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Auditing

Customer Question

1.     Which of the following control procedures may prevent the failure to bill customers for some shipments?

a.   Each shipment should be supported by a prenumbered sales invoice that is accounted for.

b.   Each sales order should be approved by authorized personnel.

c.   Sales journal entries should be reconciled to daily sales summaries.

d.   Each sales invoice should be supported by a shipping document.



2.     Which of the following most likely would be the result of ineffective internal control policies and procedures in the revenue cycle?

a.   Final authorization of credit memos by personnel in the Sales Department could permit an employee defalcation scheme.

b.   Fictitious transactions could be recorded, causing an understatement of revenues and an overstatement of receivables.

c.   Irregularities in recording transactions in the subsidiary accounts could result in a delay in goods shipped.

d. Omission of shipping documents could go undetected, causing an understatement of inventory.



3.     Which of the following internal control procedures most likely would ensure that all billed sales are correctly posted to the accounts receivable ledger?

a.   Daily sales summaries are compared to daily postings to the accounts receivable ledger.

b.   Each sales invoice is supported by a prenumbered shipping document.

c.   The accounts receivable ledger is reconciled daily to the control account in the general ledger.

d. Each shipment on credit is supported by a prenumbered sales invoice.



4.     Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?

a.   The cashier prepares the daily deposit.

b.   The cashier makes the daily deposit at a local bank.

c.   The cashier posts the receipts to the accounts receivable subsidiary ledger cards.

d.    The cashier endorses the checks.



5.     When an auditor selects a sample of items from the vouchers payable register for the last month of the period under audit and traces these items to underlying documents, the auditor is gathering evidence primarily in support of the assertion that

a.   Recorded obligations were paid.

b.   Incurred obligations were recorded in the correct period.

c.   Recorded obligations were valid.

d. Cash disbursements were recorded as incurred obligations





6.     A client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner?

a.   Footing the purchases journal.

b.   Reconciling vendors' monthly statements with subsidiary payable ledger accounts.

c.   Tracing totals from the purchases journal to the ledger accounts.

d. Sending written quarterly confirmations to all vendors



7.     Unrecorded liabilities are most likely to be found during the review of which of the following documents?

a.   Unpaid bills.

b.   Shipping records.

c.   Bills of lading.

d. Unmatched sales invoices.



8.     Purchase cutoff procedures should be designed to test whether or not all inventory

a.   Purchased and received before the year end was recorded.

b.   On the year end balance sheet was carried at lower of cost or market.

c.   On the year end balance sheet was paid for by the company.

d. Owned by the company is in the possession of the company.



9.     An entity's internal control structure requires for every check request that there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all:

a.   Purchase orders.

b.   Canceled checks.

c.   Receiving reports.

d.   Approved vouchers.



10.   To determine whether accounts payable are complete, an auditor performs a test to verify that all merchandise received is recorded. The population of documents for this test consists of all

a.   Payment vouchers.

b.   Receiving reports.

c.   Purchase requisitions.

d.   Vendor's invoices.

   

11.   In the weekly computer run to prepare payroll checks, a check was printed for an employee who had been terminated the previous week. Which of the following controls, if properly utilized, would have been most effective in preventing the error or ensuring its prompt detection?

a.   A control total for hours worked, prepared from time cards collected by the Timekeeping Department.

b.   Requiring the treasurer's office to account for the numbers of the prenumbered checks issued to the EDP department for the processing of the payroll.

c.   Use of a check digit for employee numbers.

d. Use of a header label for the payroll input sheet.



12.   A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that

a.   Only bona fide employees worked and their pay was properly computed.

b.   Jobs on which employees worked were charged with the appropriate labor cost.

c.   Internal controls relating to payroll disbursements are operating effectively.

d. All employees worked the number of hours for which their pay was computed.



13.   Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?

a.   There are significant unexplained variances between standard and actual labor cost.

b.   Payroll checks are disbursed by the same employee each payday.

c.   Employee time cards are approved by individual departmental supervisors.

d.   A separate payroll bank account is maintained on an imprest basis.



14.   In determining the effectiveness of an entity’s policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and

a.   Observe the segregation of duties concerning personnel responsibilities and payroll disbursement.

b.   Inspect evidence of accounting for prenumbered payroll checks.

c.   Recompute the payroll deductions for employee fringe benefits.

d.      Verify the preparation of the monthly payroll account bank reconciliation.



15.   An auditor most likely would extend substantive tests of payroll when

a.   Payroll is extensively audited by the state government.

b.   Payroll expense is substantially higher than in the prior year.

c.   Overpayments are discovered in performing tests of details.

d.   Employees complain to management about too much overtime.





16.   An inventory turnover analysis is useful to the auditor because it may detect

a.   Inadequacies in inventory pricing.

b.   Methods of avoiding cyclical holding costs.

c.   The optimum automatic reorder points.

d.   The existence of obsolete merchandise.



17.   The auditor tests the quantity of materials charged to work in process by tracing these quantities to

a.   Cost ledgers.

b.   Perpetual inventory records.

c.   Receiving reports.

d.   Material requisitions.



19.   Which one of the following procedures would not be appropriate for an auditor in discharging his or her responsibilities concerning the client's physical inventories?

a.   Confirmation of goods in the hands of public warehouses.

b.   Supervising the taking of the annual physical inventory.

c.   Carrying out physical inventory procedures at an interim date.

d.   Obtaining written representation from the client as to the existence, quality, and dollar amount of the inventory.



20.   A client's physical count of inventories was lower than the inventory quantities shown in its perpetual records. This situation could be the result of the failure to record.

a.   Sales.

b.   Sales returns.

c.   Purchases.

d.   Purchase discounts.

Edited by Customer on 10/24/2006 at 3:58 PM
Submitted: 8 years ago.
Category: Homework

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