WorksheetsAudit Exam 3 Review
Total questions: 15
Worksheet time: 5mins
When performing confirmation of cash balances with a bank, the auditor is primarily gathering evidence related to which financial statement assertion?
Existence
Completeness
Valuation
Presentation
Immediately upon receipt of cash, a responsible employee should
Record the amount in the cash receipts journal.
Update the subsidiary accounts receivable records.
Prepare a control listing of incoming cash receipts
Prepare a deposit slip in triplicate.
Which of the following control activities would best protect against the preparation of improper or inaccurate cash disbursements?
All checks must be sequentially numbered and accounted for by internal auditors.
All signed checks must be reviewed and compared with supporting documentation by the treasurer before mailing.
All checks must be signed by an officer designated by the board of directors.
All checks must be perforated or otherwise effectively canceled when they are returned with the bank statement.
Which of the following is least indicative of fraudulent activity?
Bank reconciliation has no outstanding checks or deposits older than 15 days.
Internal auditors cannot locate several credit memos to support reductions of customers’ balances.
Three people were absent the day the auditors handed out the paychecks and have not picked them up four weeks later.
Numerous cash refunds have been made to different people at the same post office box address.
An audit team is auditing sales transactions. One step is to vouch a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. The purpose of this audit procedure is to establish that:
Sales invoices represent bona fide sales.
All sales have been recorded.
Entries in the accounts receivable subsidiary ledger were properly invoiced.
All sales invoices have been properly posted to customer accounts.
A client has a separate sales group for its largest “preferred” customers, a select group of customers who normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?
Send out negative confirmations on a large sample of these customers.
Send out positive confirmations on a large sample of these customers.
Inquire of the sales manager regarding the accounts receivable terms.
Prepare a schedule of purchases and payments for these customers.
In the audit of accounts receivable, the most important emphasis should be on the
Existence assertion.
Presentation and disclosure assertion.
Completeness assertion.
Rights and obligations assertion.
Which of the following would not overstate current-period net income?
Capitalizing an expenditure that should be expensed.
Failing to record a liability as an expense.
Failing to record a check paying an item in Vouchers Payable.
All of the choices would overstate net income.
A client’s purchasing system ends with the recording of a liability and its eventual payment. Which of the following best describes auditors’ primary concern with respect to liabilities resulting from the purchasing system?
Authority to incur liabilities is restricted to one designated person.
Acquisition of materials is not made from one vendor or one group of vendors.
Commitments for all purchases are made only after established competitive bidding procedures are followed.
Accounts payable are not materially understated.
An audit team would most likely examine the detail support for charges to which of the following accounts?
Payroll expense.
Legal expense.
Cost of goods sold.
Supplies expense.
Which of the following tests of details most likely would help an auditor determine whether accounts payable have been misstated?
Searching for customer-returned goods that were not reported as returns.
Examining vendor statements for amounts not reported as purchases.
Examining reported purchase returns that appear too low.
Reviewing bank transfers recorded as cash received from customers.
An auditor reviews job cost sheets to test which transaction assertion?
Occurence
Completeness
Classification
Accuracy
Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity’s assertion of rights and obligations related to inventories?
Trace test counts noted during the entity’s physical count to the entity’s summarization of quantities.
Select the last few shipping documents used before the physical count and determine whether the shipments were recorded as sales.
Inspect the open purchase order file for significant commitments that should be considered for disclosure.
Inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens.
Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?
Inventory is properly presented in the financial statements.
Inventory is complete.
Inventory is properly valued.
The entity has rights to the inventory.
An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s balance assertions about
Existence
Rights
Presentation
Valuation
