JUNIOR: THE CALM BEFORE THE STORM MIDTERMS

Which of the following is an example of a no trail Test of Controls? 

• The auditor inspects a document for an authorized signatory. 

• The auditor recalculates the amortization recorded for an intangible asset

• The auditor makes inquiries and observations of personnel to determine how control procedures are performed.

• The auditor traces an individual accounts payable balance to the subsidiary ledger.

Which type of audit procedure is always required to be designed and performed by the auditor for each material class of transactions, account balance, and disclosure, irrespective of the assessed risks of material misstatement? 

• Test of Controls

• Substantive Procedures

•  Analytical Review Procedures

• Test of details of transactions

In the planning phase of an audit (Understanding the client and industry), which of the following is an appropriate audit procedure?

• Vouching transactions from the final record back to origin.

•  Reviewing prior-year work. 

• Selecting transactions and tracing them through processing to determine if controls are working properly.

• Physically examining assets.

A substantive analytical procedure involves comparing interest expense to the average outstanding balance of interest-bearing debt. This is an example of comparing current financial information with which of the following?

• Prior period information.

• Anticipated data.

•  Known or predictable relationships.

• Industry information.

 What is the primary purpose of performing an Analytical Review Procedure?

• To obtain audit evidence about the operating effectiveness of controls. 

• To obtain evidential matter on the items involved in an account balance.

• To study and compare relationships among accounting data and related information.

• To verify the mathematical accuracy of an account balance.

  
  

The audit objective "To determine whether cash exists at year-end" relates primarily to which financial statement assertion for cash balances?

• Completeness

• Rights and Obligations 

• Existence or Occurrence

• Valuation or Allocation

Which substantive audit procedure is primarily used to address the Completeness assertion for cash balances?

• Confirm bank balances as of the statement of financial position date.

• Trace all transfers occurring between banks near year-end. 

• Obtain analysis of cash balance and reconcile to the general ledger.

• Obtain a cutoff bank statement containing transactions several days subsequent to the statement of financial position date.

For the audit of Cash Receipts Transactions, which assertion is addressed by the control "Duties of handling cash receipts are segregated from posting to accounts receivable"?

• Completeness 

• Rights and Obligations 

• Existence or Occurrence

• Presentation and Disclosure 

For the audit of Cash Disbursements Transactions, the audit objective "To determine that recorded cash disbursements occurred" relates to which assertion?

• Valuation or Allocation

• Existence or Occurrence

• Rights and Obligations

• Completeness

Which control over Cash Disbursements is designed to ensure the Rights and Obligations assertion is met?

• Checks should be pre-numbered and accounted for. 

• Amounts and calculations on vendors’ invoices are independently verified.

• Check signer, independent of voucher preparation, should examine supporting documentation before signing checks.

• A review should be made by a person not responsible for handling disbursements to determine that checks are processed on a timely basis.