Audit Chapter 11 HW

Question 1

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

1. Checks are signed by the company president, who compares the checks with the underlying supporting documents

Answer 1

Adequate separation of duties and Independent checks on performance

Question 2

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

2. Sales invoices are matched with shipping documents by the computer system and an exception report is generated

Answer 2

Adequate documents and records

Question 3

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

3. Receiving reports are prenumbered and accounted for on a daily basis

Answer 3

Adequate documents and records

Question 4

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

4. The accounts receivable master file is reconciled each month to the general ledger

Answer 4

Independent checks on performance

Question 5

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

5. Sales invoices are independently verified before being sent to customers

Answer 5

Independent checks on performance

Question 6

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

6. Payments by check are received in the mail by the receptionist, who lists the checks and restrictively endorses them

Answer 6

Adequate separation of duties

Question 7

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

7. Labor hours for payroll are reviewed for reasonableness by the computer system

Answer 7

Independent checks on performance and proper authorization of transactions

Question 8

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

8.Unmatched shipping documents are accounted for on a daily basis

Answer 8

Physical control over documents and records

Question 9

For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as proper authorization and adequate documents and records.)

9. The computer system verifies that all payroll payments have a valid employee identification number assigned by the human resources department at the time of hiring

Answer 9

Adequate separation of duties

Question 10

For each internal control, identify the transaction-related audit objective(s) to which it applies

1. Checks are signed by the company president, who compares the checks with the supporting documents

Answer 10

Occurrence and Accuracy

Question 11

For each internal control, identify the transaction-related audit objective(s) to which it applies

2. Sales invoices are matched with shipping documents by the computer system and an exception report is generated

Answer 11

Occurrence

Question 12

For each internal control, identify the transaction-related audit objective(s) to which it applies

3. Receiving reports are prenumbered and accounted for on a daily basis

Answer 12

Completeness and Timing

Question 13

For each internal control, identify the transaction-related audit objective(s) to which it applies

4.The accounts receivable master file is reconciled each month to the general ledger

Answer 13

Posting and summarization

Question 14

For each internal control, identify the transaction-related audit objective(s) to which it applies

5. Sales invoices are independently verified before being sent to customers

Answer 14

Accuracy

Question 15

For each internal control, identify the transaction-related audit objective(s) to which it applies

6. Payments by check are received in the mail by the receptionist, who lists the checks and restrictively endorses them

Answer 15

Completeness

Question 16

For each internal control, identify the transaction-related audit objective(s) to which it applies
7. Labor hours for payroll are reviewed for reasonableness by the computer system

Answer 16

Occurrence and Accuracy

Question 17

For each internal control, identify the transaction-related audit objective(s) to which it applies

8. Unmatched shipping documents are accounted for on a daily basis

Answer 17

Completeness and Timing

Question 18

For each internal control, identify the transaction-related audit objective(s) to which it applies

9. The computer system verifies that all payroll payments have a valid employee identification number assigned by the human resources department at the time of hiring

Question 19

For each misstatement, identify one or more types of controls that were absent

1. On the last day of the year, a truckload of beef as set aside for shipment but was not shipped. Because it was still on hand the inventory was counted. The shipping document was dated last day of the year, so it was also included as a current-year sale

Answer 19

Adequate documents and records and independent checks on performance

Question 20

For each misstatement, identify one or more types of controls that were absent

2. The incorrect price was used on sales invoices for billing shipments to customers because the wrong price was entered into the computer master file of prices

Answer 20

Adequate documents and records and independent checks on performance

Question 21

For each misstatement, identify one or more types of controls that were absent

3. A vendor invoice was paid even though no merchandise was ever received. The accounts payable software application does not require the input of a valid receiving report number before payment can be made

Answer 21

Proper authorization of transactions and adequate documents and records

Question 22

For each misstatement, identify one or more types of controls that were absent

4. Employees in the receiving department took sides of beef for their personal use. When a shipment of meat was received, the receiving department filled out a receiving report and forwarded it to the accounting department for the amount of goods actually received. At the time, two sides of beef were put in an employee’s pickup truck rather than in the storage freezer.

Answer 22

Adequate documents and records, physical control over assets and records, and independent checks on performance

Question 23

For each misstatement, identify one or more types of controls that were absent

5. An accounts payable clerk processed payments to himself by adding a fictitious vendor address to the approved vendor master file

Answer 23

Adequate separation of duties

Question 24

For each misstatement, identify one or more types of controls that were absent

6. During the physical count of inventory of the retail grocery, one counter wrote down the wrong description of several products and miscounted the quantity

Answer 24

Independent checks on performance

Question 25

For each misstatement, identify one or more types of controls that were absent

7. A salesperson sold an entire carload of lamb at a price below cost because she did not know the cost of lamb had increased in the past week

Answer 25

Proper authorization of transactions and activities

Question 26

For each misstatement, identify one or more types of controls that were absent

8. A vendor’s invoice was paid twice for the same shipment because the vendor sent a duplicate copy of the original 2 weeks after the payment was due

Answer 26

Adequate documents and records

Question 27

For each misstatement, identify the transaction-related audit objectives impacted

1. On the last day of the year, a truckload of beef as set aside for shipment but was not shipped. Because it was still on hand the inventory was counted. The shipping document was dated last day of the year, so it was also included as a current-year sale

Answer 27

Timing

Question 28

For each misstatement, identify the transaction-related audit objectives impacted

2. The incorrect price was used on sales invoices for billing shipments to customers because the wrong price was entered into the computer master file of prices

Answer 28

Accuracy

Question 29

For each misstatement, identify the transaction-related audit objectives impacted

3. A vendor invoice was paid even though no merchandise was ever received. The accounts payable software application does not require the input of a valid receiving report number before payment can be made

Answer 29

Occurrence

Question 30

For each misstatement, identify the transaction-related audit objectives impacted

4. Employees in the receiving department took sides of beef for their personal use. When a shipment of meat was received, the receiving department filled out a receiving report and forwarded it to the accounting department for the amount of goods actually received. At the time, two sides of beef were put in an employee’s pickup truck rather than in the storage freezer.

Answer 30

Occurrence

Question 31

For each misstatement, identify the transaction-related audit objectives impacted

5. An accounts payable clerk processed payments to himself by adding a fictitious vendor address to the approved vendor master file

Answer 31

Occurrence

Question 32

For each misstatement, identify the transaction-related audit objectives impacted

6. During the physical count of inventory of the retail grocery, one counter wrote down the wrong description of several products and miscounted the quantity

Answer 32

Accuracy

Question 33

For each misstatement, identify the transaction-related audit objectives impacted

7. A salesperson sold an entire carload of lamb at a price below cost because she did not know the cost of lamb had increased in the past week

Answer 33

Accuracy

Question 34

For each misstatement, identify the transaction-related audit objectives impacted

8. A vendor’s invoice was paid twice for the same shipment because the vendor sent a duplicate copy of the original 2 weeks after the payment was due

Answer 34

Occurrence