Exam 3 Flashcards
Which of the below procedures would NOT test completeness of liabilities as of December 31?
a. Review open purchase orders as of December 31
b. Select several cash disbursements from Jan through Feb from the subsequent year and verify proper inclusion/exclusion
c. Confirm with the bank all debt and liabilities outstanding as of Dec 31
d. Select sever expenses from the AP aging in late December and determine proper inclusion/exclusion
d. Select sever expenses from the AP aging in late December and determine proper inclusion/exclusion
Which of the below items would most likely be included in other accrued liabilities?
a. Payable to Walmart for office supplies
b. Estimate of legal payments for lawsuits as of the end of the year
c. Payable to insurance company for December coverage
d. December rent expense
b. Estimate of legal payments for lawsuits as of the end of the year
The audit team selects an expense and the following information is discovered about this item: The item was received on December 30th 20X2, The item was paid for on Jan 2, 20X3, and the invoice for the item was received Jan1st, 20X3. Should there be an accrual on the books for this item as of December 31st, 20X2?
Yes
Which assertion is of primary concern when testing liabilities?
a. Existence
b. Completeness
c. Valuation/Accuracy
d. Rights/Obligations
d. Presentation/Disclosure
b. Completeness
Which of the below procedures would be least effective in testing completeness of payables and other liabilities as of year end?
a. Review bank confirmations for undisclosed loans
b. Review board of director meeting minutes for discussion of potential unrecorded liabilities
c. Select a sample of cash disbursements (outgoing checks) right before year end and determine proper inclusion/exclusion in the AP listing.
d. Review open purchase orders in the purchasing department to see if any were missed.
c. Select a sample of cash disbursements (outgoing checks) right before year end and determine proper inclusion/exclusion in the AP listing.
Which of the following assertions would be most concerning regarding prepaid expenses?
a. Existence/occurrence
b. Completeness
c. Rights/Obligations
d. Valuation/Accuracy
a. Existence/occurrence
While performing an inventory observation, you are observing and asking about any inventory held on consignment, which assertion are you concerned about?
a. Existence/occurrence
b. Completeness
c. Rights/Obligations
d. Valuation/Accuracy
c. Rights/Obligations
While performing an inventory observation, you see a pile of broken and unusable inventory items in one of the aisles. You note the items have count tags on them. Which assertion are you concerned about with respect to this?
a. Existence/occurrence
b. Completeness
c. Rights/Obligations
d. Valuation/Accuracy
d. Valuation/Accuracy
Which of the below observations of the purchases/acquisition process would give rise to fraud risk?
a. The purchasing agent works standing up
b. The purchasing department has a key to the inventory warehouse
c. The controller is who reconciles the bank statement
d. The inventory warehouse manager matches the shipping and receiving documents to open invoices and purchase orders.
b. The purchasing department has a key to the inventory warehouse
Which assertion is most concerning with respect to revenue for a for-profit public company?
existence/occurrence
