Before goods are shipped on account, a properly authorized person must

verify that the unit price is accurate

Which accounts are involved in the sales class of transactions?

accounts receivable and sales returns and allowances

cash and allowance for uncollectible accounts

sales allowances and accounts receivable

The accurate recording of sales transactions concerns all of the following except for

shipping the amount of goods ordered

accurately billing for the amount of goods shipped.

accurately recording the amount billed in the accounting records.

Which of the following is a correct statement regarding analytical procedures?

Auditors should also compare the results of their analytical procedures to budgets and industry trends.

If an auditor identifies a possible misstatement in sales using analytical procedures, accounts payable will be the likely offsetting misstatement

If sales are overstated, the income statement will be incorrect, but the balance sheet will be correct

If an analytical procedure uncovers an unusual fluctuation, the auditor must assume fraud is involved.

Inventory is a complex area to audit for all except which of the following reasons?

Inventory valuation includes few estimates.

Inventory is often in different locations

There are several acceptable valuation methods and some entities use different methods for different types of inventory

Inventory is often the largest account on the balance sheet.

) In most manufacturing companies, the inventory and warehousing cycle begins with the

acquisition of raw materials for production.

completion of production of a customer's order.

initiation of production of a customer's order

________ accumulate costs by individual jobs as material is issued into production and labor costs are incurred.

Just-in-time production systems

The main difference between job order and process costing systems is that

one accumulates costs by individual jobs and the other by particular processes.

one accumulates costs by materials issued and the other by labor incurred.

one emphasizes costs accumulated in completed products and the other emphasizes costs associated with work-in-process.

one emphasizes costs adding value to the product and the other emphasizes costs incurred because of waste, scrap, and obsolescence.

From which of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

observation of physical inventory counts

written inventory representations from management

confirmation of inventories in a public warehouse

auditor's recomputation of inventory extensions

Which of the following is a business function related to sales returns and allowances?

processing and recording credit memos

writing off uncollectible accounts

Which one the following procedures performed for the billing function provides evidence for the completeness assertion?

making sure that all shipments have been billed

making sure that no shipment has been billed more than twice

making sure that each shipment is billed at the correct amount

making sure that each shipment is billed to the proper customer

Which of the following test of controls is useful to test the completeness objective for cash receipts?

Observe endorsement of incoming checks.

Compare shipping documents with sales records.

Examine evidence that the receivable master file is reconciled to the general ledger.

Observe if the client reconciles the bank account.

Cutoff misstatements occur

randomly without causes related to errors or fraud.

How might the auditor determine whether a client has limited rights to accounts receivable?

Review minutes from board of directors meetings Inquiries of the client Yes Yes

Review minutes from board of directors meetings Inquiries of the client No No

Review minutes from board of directors meetings Inquiries of the client Yes No

Review minutes from board of directors meetings Inquiries of the client No Yes

You are reviewing sales to discover cutoff problems. If the client's policy is to record sales when title to the merchandise passes to the buyer, then the books and records would contain errors if the December 31 entries were for sales recorded

before the merchandise was shipped.

at the time the merchandise was shipped.

several days subsequent to shipment.

The net realizable value of accounts receivable is equal to:

gross accounts receivable less allowance for uncollectible accounts.

gross accounts receivable less returns and allowances.

gross accounts receivable less sales discounts.

What typically ends the acquisitions and payment cycle?

issuance of a purchase requisition or request for purchase of goods/services

issuance of a payment on accounts payable

When reviewing the controls and procedures in the acquisition and payment cycle,

personnel who record the acquisitions should not have access to cash or other assets

the accounts payable department should account for all receiving reports to assure that the occurrence objective is satisfied.

companies cannot record the liability for the acquisition until the invoice is received from the vendor.

A written purchase order is a contractual document that is

an offer to buy goods or services.

not enforceable if it is not in writing.

an acceptance of a vendor's catalog offer to sell.

Which one of the following duties should not be assigned the purchases department?

authorizing the acquisition of goods

reviewing vendors' catalog descriptions and prices for standardized items

Cutoff procedures for inventory purchased should be designed by companies to assure that

inventory received before year-end was recorded before year-end.

inventory included in the year-end inventory count has been paid.

inventory owned by the company has been received

The auditor needs to be aware that most users of financial statements rely most heavily on the ________ for making decisions.

statement of stockholders' equity

The most effective and efficient audit approach in the examination of the income statement would be which of the following?

Examine income statement accounts concurrently with the related balance sheet accounts.

Compare company's components of net income to other businesses in the same industry.

Compare company's components of net income to the previous two years

Which of the following audit tests both have the effect of simultaneously verifying balance sheet and income statement accounts?

tests of details of balances and substantive tests of transactions

analytical procedures and substantive tests of transactions

tests of controls and substantive tests of transactions

To ensure proper segregation of duties, who should maintain the perpetual inventory master files?

accounting department personnel

production personnelproduction personnel

When auditing inventory cost accounting, the auditor is concerned with all of the following except for

documents and records for transferring inventory.

physical controls over inventory.

Almost all companies need physical controls over their assets to prevent loss. Which of the following is not an example of such a control?

perpetual inventory master files

approved prenumbered documents for authorizing movement of inventory

custody of assets assigned to specific responsible individuals

Inventory is often a significant part of a company's current assets. Because of its importance,

auditors are required by auditing standards to observe the client taking a physical inventory count.

price tests must be performed to verify whether the physical counts were correctly summarized.

auditors are required by auditing standards to take the physical inventory for the client.

Which of the following is not a function within the inventory and warehousing cycle?

process invoices for shipped goods

Which of the following is a continuously updated computerized record of inventory items purchased, used, sold, and on hand for merchandise, raw materials, and finished goods?

perpetual inventory master file

MCQ FA1

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Other

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Phương Anh Lê

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matching of shipping document with sales invoice

receipt of sales order from the customer

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