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Scott, MIT Graduate
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Experience:  MIT Graduate (Math, Programming, Science, and Music)
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Final Exam- need to be completed by 9/1/08

Customer Question

1. Which of the following questions would be most likely to be included in an internal control questionnaire concerning the completeness assertion for purchases?
a. Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher?
b. Are purchase requisitions pre numbered and independently matched with vendor invoices?
c. Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions?
d. Are purchase orders, receiving reports and vouchers pre numbered and periodically accounted for?

2. The authority to accept incoming goods in receiving should be based on a [ an]:
a. vendor’s invoice
b. materials requisition
c. Bill of lading
d. Approved purchase order

3. Which of the following internal accounting control procedures would best prevent direct labor from being charged to manufacturing overhead?
a. Reconciliation of work in process inventory with cost records.
b. Comparison of daily journal entries with factory labor summary.
c. Comparison of period costs budgets and time cards.
d. Reconciliation of unfinished job summary and production cost records.

4. The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the
a. Administrative controls from the internal accounting records.
b. Human resources function from the controller ship function.
c. Operational responsibility from the record keep responsibility.
d. Authorization of transactions from the custody of related assets.

5. An auditor would most likely assess control risk at the maximum if the payroll department supervisor is responsible for
a. Examining authorization forms for new employees.
b. Comparing payroll registers with original batch transmittal data.
c. Authorizing payroll rate changes for all employees.
d. Hiring all subordinate payroll department employees.

6. If the perpetual inventory records show lower quantities of inventory that the physical count, an explanation of the difference might be unrecorded
a. sales
b. sales discounts
c. purchases
d. purchase discounts.

7. Which of the following audit procedures would provide the least reliable evidence that the client has legal title to inventories?
a. Confirmation of inventories at locations outside the client’s facilities.
b. Analytical review of inventory balances compared to purchasing and sales activities.
c. Observation of physical inventory counts.
d. Examination of paid vendors’ invoices.

8. The auditor may conclude that depreciation charges are insufficient by noting
a. insured values greatly in excess of book values.
b. large amounts of fully depreciated assets.
c. Continuous trade-ins of relatively new assets,
d. Excessive recurring losses on assets retired.

9. Which of the following accounts should be reviewed by the auditor to gain reasonable assurance that additions to property, plant , and equipment are not understate?
a. depreciation
b. accounts payable
c. cash
d. repairs

10. In the examination of property, plant and equipment, the auditor tires to determine all of the following except the
a. adequacy of internal control
b. extent of property abandoned during the year
c. adequacy of replacement funds
d. reasonableness of the depreciation.

11. During an audit of an entity’s stockholder’s equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management's assertion of
a. existence or occurrence._
b. completeness
c. valuation or allocation
d. presentation and disclosure.

12. In auditing long-term bonds payable, an auditor most likely would
a. perform analytical procedures on the bond premium and discount accounts
b. examine documentation of assets purchase with bond premiums for liens.
c. compare interest expense with the bond payable amount for reasonableness.
d. Confirm the existence of individual bond holders at year end.

13. Which of the following internal control procedures would an entity mot likely use to assist in satisfying the completeness assertion related to long-term investments?
a. Senior management verifies that securities in the bank safe deposit box are registered in the entity’s name.
b. The internal auditor compares the securities in the bank safe deposit box with recorded investments.
c. The treasurer vouches the acquisition of securities by comparing brokers’ advices with canceled checks.
d. The controller compares the current market prices of recorded investments with the brokers’ advices on file.

14. When an entity uses a trust company as custodian of its marketable securities, the possibility of concealing fraud most likely would be reduced if the
a. Trust company has no direct contact with the entity employees responsible for maintaining the investment accounting records.
b. Securities are registered in the name of the trust company, rather than the entity itself.
c. Interest and dividend checks are mailed directly to an entity employee who is authorized to sell securities.
d. Trust company places the securities in a bank safe-deposit vault under the custodian’s exclusive control.

15. The date of the management representation letter should coincide with the
a. date of the auditor’s report
b. balance sheet date
c. date of the latest subsequent event referred to in the notes of the financial statements.
d. date of the engagement agreement.

16. When an examination is made in accordance with generally accepted auditing standards, the auditor should always
a. Document the auditor’s understanding of the client’s internal accounting control system.
b. Employ analytical review procedures.
c. Obtain certain written representations from management.
d. Observe the taking of physical inventory on the balance sheet date.

17. When reporting on comparative financial statements where the financial statements of the prior year have been examined by a predecessor auditor whose report is not presented, the successor auditor should make
a. No reference to the predecessor auditor.
b. Reference to the predecessor auditor only if the predecessor auditor expressed a qualified opinion.
c. Reference to the predecessor auditor only if the predecessor auditor expressed an unqualified opinion.
d. Reference to the predecessor auditor regardless of the type of opinion expressed by the predecessor auditor.

18. Which of the generally accepted auditing standards of reporting would not normally apply to special reports such as cash-basis statements/
a. first standard
b. second standard
c. third standard
d. fourth standard

19. A violation of the profession’s ethical standards would most likely occur when a CPA who
a. is also admitted to the Bar represents on letterhead to be both an attorney and a CPA
b. Writes a newsletter on financial management and also permits a publishing company to solicit subscriptions by direct mail.
c. Is controller of a bank and permits the bank to use the controller’s CPA title in listing of officers in its publications.
d. Is the sole shareholder in a professional accountancy corporation and used the designation “and company” in the firm title.

20. An auditor strives to achieve independence in a appearance in order to
a. maintain public confidence in the profession
b. become independent in fact
c. Comply with the generally accepted auditing standards of field work.
d. Maintain an unbiased mental attitude

21. West and Company, CPAs, was engaged by Sand Corporation to audit its financial statements. West issued an unqualified opinion on Sand’s financial statements. Sand has been accused of making negligent misrepresentation in the financial statements that Reed relied upon when purchasing Sand stock. West was not aware of the misrepresentations and was not negligent in performing the audit. If Reed sues West for damages based on Section 10 [b[ and Rule 10b-5 of the Securities Exchange Act of 1934, west will
a. Lose, because the statements contained negligent misrepresentations.
b. Lose, because Reed relied upon the financial statements.
c. Prevail, because some element of scienter must be proved.
d. Prevail, because Reed was not privity of contract with West.

22. Under the antifraud provisions of Section 10 of the Securities Exchange Act of 1934, a CPA may be liable if the CPA acted
a. negligently
b. with independence
c. Without due diligence
d. Without good faith

23. Which of the following procedures is not included in a review engagement of a nonpublic entity?
a. inquires of management?
b. Inquiries regarding events subsequent to the balance sheet date
c. Any procedures designed to identify relationships among data that appear to be unusual.
d. A study and evaluation of internal control.

24. Inquiry of the entity’s personnel and analytical procedures are the primary bases for the issuance of a[n]
a. Compilation report on financial statements for a nonpublic company in its first year of operations.
b. Auditor's report on financial statements supplemented with price-level information.
c. Review report on comparative financial statements supplemented with price-level information.
d. Management advisory report prepared at the request of the client's audit committee.

25. The report of a CPA on a review of the financial statements is the representation of the owners of the equity.
a. All information included in the financial statements is the representation of the owners of the entity.
b. The review was performed in accordance with generally accepted auditing standards.
c. The CPA is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles.
d. A review consists principally of inquires of company personnel and analytical procedures applied to financial data.
Submitted: 6 years ago.
Category: Homework

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