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Yaeger AUD > SIMs Wrong Answers > Flashcards

SIMs Wrong Answers Flashcards

0
Q

When the current period financial statements of a nonissuer have been compiled or reviewed and those of prior period have been audited, the accountant should…2

A

1 issue appropriate compilation or review report on current period FS

2 include as separate paragraph an appropriate description of responsibility assumed for FS of prior period

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1
Q

Financial statements were audited in 20X2 and reviewed in 20X3:

If the prior audit report is not reissued, there should be…

A

No reference to the prior year’s audited financial statements in
The introductory paragraph

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2
Q

In a review report where should the reference to the American
Institute of Certified Public Accountants be mentioned?

A

Auditor’s responsibility (3rd paragraph)

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3
Q

Financial statements were audited in 20X2 and reviewed in 20X3:

Where should e comparison of the scope of a review be to an audit?

A

Introductory (first paragraph)

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4
Q

Negative assurance, quote in report 2

A

“Nothing came to the accountant’s attention”

“We are not aware”

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5
Q

Financial statements were audited in 20X2 and reviewed in 20X3:

Where should the type of opinion expressed on the prior year’s audited financial statements be located?

A

In the fifth separate paragraph

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6
Q

Financial statements were audited in 20X2 and reviewed in 20X3:

Should there be a reference to updating the prior year’s auditor’s report for events and circumstances occurring after that date, in the fifth paragraph?

A

No

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7
Q

Inspection consists of…

A

Examining documents or records

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8
Q

Examined sales invoices to see if they were initialed by the credit manager indicating credit approval.

A

Inspection to test controls

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9
Q

To test controls look for a…

A

Yes or no answer to not a dollar value

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10
Q

Examined invoices to support additions to the fixed asset account during the year. The auditor is gathering audit evidence regarding…

A

Existence and completeness of fixed assets on the balance sheet

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11
Q

Agreed sales invoices to credit files to determine whether the customer had a credit file and had been approved for credit. What is the auditor doing?

A

Reperformance, to test controls over credit approval

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12
Q

Reperfromance

A

Auditor’s independent execution of procedures or controls that
Were originally performed as part of entity’s internal control

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13
Q

When asking the accounting manager how often cash is deposited and by whom, the auditor is determining if…

A

Control procedures over cash are implemented and operating effectively

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14
Q

Would a standard report state in the scope paragraph that an audit includes assessing internal control?

A

No

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15
Q

In a standard report an auditor’s concurrence with the accounting change…

2) unless…

A

Need not be explicitly stated, it is implicit

2) implicit unless auditor takes exception to the change

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16
Q

Determine if following is significant or not and explain why:

Warranty expense may not be valued correctly

A

Accounting estimates/areas where there is measurement uncertainty
Represent significant risk

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17
Q

The risk of material misstatement of the financial statements is generally greater when account balances and transactions are…(compared to what)

A

Subject to estimation rather than precise measurement

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18
Q

The risk of material misstatement of the financial statements is generally greater when account balances and transactions are subject to estimation rather than precise measurement because of…

A

Inherent subjectivity in estimating future events

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19
Q

Determine if following is significant or not and explain why:

Trade accounts payable may not be valued correctly.

A

Not significant risk

Trade accounts payable is subject to systematic processing and
Recording of these transactions is routine

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20
Q

With trade accounts payable, dealing with the same provider repeatedly helps…

A

Uncover errors

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21
Q

Although the assertion of trade accounts payable not being valued correctly should be tested it is…

A

Not likely to be a significant risk

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22
Q

Determine if following is significant or not and explain why:

The company sold bonds for the first time this past year to fund expansion.

A

Significant risk

The accounting involved is unusual, infrequent or sizable

23
Q

The type of change in record keeping and reporting a new bond issuance requires individuals responsible for financial reporting to…

2) what would this do?

A

Learn and understand bond valuation

2) significantly increase the risk that FS may be misstated

24
Q

Determine if following is significant or not and explain why:

Travel and estimation expense increased 10% since last year, but no new employees were hired.

A

Not significant

Travel and entertainment is not unusual, infrequent or outside
The normal course of business for company

25
Q

When Travel and entertainment expenses increase 10% since the last year, it is probably…2

A

Not material and can be explained through inquiry of management

26
Q

Determine if following is significant or not and explain why:

Interest income has decreased significantly over the past year.

A

Not significant

Interest income is easily audited by comparing the company’s
valuation with 1099-INT issued by bank

27
Q

Significant decrease in interest income during the year would most likely be due to…2

A

1 interest rate decreases

2 increased use of cash reserves to purchase fixed assets

28
Q

The interest income account is not subject to…

A

Estimation or complex calculations

29
Q

Determine if following is significant or not and explain why:

Major construction on the company’s warehouse building was completed by one of the shareholder’s spouse’s family members

A

Significant risk

Large capital expense and related party transaction

30
Q

AU identifies significant related party transactions as…

A

A risk factor related to fraudulent financial reporting

31
Q

If a risk is related to recent economic, accounting or other developments or the risk is related to judgmental matters it is…

A

Considered a significant risk

32
Q

Indicators of material weaknesses in internal control include:

Identification of…

A

Fraud whether or not material on part of senior management

33
Q

Indicators of material weaknesses in internal control include:

Restatement of previously issued…

A

Financial statements to reflect correction of material misstatement
Due to fraud of error

34
Q

Indicators of material weaknesses in internal control include:

Identification by auditor of material misstatement of financial statements under audit in circumstances that indicate that…

A

Misstatement would not have been detected by entity’s internal
control

35
Q

Indicators of material weaknesses in internal control include:

In effective oversight of the entity’s…

A

Financial reporting and internal control by those charged with governance

36
Q

What paragraph is an accountant’s lack of independence disclosed in in a compilation report?

A

Fourth paragraph

37
Q

What paragraph would the statement, “a compilation is substantially less in scope than an audit be” in a compilation report?

A

It would not be in a compilation report, but in review report

38
Q

Goods ordered by customers are shipped, but are not billed to anyone.

What internal control should be implemented?

A

Compare shipping documents with sales invoices when goods

Are shipped

39
Q

Comparing shipping documents with sales invoices when goods are shipped should…

A

Prevent customers from receiving goods without being billed

40
Q

If the shipping clerk does not have an invoice for the order about to be shipped, the shipping should be…

A

Delayed until the billing clerk generates an invoice

41
Q

Goods are removed from inventory for unauthorized orders.

What internal control should be implemented?

A

Require approved sales orders for goods to be removed from

inventory

42
Q

Requiring approved sales orders for goods to be removed from inventory will…

A

Reduce possibility of inventory taken for unauthorized purposes

43
Q

Inventory can be stolen from a business that does not have…

A

Strict controls over when goods can be removed from inventory

44
Q

Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious transactions.

What internal control should be implemented?

A

Compare sales invoices with shipping documents and approved customer orders before invoices are mailed

45
Q

Comparing sales invoices with shipping documents and approved customer orders before invoices are mailed should…

A

Prevent recording sales for fictitious transactions

46
Q

Sales transactions should have…3

A

1 an approved sales order

2 a shipping document and

3 an invoice

47
Q

Customers’ checks are misappropriated before being forwarded to the cashier for deposit.

What internal control should be implemented?

A

Mail monthly statements to customers with outstanding balances

48
Q

If checks are misappropriated before they are deposited, the customer’s…

A

Account will not reflect the payment made

49
Q

Different customer accounts are each credited for the same cash receipt.

What internal control should be implemented?

A

Comparing the total amount posted to the accounts receivable
ledger with the amount included in the bank deposit slip

50
Q

Comparing the total amount posted to accounts receivable ledger with the amount included in the bank deposit slip will determine if…

A

The same payment was credited to two different customer accounts

51
Q

Customers’ checks are properly credited to customer accounts and are properly deposited, but errors are made in recording in the cash receipts journal.

What internal control should be implemented?

A

Employee other than the bookkeeper should prepare a bank reconciliation

52
Q

An employee other than the bookkeeper should prepare a bank reconciliation and find the discrepancy between…

A

Book and bank

53
Q

Customers’ checks are misappropriated after being forwarded to the cashier for deposit.

What internal control should be implemented?

A

Compare total amount posted to the accounts receivable ledger
To the bank deposit slip

54
Q

Comparing the total amount posted to the accounts receivable ledger
To the bank deposit slip will highlight…

A

Any failure to deposit payments

55
Q

If duties are properly segregated, the preparation of the bank deposit is performed by a different person than the one…

A

Posting payments to the A/R ledger using remittance advices

Yaeger AUD (38 decks)

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