A4 NEW

Question 1

Who controls the mailing of independent confirmations - the auditor or the entity?

Answer 1

AUDITOR

Question 2

If an auditor has communicated control deficiencies in a prior period and management has chosen not to correct the deficiencies, does the auditor need to repeat the communication in the current period?

Answer 2

NO

Question 3

To ensure proper custody of assets in the investing cycle, an __________________ person comparing the contents of the safety deposit box with the recorded balances in the investment ________________________ ledger is an effective control.

Answer 3

INDEPENDENT; SUBSIDIARY

Question 4

To test existence, the auditor needs to start with the _________________ records and _____________ backwards to the _______________ documents.

Answer 4

ACCOUNTING; VOUCH; SOURCE

Question 5

An internal control questionnaire for NP would likely ask if direct borrowings on NP are authorized by the ___________________________.

Answer 5

BOARD OF DIRECTORS

Question 6

When an employee has both the custody and recording functions is a lack of ________________ of ___________, which is a deficiency in the ____________ of internal control.

Answer 6

SEGREGATION; DUTIES; DESIGN

Question 7

For all audits, __________________ deficiencies must be communicated in writing to management.

Answer 7

SIGNIFICANT

Question 8

Assertions about the understandability of ___________________ and ___________________ deal with whether financial information is appropriately presented and described and disclosures are clearly expressed.

Answer 8

PRESENTATION; CLASSIFICATION

Question 9

When an auditor selects items for test counts and traces the test counts to the client’s inventory listing, the auditor has obtained evidence concerning management’s assertion of ________________.

Answer 9

COMPLETENESS

Question 10

By ensuring that credit approval is obtained before goods are shipped to customers, the auditor is testing management’s assertion regarding _______________________ and ______________________.

Answer 10

ALLOCATION; VALUATION

Question 11

If the auditor is unable to count the securities at the balance sheet date, can the auditor request the client to have the bank seal the safe deposit box until the auditor can count the securities?

Answer 11

YES

Question 12

A client’s failure to investigate differences between the general ledger and the subsidiary ledger would make the auditor suspect there are _____________ __________________ that exist in the client’s financial statement.

Answer 12

MATERIAL MISSTATEMENTS

Question 13

Check ________ may result in a high level of _________ coupled with a low average ____________.

Answer 13

KITING; DEPOSITS; BALANCE

Question 14

___________________ confirmations offer a lower level of assurance than __________________ confirmations, thus should only be used when the risk of material misstatement is _____.

Answer 14

NEGATIVE; POSITIVE; LOW

Question 15

The auditor should ____________ identify ______________ deficiencies and _____________ weaknesses.

Answer 15

SEPARATELY; SIGNIFICANT; MATERIAL

Question 16

A gap in recorded sequence numbers might indicate an unrecorded sale, so periodic accounting of the numerical sequence of shipping documents and invoices supports management’s financial statement assertion of _____________________ of sales.

Answer 16

COMPLETENESS

Question 17

___________ confirmations would be appropriate when the majority of the accounts receivable accounts are large, not small.

Answer 17

POSITIVE

Question 18

The internal control procedure of prenumbering receiving reports and periodically reconciling them to the inventory records most likely addresses the ________________ assertion for inventory, because it allows the auditor to determine whether all goods received have been recorded as inventory.

Answer 18

COMPLETENESS

Question 19

In auditing long-term bonds payable, an auditor most likely would compare _______________ expense with the bond payable amount for _________________.

Answer 19

INTEREST; REASONABLENESS

Question 20

A deposit in transit is a _______________ recorded in one accounting period with the ____________ occurring in the subsequent period.

Answer 20

DISBURSEMENT; RECEIPT

Question 21

An audit client has a valid reason for requesting that a certain account receivable that the auditor has selected for confirmation not be confirmed. Under these circumstances, the auditor should perform __________________ procedures on the confirmation.

Answer 21

ALTERNATIVE