AAA1-Chapter 6

Which of the following controls of a sales system ensure that all goods despatched are completely and accurately invoiced

• Good despatched notes are matched to sales invoices

• Sales invoices are sequentially numbered

• Sales invoices are matched to customer orders

Which of the following procedures are TESTS OF CONTROL an auditor should perform in testing the inventory cycle of their client whilst attending the inventory count?

(1) Observe whether the client’s staff are following the inventory count instructions

(2) Review inventory present in the warehouse for evidence of damage or obsolescence

(3) Obtain a sample of the last goods received notes and goods despatched notes and follow through to ensure inclusion in the correct accounting period

(4) Inspect and review management’s inventory count instructions

• 2 and 3

• 1 and 4

• 1 and 2

• 3 and 4

One of the control objectives of the sales system of B Co is to ensure that goods and services are sold to credit-worthy customers. Which of the following control activities would assist B Co in achieving this objective? 

• All sales orders are based on authorised price lists

• Credit limits are checked before sales orders are accepted.

• Overdue debts are chased each month by the credit controller

• The aged-debt listing is reviewed by the finance director on a monthly basis

1.       Which of the following controls helps to ensure that payroll payments are only made to bona fide employees?

1) Personnel records maintained for all employees

 (2) Comparison of bank transfer listing with payroll

(3) Segregation of duties between staff involved in human resources and payroll functions

(4) Reperformance of the calculation of a sample of payroll deductions

• (1) and (2) 

• (1) and (3) 

• (2) and (4) 

• (3) and (4)

1.       B Co maintains perpetual inventory records.  Which of the following control activities would contribute to the auditor's confidence that inventory recorded in the financial statements exists?

(1) Procedures to identify obsolete and damaged inventory

(2) Physical safeguards to protect inventory from theft

(3) Sequential numbering of goods dispatched notes

 (4) Reconciliation of inventory records to results of inventory counts

• (1) and (2) 

• (1) and (3) 

• (2) and (3) 

• (2) and (4)

1.       Which of the following is not a test of control?

• Inspection of purchase order documentation to confirm that it has been authorised 

• Review of monthly bank reconciliations performed by the audit client 

• Examination of purchase invoices for evidence of mathematical accuracy checks 

• Agreement of the cost of non-current asset additions to purchase documentation

1.       Which  of  the  following  substantive  procedures  provides  evidence  over  the  EXISTENCE  of  non-current assets?

• Select  a  sample  of  assets  included  in  the  non-current  asset  register  and  physically  verify  them  at  the  client premises

• Review the repairs and maintenance expense account to identify any items of a capital nature

• For assets disposed of, agree the sale proceeds to supporting documentation and cash book

1.       Which of the following statements is/are true with respect to analytical procedures?

(1) Analytical procedures can be used throughout the audit.

(2) Analytical procedures must be used as risk assessment procedures.

• (1) only 

• (2) only

• (1) and (2)

• Neither (1) nor (2)

1.       Which two of the following would be classified as substantive procedures?

(1) Tests of control

(2) Walk-through tests

(3) Analytical procedures

(4) Tests of details 

• (1) and (2)

• (1) and (4)

• (2) and (3)

• (3) and (4)

1.       The auditor of G Co is performing audit procedures to confirm the company's ownership of motor vehicles. Which of the following would provide the most persuasive evidence of this? 

• Physical inspection of the motor vehicles

• Inspection of vehicle registration documents 

• Checking that the motor vehicles are recorded in the non-current asset register