AUD 4

Question 1

For detecting a possible understatement of sales is tantamount to testing completeness, to test for completeness one needs to start with?

Answer 1

supporting documentation, such as “shipping documents”, and trace forward to recording in the accounting records, such as the sales invoices and sales journal

Question 2

Upon receipt of customers’ checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the?

Answer 2

Accounts receivable bookkeeper to update the subsidiary accounts receivable records

Question 3

In recording fictitious sales, the client will likely have created phony sales invoices, but no related shipment will have occurred. So, sales invoices should be traced to related shipping docs.

Answer 3

When shipping docs are traced to related sales invoices, this would test for “completeness” of sales, by identifying items that were shipped but not recorded.

Question 4

Completeness example

Answer 4

all sales have been recorded

Question 5

Occurrence assertion verifies that

Answer 5

sales are valid

Question 6

Accuracy assertion is most closely related to the objective that verifies?

Answer 6

sales are properly valued

Question 7

The cutoff assertion verifies sales are?

Answer 7

recorded in the correct accounting period

Question 8

Under an effective system of internal control, the accounts payable clerk should ensure that supporting documents (invoice, receiving report, and purchase order) are in agreement before the voucher is submitted for payment

Answer 8

The supporting documentation should be cancelled by the “treasurer” (not by a/p dept) after the check is mailed.

Question 9

Tracing items from the tag listing back to physical inventory quantities is a test for the existence of the inventory on the tag listing.

Answer 9

For the completeness assertion, the auditor should trace from the physical inventory quantities to the tag listing.

Question 10

Testing the entities computation of standard overhead rates generally provides assurance about a clients inventory valuation

Answer 10

Reviewing shipping and receiving cutoff procedures for inventories provides assurance about completeness and existence of inventory

Question 11

Inability to continue as a going concern needs to include an “EOM” paragraph “following” the opinion paragraph

Answer 11

Can issue either a unmodified with EOM paragraph, or Disclaimer report