Exam 3 Review

Question 1

an auditors decision either to apply analytical procedures as substantive tests or to perform tests of details is determined by their

Answer 1

relative effectiveness and efficiency of the tests

Question 2

which represents a key control for ensuring sales are properly authorized when assessing RMM for sales?

Answer 2

sales orders are sent to the credit department for approval

Question 3

which comparison would be most useful to an auditor in evaluating the results of an entity’s operations?

Answer 3

current year revenue to budgeted current year revenue

Question 4

what might be detected by an auditor’s review of the client’s sales cutoff?

Answer 4

inflated sales for the year

Question 5

when scheduling the audit work to be performed on an engagement, the auditor should consider confirming AR balances at an interim date if

Answer 5

the RMM relative to financial statement assertions about AR is low

Question 6

when performing tests of transactions for the sales cycle for the occurrence related audit objective, the auditor is concerned with all except

Answer 6

sales for which a shipping document exists but the client didn’t record

Question 7

tracing bills of lading to sales invoices provides evidence that

Answer 7

shipments to customers were invoiced

Question 8

the same employee should match vendors invoices with receiving reports and

Answer 8

recompute the calculations on vendor invoices

Question 9

the authority to accept incoming goods in receiving should be based on an

Answer 9

approved purchase order

Question 10

which control is not appropriate for PPE?

Answer 10

disposal of fully depreciated assets

Question 11

to determine whether AP is complete, an auditor performs a test to verify that all merch. received is recorded. the auditor selects the sample from

Answer 11

receiving reports

Question 12

an auditing AP, an auditor focuses primary on the _______ assertion

Answer 12

completeness

Question 13

which procedure is least likely to be performed before the balance sheet date?

Answer 13

search for unrecorded liabilities

Question 14

in testing PPE balances, an auditor physically examined new additions listed on analysis of PPE. this procedure tests:

Answer 14

existence

Question 15

the auditor may conclude that depreciation changes are insufficient by noting:

Answer 15

excessive recurring losses on assets retired