Audit Procedures and Internal Controls

A positive confirmation is more reliable evidence than a negative confirmation because A) fewer confirmations can be sent out. B) the auditor has a document which can be used in court. C) the debtor's lack of response indicates agreement with the stated balance. D) follow-up procedures are performed if a response is not received from the debtor

• fewer confirmations can be sent out.

• the auditor has a document which can be used in court.

• the debtor's lack of response indicates agreement with the stated balance.

• follow-up procedures are performed if a response is not received from the debtor

Which audit procedure would be used to test for the existence balance-related audit objective? A) Trace ten accounts from the aged trial balance to the accounts receivable master file. B) Confirm accounts receivable. C) Review large sales returns and allowances before and after the balance sheet date. D) Trace ten accounts from the trial balance to the accounts on the master file.

• Trace ten accounts from the aged trial balance to the accounts receivable master file.

• Confirm accounts receivable.

• Review large sales returns and allowances before and after the balance sheet date.

• Trace ten accounts from the trial balance to the accounts on the master file.

The auditor is reviewing the receivables listed on the aged trial balance for notes and related party receivables. Which balance-related audit objective is he trying to satisfy? A) detail tie-in B) existence C) classification D) all of the above

• detail tie-in

• existence

• classification

• all of the above

Which audit procedure would the auditor use to test for the cutoff balance-related audit objective? A) Review minutes of the board of directors meetings. B) Review the accounts receivable trial balance for large items. C) Use audit software to foot and cross-foot the aged trial balance. D) Select the last 20 sales transaction from the current year's sales journal and the first 20 from the subsequent year's and trace each to the related shipping documents.

• Review minutes of the board of directors meetings.

• Review the accounts receivable trial balance for large items.

• Use audit software to foot and cross-foot the aged trial balance.

• Select the last 20 sales transaction from the current year's sales journal and the first 20 from the subsequent year's and trace each to the related shipping documents.

A substantive tests of transactions for acquisitions that would be used to provide evidence regarding the occurrence assertion would be to A) compare the classification with the chart of accounts by referring to vendors' invoices. B) recompute the clerical accuracy on the vendors' invoice. C) review the acquisitions journal for large or unusual amounts. D) trace from a file of receiving reports to the acquisition journal.

• compare the classification with the chart of accounts by referring to vendors' invoices.

• recompute the clerical accuracy on the vendors' invoice.

• review the acquisitions journal for large or unusual amounts.

• trace from a file of receiving reports to the acquisition journal.

When testing the controls for the completeness transaction-related audit objectives, A) failure to record the acquisition of goods or services will generally understate net income. B) failure to record the acquisition of goods or services has no impact on the balance sheet. C) it is generally easy for the auditor to determine whether unrecorded transactions exist. D) the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls.

• failure to record the acquisition of goods or services will generally understate net income.

• failure to record the acquisition of goods or services has no impact on the balance sheet.

• it is generally easy for the auditor to determine whether unrecorded transactions exist.

• the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls.

Which of the following is not a key control in the acquisition and payment cycle? A) authorization of purchases B) authorization of credit C) timely recording and independent review of transactions D) authorization of payments

• authorization of purchases

• authorization of credit

• timely recording and independent review of transactions

• authorization of payments

A key internal control over the acquisition cycle is to ensure that the company requires recording transactions as soon as possible after the goods and services have been received. This satisfies the transaction-related audit objective of A) accuracy. B) completeness. C) timing. D) occurrence.

• accuracy

• completeness

• timing

• occurrence

Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather that the entity being audited satisfy the control objective that A) acquisitions are correctly valued. B) existing acquisitions are recorded. C) acquisitions are correctly classified. D) recorded acquisitions are for goods and services received.

• acquisitions are correctly valued.

• existing acquisitions are recorded.

• acquisitions are correctly classified.

• recorded acquisitions are for goods and services received.

_______ is a balance-related audit objective that is not applicable to liabilities. A) Existence B) Accuracy C) Detail tie-in D) Realizable value

• Existence

• Accuracy

• Detail tie-in

• Realizable value