to test valuation, allocation, accuracy

Answer 7

review of subsequent events, recalculations

Question 8

procedures to test rights and obligations

Answer 8

inspection, examination, confirmation, review of subsequent events

Question 9

clients may try to understate liabilities/expenses; therefore, auditors are especially concerned with which assertion?

Answer 9

completeness

Question 10

clients may try to overstate assets/revenue; therefore, auditors are especially concerned with which assertion?

Answer 10

existence

Question 11

as it pertains to the expenditure cycle, which 3 documents should always to be matched before a voucher is submitted for payment?

Answer 11

purchase order, receiving report, and vendor’s invoice

Question 12

what functions are performed in the payables department?

Answer 12

match documents, update AP records, approve vouchers

Question 13

which document provides authority to receive goods?

Answer 13

authorized purchase order

Question 14

which department signs checks, mails check/remittance advice, and cancels voucher packages?

Answer 14

treasury

Question 15

which department is responsible for approving the requisition to initiate a purchase transaction?

Answer 15

requisitioning department

Question 16

a contingent liability can be identified by a ___ ___ confirmation

Answer 16

standard bank

Question 17

what is kitting and how can it be identified?

Answer 17

when a check is drawn from one bank and deposited in another bank and no record is made of the disbursement in the balance of the first bank. Low average balance compared to high level of deposits

Question 18

when looking at a bank transfer schedule, what would indicate check kitting?

Answer 18

the receipt date per bank is before the disbursement date per books

Question 19

which of the following has to be properly disclosed in the FS: consigned goods and/or pledged inventory?

Answer 19

pledged inventory

Question 20

inquiring about consigned inventory would test which FS assertion?

Answer 20

completeness

Question 21

examining consignment agreements tests which FS assertion?

Answer 21

rights and obligations

Question 22

in testing LT investments, an auditor would use analytical procedures to ascertain the reasonableness of what?

Answer 22

completeness of recorded investment income

Question 23

in auditing investments in securities and derivatives, the auditor must assess three elements, what are they?

Answer 23

reasonableness and appropriateness of assumptions, market variables, and valuation models

Question 24

what is the auditor’s responsibility when it comes to predicting how future conditions will impact the client’s fair value reporting during the current year’s audit?

Answer 24

no responsibility

Question 25

at what point does a check actually become an asset?

Answer 25

when it is signed

Question 26

notes can be classified as ___ or ___; therefore, procedures to test proper classification are important

Answer 26

current, non current

Question 27

the procedure “tour the client’s facilities, and then inspect the property ledger and the insurance and tax records” tests for what, and the verse of this procedure test for what?

Answer 27

unrecorded addition (completeness)
unrecorded retirements of fixed assets

Question 28

what is the primary responsibility of a stock registrar?

Answer 28

verify that stock is issued only with proper authorization

Question 29

if an auditor is testing the “reasonableness” of an account balance, he/she is usually testing which FS assertion?

Answer 29

valuation, allocation, accuracy

Question 30

is construction is progress considered an asset on the BS?

Answer 30

Yes!

Question 31

what is the journal entry when an asset is retired at a loss?

Answer 31

Loss on disposal
Acc Dep
Asset (at historical cost)

Question 32

what is a remittance advice?

Answer 32

its sent along with a check for payment of goods (buyer sends to seller). Includes the invoice number and amount paid.

Question 33

what is a credit memo and why is it used?

Answer 33

a document sent to the buyer by the seller indicating that the amount owed under an earlier invoice is being reduced. Usually results from returned goods.