Auditing and Internal Control Quiz

Which of the following would an auditor be most likely to examine to determine whether controls are operating as designed?

• Gross margin information regarding the client's industry

• Confirmation of receivables verifying account balances

• Sales orders documenting credit approval

• Anticipated results documents in budgets or forecasts

An auditor examines a sample of sales invoices to determine if they were recorded in the correct revenue accounts. What assertion is the auditor testing?

• Accuracy, valuation and allocation

• Classification.

• Completeness

• Occurrence

Which of the following procedures would be most effective in detecting an understatement of sales?

• Select sales delivery notes and check the details with the related sales invoices

• Select sales invoices and check the details with the related sales orders

• Select sales invoices and check the details with the related sales delivery notes

• Select sales orders and check the details with the related sales invoices

Which of the following approaches to evaluating the reasonableness of an accounting estimate would NOT provide sufficient audit evidence?

• Review subsequent events or transactions occurring prior to audit completion

• Develop an independent expectation of the estimate

• Review and test the process used to develop the estimate

• Review the minutes of board of directors and shareholder meetings for discussion of the estimate

Which TWO of the following are analytical procedures? 1. Checking a monthly payroll calculation

2. 2. Reviewing bank reconciliations 3.Comparing monthly sales totals from one month to another 4.Calculating the inventory holding period

• 1 and 2

• 1 and 3

• 2 and 4

• 3 and 4

From which of the following populations should an auditor select a sample when testing for the completeness of reported sales of a manufacturing company?

• Goods despatch notes

• Sales invoices

• Sales orders

• Sales receipts

Which of the following assertions are relevant to presentation of account balances and related disclosures in the financial statements? 1. Accuracy and valuation 2.Cut-off 3.Existence

• 1 only

• 1 and 3

• 1 and 2

• 3 only

Which of the following are examples of 'reperformance' in the context of procedures carried out by an auditor to obtain audit evidence? 1.Carrying out arithmetic checks on copy sales invoice documentation 2.Carrying out an end of year bank reconciliation 3.Extracting a trial balance from the general ledger

• 1, 2 and 3

• 1 and 2

• 2 and 3

• 1 and 3

Which TWO of the following substantive procedures provide evidence to support the OCCURRENCE assertion for revenue?

• Compare the reported revenue figure to the budget and to the previous year, investigating any significant differences

• Select a sample of invoices from the detailed sales listing and agree to GDNs

• Select a sample of goods despatched notes (GDNs) and agree to invoices in the detailed sales listing

• Select a sample of invoices and recalculate the invoiced amount agreeing to price list

Which of the following statements are correct? 1. Internal auditor should report to the finance director as the person best placed to implement any recommendations on a timely basis 2.Companies are not required to establish and maintain an internal audit function

• Neither 1 nor 2

• Both 1 and 2

• 1 only

• 2 only