An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when

no reply to a positive confirmation request is received.

collectability of the receivables is in doubt.

no reply to a negative confirmation request is received.

pledging of the receivables is probable.

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide the strongest evidence concerning the

existence of the balances confirmed.

internal control over balances confirmed.

collectability of the balances confirmed.

ownership of the balances confirmed.

Vouchers should be stamped PAID to

facilitate preparation of the bank reconciliation.

indicate posting in the voucher register.

A voucher package is used to

provide a source document for recording the purchase of a good or service.

document completion of services.

An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal. The purpose of this substantive audit procedure most likely was to

determine that purchases were properly recorded.

test whether payments were for goods actually ordered.

identify usually large purchases that should be investigated further.

verify that cash disbursements were for goods actually received.

Which of the following situations indicates a potential material weakness in internal control over acquisition and expenditure?

The same person signs checks and stamps vouchers PAID.

Unacceptable goods are not scheduled on receiving reports.

Purchase orders are not prepared for services acquired directly under authorization of department heads.

The same person authorizes voucher packages and signs checks.

When auditing merchandise inventory at year-end, the auditor performs a purchase cutoff test to obtain evidence that

all goods owned at year-end are included in the inventory balance.

no goods held on consignment for customers are included in the inventory balance.

all goods purchased before year-end are received before the physical inventory count.

no goods observed during the physical count are pledged or sold.

What evidence is appropriate to determine whether recorded purchase transactions are valid and the vendors charged the correct prices?

Receiving reports and purchase orders

Purchase requisitions and purchases orders

Purchase requisitions and accounts payable entries

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

Reconcile receiving reports with related cash payments made just prior to year-end.

Contrast the ratio of accounts payable to purchases with the prior year's ratio.

Vouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

stamped "paid" by the check signer.

approved for authorized purchases.

supported by a vendor's invoice.

Which of the following is an internal control activity that could prevent a paid disbursement voucher from being presented for payment a second time?

The official who signs the check should compare the check with the voucher and should stamp PAID on the voucher documents.

Vouchers should be prepared by individuals who are responsible for signing disbursement checks.

Disbursement vouchers should be approved by at least two responsible management officials.

The date on a disbursement voucher should be within a few days of the date the voucher is presented for payment.

The audit procedures used in an observation of the client's physical inventory taking are designed primarily to

test and observe the client's physical count of inventory.

verify independently the physical counts obtained by the client.

determine whether inventory contains obsolete goods.

assist the client in taking test counts of year-end inventory.

Periodic or cycle counts of selected inventory items are made at various times during the year rather than during a single inventory count at year-end. Which of the following is necessary if the auditor plans to observe inventories at interim dates?

Perpetual inventory records are maintained.

Complete recounts by independent teams are performed.

Inventory balances are rarely at low levels.

Unit cost records are integrated with production accounting records.

Generally accepted accounting principles (GAAP) require that inventory be recorded at

None of the choices are correct.

the higher of cost or net realizable value less a normal profit (floor).

the higher of cost or fair market value.

the lower of cost or fair market value.

Which of the following steps would not normally be included in a program for a physical inventory observation?

Vouch unit prices to vendors' invoices or other cost records.

Obtain the client's inventory counting instructions and review them for completeness.

Obtain the numbers of the last five receiving reports and last five shipping documents.

Inspect the tags used and unused and record the tag numbers used.

Your client counts inventory three months before the end of the fiscal year. Internal controls over inventory are excellent. Which procedure is not necessary for the inventory roll- forward?

Request the client to recount inventory at the end of the year.

Check that shipping documents for the last three months agree with perpetual records.

Tracing receiving reports for the last three months to perpetual records.

Compare gross margin percentages for the last three months.

Which of the following would not be a place in which owners' equity transactions would be documented?

Minutes of the meetings of the board of directors

Securities offering registration statements

handles the exchange of shares, canceling the shares surrendered by sellers and issuing new certificates.

keeps the stockholder list and, from time to time, determines the shareholders eligible to receive dividends.

makes investment decisions for an entity.

records notes and bonds payable.

require the borrower to maintain certain financial characteristics.

describe the collateral of the loan.

All of these choices are correct.

describe the lender's responsibilities.

Loan covenants are used for which of the following reasons?

To protect the lender from the borrower substantially weakening the borrower's financial position.

To protect the borrower from the lender calling the loan early.

To protect shareholders from management taking on too much debt.

To protect the auditors from false information by the borrower.

Which of the following is the most important audit consideration when examining the stockholders' equity section of a client's balance sheet?

Entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors.

Stock dividends and stock splits during the year under audit were approved by the stockholders.

Stock dividends are capitalized at par or stated value on the dividend declaration date.

Changes in the capital stock account are verified by an independent stock transfer agent.

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, canceled stock certificates should

be defaced to prevent reissuance and attached to their corresponding stubs.

not be defaced but be segregated from other stock certificates and retained in a canceled certificates file.

be defaced and sent to the secretary of state.

not be defaced but be segregated from other stock certificates and retained in a canceled certificates file.

ch.7-11

Authored by Yeonjae Seo

Specialty

University

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101 questions

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MULTIPLE CHOICE QUESTION

15 mins • 1 pt

"Bill and hold" refers to an arrangement where

sales are billed but not collected.

inventory is held but not billed.

sales are recorded but are not shipped.

sales are shipped but are not recorded.

MULTIPLE CHOICE QUESTION

15 mins • 1 pt

The file that contains sales transactions that were initiated in the system but are not yet completed is the

pending order master.

inventory master.

credit check file.

sales detail.

MULTIPLE CHOICE QUESTION

15 mins • 1 pt

The assertion that auditors will probably emphasize in the revenue and collection cycle is

accuracy.

classification.

completeness.

occurrence.

MULTIPLE CHOICE QUESTION

15 mins • 1 pt

Vouching debits from a sample selection of customers' accounts receivable records to supporting sales invoices is an audit procedure designed to obtain evidence about the assertion of

occurrence.

accuracy.

completeness.

classification.

MULTIPLE CHOICE QUESTION

15 mins • 1 pt

Confirmations of accounts receivable provide the most evidence for which of the following assertions?

rights and obligations

completeness

existence

valuation or allocation

MULTIPLE CHOICE QUESTION

15 mins • 1 pt

To determine whether sales transactions have been recorded in the proper accounting period, the auditor performs cutoff tests. Which of the following best describes the overall approach used when performing cutoff tests?

Confirm year-end transactions with regular customers.

Examine cash receipts in the subsequent period.

Analyze transactions occurring within a few days before and after year-end.

Ascertain that management has included in the representation letter a statement that transactions have been accounted for in the proper accounting period.

MULTIPLE CHOICE QUESTION

15 mins • 1 pt

In determining the adequacy of the allowance for uncollectible accounts, the least valuable evidence would be obtained from

no reply to negative confirmations.

an aging schedule of past due accounts that the auditor has tested.

financial statements of individual customers.

correspondence with the client's collection agency.

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ch.7-11

"Bill and hold" refers to an arrangement where

The file that contains sales transactions that were initiated in the system but are not yet completed is the

The assertion that auditors will probably emphasize in the revenue and collection cycle is

Vouching debits from a sample selection of customers' accounts receivable records to supporting sales invoices is an audit procedure designed to obtain evidence about the assertion of

Confirmations of accounts receivable provide the most evidence for which of the following assertions?

To determine whether sales transactions have been recorded in the proper accounting period, the auditor performs cutoff tests. Which of the following best describes the overall approach used when performing cutoff tests?

In determining the adequacy of the allowance for uncollectible accounts, the least valuable evidence would be obtained from

An auditor should normally perform alternative procedures to substantiate the existence of accounts receivable when

In the revenue and collection cycle, the auditor checks the numerical sequence of shipping documents. This procedure is related to which of the following assertions?

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide the strongest evidence concerning the

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