Finals Flashcards
Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the
Receiving Department
Which of the following controls is most effective in providing assurance that recorded purchases are free of material errors?
Purchase orders, receiving reports, and vendors’ invoices are independently matched in preparing vouchers
to provide assurance that each voucher is submitted and paid only once, an auditor would most likely examine a sample of paid vouchers and determine whether each voucher is
stamped “paid” by the check signer
which of the following is a substantive procedure that an auditor most likely would perform to verify the existence assertion and the accuracy, valuation, and allocation assertion about recorded accounts payable?
vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports
when using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely is
vendors with whom the entity has previously done business
which of the following activities performed by a department supervisor most likely would help in the prevention or detection of payroll fraud?
approving a summary of hours each employee worked during the pay period
which of the following human resources department procedures reduces the risk of payroll fraud and represents an appropriate responsibility for the department
authorizing the addition or deletion of employees from payroll
an auditor most likely would perform substantive tests of details on payroll transactions and balances when
analytical procedures indicate unusual fluctuations in recurring payroll entities
vouching selected items from the payroll journal to employee time cards that have been approved by supervisory personnel provides evidence that
employees worked the number of hours for which their pay was computed
an auditor’s test of controls over the issuance of raw materials to production would most likely include
examining materials requisitions and reperforming client controls designed to process and record issuances
which of the following internal control activities most likely would be used to maintain accurate inventory records
periodic inventory counts are used to adjust the perpetual inventory records
an auditor most likely would analyze inventory turnover rates to obtain evidence concerning relevant assertions about
accuracy, valuation, and allocation
which of the following auditing procedures most likely would provide assurance regarding a manufacturing entity’s relevant assertions about the inventory valuation
testing the entity’s computation of standard overhead rates
to obtain assurance that items reflected in a client’s perpetual inventory records actually exist, an auditor would most likely trace
items in the inventory perpetual records to inventory tags and auditor’s test counts
recomputing the unexpired portion of insurance policies in effect tests which of the following assertions for prepaid insurance
accuracy, valuation, and allocation
an auditor typically sets inherent risk for intangible assets at this level
high
in verifying the amounts of goodwill recorded by a client in the current period, the most convincing evidence an auditor can obtain is by comparing the recorded amounts of assets acquired and liabilities assumed with the
fair values as evidenced by independent appraisals
one objective of internal control is to record PPE additions correctly as to account, amount, and period. which of the following environmental considerations indicates that the risks of material misstatements of these additions are high
most construction is performed in-house
to strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic
inspection of equipment and reconciliation with accounting records
an analysis of which of the following accounts would best aid in verifying that all fixed assets have been capitalized
repairs and maintenance
an auditor traces the serial numbers on equipment to a nonissuer’s sub-ledger. which of the following management assertions is supported by this test
completeness
during an audit of an issuer of bonds, the auditor should obtain written confirmation regarding debenture transactions from the
trustee
during its fiscal year, a company issued, at a discount, a substantial amount of first mortgage bonds. when performing audit work in connection with the bond issue, the independent auditor should
review the minutes for authorization
when a client’s company does not maintain its own stock record, the auditor should obtain written confirmation from the transfer agent and the registrar concerning
the number of shares issued and outstanding
an auditor should vouch corporate stock issuances and treasury stock transactions to the
minutes of the board of directors
a company issued bonds for cash during the year under audit. to ascertain that this transaction was properly recorded, the auditor’s best course of action is to
trace the cash received from the issuance to the accounting records
an auditor selects a sample of recorded cash receipts and vouches them to accounts receivable and customer orders. the procedure is relevant to which assertion
occurrence
the best evidence regarding year-end bank balances is documented in the
bank reconciliation
the primary purpose of sending a standard confirmation request to financial institutions with which the client has done business during the year is to
corroborate information regarding deposit and loan balances
an auditor should test bank transfers for the last part of the audit period and first part of the subsequent period to detect whether
cash balances were overstated because of kiting
