final Flashcards
When auditing inventories, an auditor would least likely verify that
the client has used proper inventory pricing.
damaged goods and obsolete items have been properly accounted for.
the financial statement presentation of inventories is appropriate.
all inventory owned by the client is on hand at the time of the count.
D
The information for inventory recordkeeping typically comes from all of the following sources, except
Multiple Choice
shipping department, when goods have been sold.
receiving department, when goods are returned by customers.
inventory stores, when purchased goods are received.
accounting department, when accounts payable are paid.
D
A cutoff test reveals goods received and counted in inventory but not recorded in purchases. The effect on the financial statements is
Multiple Choice
There is no effect because the inventory records were adjusted to the physical count.
Net income is overstated.
Net income is understated.
Net income is not affected until the subsequent period.
B
Which cycle is not directly linked to the production cycle?
Multiple Choice
Acquisition and expenditure cycle.
Finance and investment cycle.
Revenue and collection cycle.
Payroll cycle.
B
Most businesses try to estimate sales levels and seasonal timing and then try to plan production schedules to meet customer demand.
True or False
True my bro
An auditor is examining a nonpublic company’s inventory procurement system and has decided to perform tests of controls. Under which of the following conditions should the auditor perform tests of controls?
Multiple Choice
The auditor hopes to reduce the amount of work to be done in assessing inherent risk.
Tests of controls are always performed when the auditor begins to assess control risk.
Significant weaknesses were found in the company’s internal control.
The auditor believes that testing the controls could lead to a reduction in overall audit time and cost.
D
Most businesses try to estimate sales levels and seasonal timing and then try to plan production schedules to meet customer demand.
True or False
True
If inventory located is off the client’s premise the auditor might confirm the amount with the custodian to satisfy evidence requirements.
True or False
True
When inventory quantities are determined solely by means of a physical count it is necessary for the auditor to be present at the time of the count.
True or False
True
Your client plans to count inventory at several locations on the same day. No location is material in amount, but the total of inventory is quite material. How is an auditor likely to plan to observe?
Multiple Choice
Observe a sample of locations on a surprise basis.
Work with the client to determine which locations to observe.
Observe all counts at all locations by using the required number of auditors.
A
All companies use a registrar to keep track of stock certificates issued and outstanding.
True or False
False
The typical business activity of the finance and investment cycle would not include
Multiple Choice
proposals for cash forecasts, capital budgets, and business expansion.
analysis of excess cash funds.
reconciliation of cash.
sale of stocks, bonds, or notes.
C
If it would be appropriate to confirm capital stock, the auditor would obtain the confirmation from:
Multiple Choice
management.
the board of directors.
stockholders.
an independent registrar.
D
A transfer agent:
Multiple Choice
keeps the stockholder list and, from time to time, determines the shareholders eligible to receive dividends.
handles the exchange of shares, canceling the shares surrendered by sellers and issuing new certificates.
records notes and bonds payable.
makes investment decisions for an entity.
B
The focus of controls in the finance and investment cycle is on:
Multiple Choice
proper authorizations and competent personnel.
computer controls over transactions.
physical security of assets.
prenumbered documents.
A
