ACC 544 Quiz 1

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ACC 544 Quiz 1

Question 1 Imperial Corp. is offering $450,000 of its securities

under Rule 504 of Regulation D of the Securities Act of 1933. Under
Rule 504, Imperial is required to
Question 2 A $10,000,000 offering of corporate stock intended to
be made pursuant to the provisions of Rule 506 of Regulation D of the
Securities Act of 1933 would not be exempt under Rule 506 if
Question 3 Under Section 12 of the Securities Exchange Act of
1934, in addition to companies whose securities are traded on a
national exchange, what class of companies is subject to the SECs
continuous disclosure system?
Question 4 Tweed Manufacturing, Inc. plans to issue $10 million
of common stock to the public in interstate commerce after its
registration statement with the SEC becomes effective. What, if
anything, must Tweed do in respect to those states in which the
securities are to be sold?
Question 5 Acme Corp. intends to make a public offering in
several states of 250,000 shares of its common stock. Under the
Securities Act of 1933,
Question 6 Which of the following statements is correct with
respect to the Securities Exchange Act of 1934?
Question 7 Under the Securities Act of 1933, an accountant may be
held liable for any materially false or misleading financial statements,
including an omission of a material fact therefrom, provided the
purchaser
 Question 8 Regulation D of the Securities Act of 1933 is available
to issuers without regard to the dollar amount of an offering only
when the
Question 9 The provisions of the Securities Exchange Act of 1934
Question 10 Which of the following is required under the Securities
Exchange Act of 1934 or the SECs reporting requirements issued
pursuant thereto?
Question 11 Under the provisions of the Securities Exchange
Act of 1934, a corporation whose common stock is listed on a national
stock exchange
Question 12 Which of the following are exempt from the registration
requirements of the Securities Act of 1933?
Question 13 Wane Corporation has issued securities that are traded
on a national securities exchange. Wane just had a significant change
in its assets due to a large acquisition of real property. Which of the
following is true?
Question 14 Which of the following statements is(are) correct
concerning issuers of securities registered under the Securities
Exchange Act of 1934?
Question 15 Under Regulation D of the Securities Act of 1933, what
is the maximum time period during which an exempt offering may be
made?
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ACC 544 Quiz 2

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ACC 544 Quiz 2

 Question 1 Mead Corp. orally engaged Dex & Co., CPAs, to audit
its financial statements. The management of Mead informed Dex that
it suspected that the accounts receivable were materially overstated.
Although the financial statements audited by Dex did, in fact, include
a materially overstated accounts receivable balance, Dex issued an
unqualified opinion. Mead relied on the financial statements in
deciding to obtain a loan from City Bank to expand its operations. City
relied on the financial statements in making the loan to Mead. As a
result of the overstated accounts receivable balance, Mead has
defaulted on the loan and has incurred a substantial loss. If Mead sues
Dex for negligence in failing to discover the overstatement, Dexs best
defense would be that
Question 2 Doe and Co., CPAs, issued an unqualified opinion on
the 2012 financial statements of Marx Corp. These financial
statements were included in Marxs annual report and Form 10K filed
with the SEC. Doe did not detect material misstatements in the
financial statements as a result of negligence in the performance of
the audit. Based upon the financial statements, Fitch purchased stock
in Marx. Shortly thereafter, Marx became insolvent, causing the price
of the stock to decline drastically. Fitch has commenced legal action
against Doe for damages based upon Section 10(b) and Rule 10b-5 of
the Securities Exchange Act of 1934. Does best defense to such an
action would be that
Question 3 A CPA firm was negligent in the audit of financial
statements contained in a Form 10-K filed with the SEC. If an injured
third party decided to file suit against the CPA, it would most likely be
filed under
Question 4 Dexter and Co., CPAs, issued an unqualified opinion
on the 2012 financial statements of Bart Corp. Late in 2010, Bart
determined that its treasurer had embezzled over $1,000,000. Dexter
was unaware of the embezzlement. Bart has decided to sue Dexter to
recover the $1,000,000. Barts suit is based upon Dexters failure to
discover the missing money while performing the audit. Which of the
following is Dexters best defense?
 Question 5 Hugh, CPA, has developed an opinion for which tax
avoidance is a significant purpose that is marketed to potential
investors. According to Treasury Department Circular 230
Question 6 Under the liability provisions of Section 11 of the
Securities Act of 1933, a CPA who certifies financial statements
included in a registration statement generally will not be liable to a
purchaser of the security
Question 7 Which of the following circumstances is a defense to an
accountants liability under Section 11 of the Securities Act of 1933
for misstatements and omissions of material facts contained in a
registration statement?
Question 8 A CPA partnership may, without being lawfully
subpoenaed or without the clients consent, make client workpapers
available to
Question 9 An accounting firm was hired by a company to perform
an audit. The company needed the audit report in order to obtain a
loan from a bank. The bank lent $500,000 to the company based on
the auditors report. Fifteen months later, the company declared
bankruptcy and was unable to repay the loan. The bank discovered
that the accounting firm failed to discover a material overstatement of
assets of the company. Which of the following statements is correct
regarding a suit by the bank against the accounting firm? The bank
Question 10 In accordance with the AICPA Statements on
Standards for Tax Services, if after having provided tax advice to a
client there are legislative changes which affect the advice provided,
the CPA
Question 11 Alex Stone, CPA, prepared Ray Pyms 2012 federal
income tax return. Pym advised Stone that he had paid doctors bills
of $15,000 during 2012, when in fact Pym had paid only $3,000 of
bills. Based on Pyms representations, Stone properly computed the
medical expense deduction, with consequent understatement of tax
liability of more than $5,000. Pyms total tax liability shown on the
return was $40,000. Stone had no reason to doubt the accuracy of
Pyms figures, although Stone did not request documentation for the
expenses claimed; but he was assured by Pym that sufficient
corroborative evidence of these expenses existed. In connection with
Stones preparation of Pyms 2012 return, Stone is
Question 12 The Ultramares decision is a leading case that helps
define when a CPA is liable to different parties. If a CPA has
committed negligence, under this decision the CPA is liable to which
of the following parties?
Question 13 Clark, a professional tax return preparer, prepared and
signed a clients 2012 federal income tax return that resulted in a $600
refund. Which one of the following statements is correct with regard
to an Internal Revenue Code penalty Clark may be subject to for
endorsing and cashing the clients refund check?
Question 14 Jay, CPA, gave an unqualified opinion on Nast Power
Co.s financial statements. Larkin bought Nast bonds in a public
offering subject to the Securities Act of 1933. The registration
statement filed with the SEC included Nasts financial statements.
Larkin sued Jay for misstatements contained in the financial
statements under the provisions of Section 11 of the Securities Act of
1933. To prevail, Larkin must prove
Question 15 The Joint Ethics Enforcement Program involves joint
enforcement of the ethics rules of
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ACC 544 Quiz 3

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ACC 544 Quiz 3

Question 1 Which of the following statements about investment

decision models is true?
 Question 2 Which of the following events would decrease the
internal rate of return of a proposed asset purchase?
Question 3 Which of the following is a disadvantage of the internal
rate of return as a method of evaluating investments?
Question 4 Net present value (NPV) and internal rate of return
(IRR) differ in that
Question 5 Which of the following characteristics represent an
advantage of the internal rate of return technique over the accounting
rate of return technique in evaluating a project?
Question 6 It is assumed that cash flows are reinvested at the rate
earned by the investment in which of the following capital budgeting
techniques?
Question 7 Which of the following changes would result in the
highest present value?
Question 8 Which of the following is an advantage of net present
value modeling?
Question 9 The Bread Company is planning to purchase a new
machine which it will depreciate on a straight-line basis over a 10-year
period. A full years depreciation will be taken in the year of
acquisition. The machine is expected to produce cash flow from
operations, net of income taxes, of $3,000 in each of the 10 years.; The
accounting (book value) rate of return is expected to be 10% on the
initial increase in required investment. The cost of the new machine
will be
Question 10 Net present value as used in investment decision-
making is stated in terms of which of the following options?
Question 11 On January 1, 2012, Colt Company issued 10-year
bonds with a face amount of $1,000,000 and a stated interest rate of
8% payable annually on January 1. The bonds were priced to yield
10%. Present value factors are as follows:
Question 12 Assume that management of Trayco has generated the
following data about an investment project that has a five-year life:
Question 13 Assume that management of Trayco has generated the
following data about an investment project that has a five-year life:
 Question 14 Which of the following statements is correct regarding
payback method as a capital budgeting technique?
Question 15 A client wants to know how many years it will take
before the accumulated cash flows from an investment exceed the
initial investment, without taking the time value of money into
account. Which of the following financial models should be used?
Question 16 Which of the following limitations is common to the
calculations of payback period, discounted cash flow, internal rate of
return, and net present value?
Question 17 A project has an initial outlay of $1,000. The projected
cash inflows are
Question 18 Harvey Co. is evaluating a capital investment proposal
for a new machine. The investment proposal shows the following
information:
Question 19 How are the following used in the calculation of the net
present value of a proposed project? Ignore income tax considerations.
Question 20 In considering the payback period for three projects,
Fly Corp. gathered the following data about cash flows:
Question 21 The discount rate (hurdle rate of return) must be
determined in advance for the
Question 22 Which of the following statements is correct regarding
financial decision making?
Question 23 Which of the following is necessary in order to
calculate the payback period for a project?
Question 24 An efficient portfolio is one that
Question 25 Which of the following scenarios would encourage a
company to use short-term loans to retire its ten-year bonds that have
five years until maturity?
Question 26 What is the formula for calculating the profitability
index of a project?
Question 27 The profitability index is a variation on which of the
following capital budgeting models?
Question 28 Assume that management of Trayco has generated the
following data about an investment project that has a five-year life:
 Question 29 A company purchases an item for $43,000. The salvage
value of the item is $3,000. The cost of capital is 8%. Pertinent
information related to this purchase is as follows:
Question 30 A project has a present value of future net cash inflows
of $120,000 and an initial investment of $110,000. Calculate the excess
present value index for the project.
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ACC 544 Quiz 4

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ACC 544 Quiz 4

Question 1 Central Winery manufactured two products, A and B.

Estimated demand for product A was 10,000 bottles and for product B
was 30,000 bottles. The estimated sales price per bottle for A was $6.00
and for B was $8.00. Actual demand for product A was 8,000 bottles
and for product B was 33,000 bottles. The actual price per bottle for A
was $6.20 and for B was $7.70. What amount would be the total selling
price variance for Central Winery?
Question 2 A defense contractor for a government space project
has incurred $2,500,000 in actual design costs to date for a guidance
system whose total budgeted design cost is $3,000,000. If the design
phase of the project is 60% complete, what is the amount of the
contractors current overrun/savings on this design work?
Question 3 After the goals of the company have been established
and communicated, the next step in the planning process would be the
development of the
 Question 4 Birney Company is planning its advertising campaign
for 2012 and has prepared the following budget data based on a zero
advertising expenditure:
Question 5 The cash receipts budget includes
Question 6 Breakeven analysis assumes over the relevant range
that
Question 7 An increase in production levels within a relevant range
most likely would result in
Question 8 The process of developing plans for a companys
expected operations and controlling the operations to help carry out
those plans is known as
Question 9 Sussex Company has budgeted its operations for
February 2012. No change in inventory level during the month is
planned. Selected data from estimated amounts are as follows:
Question 10 A company is attempting to determine if there is a cause
and effect relationship between scrap value and output produced. The
following exhibit presents the companys scrap data for the last fiscal
year:
Question 11 A professional organization is planning to conduct a
series of one-day continuing education programs in various cities. The
projected costs related to these programs are
Question 12 A company wants to determine its marketing costs for
budgeting purposes. Activity measures and costs incurred for four
months of the current year are presented in the table below.
Advertising is considered to be a discretionary cost. Salespersons are
paid monthly salaries plus commissions. The sales force was increased
from 20 to 21 individuals during the month of May.
Question 13 Ajax Division of Carlyle Corporation produces electric
motors, 20% of which are sold to Bradley Division of Carlyle and the
remainder to outside customers. Carlyle treats its divisions as profit
centers and allows division managers to choose their sources of sale
and supply. Corporate policy requires that all interdivisional sales and
purchases be recorded at variable cost as a transfer price. Ajax
Divisions estimated sales and standard cost data for the year ending
December 31, 2012, based on the full capacity of 100,000 units, are as
follows:
Question 14 Light Company has 2,000 obsolete light fixtures that
are carried in inventory at a manufacturing cost of $30,000. If the
fixtures are reworked for $10,000, they could be sold for $18,000.
Alternately, the light fixtures could be sold for $3,000 to a jobber
located in a distant city. In a decision model analyzing these
alternatives, the opportunity cost would be
Question 15 Multiple regression differs from simple regression in
that it
Question 16 Gata Co. plans to discontinue a department with
$48,000 contribution to overhead, and allocated overhead of $96,000,
of which $42,000 cannot be eliminated. What would be the effect of
this discontinuance on Gatas pretax profit?
Question 17 A professional organization is planning to conduct a
series of one-day continuing education programs in various cities. The
projected costs related to these programs are
Question 18 Rodder, Inc. manufactures a component in a router
assembly. The selling price and unit cost data for the component are
as follows:
Question 19 Lincoln Company, a glove manufacturer, has enough
idle capacity available to accept a special order of 20,000 pairs of
gloves at $12.00 a pair. The normal selling price is $20.00 a pair.
Variable manufacturing costs are $9.00 a pair, and fixed
manufacturing costs are $3.00 a pair. Lincoln will not incur any
selling expenses as a result of the special order. What would be the
effect on operating income if the special order could be accepted
without affecting normal sales?
Question 20 JacKue Co. plans to produce 200,000 pairs of roller
skates during January of next year. Planned production for February
is 250,000 pairs. Sales are forecasted at 180,000 pairs for January and
240,000 pairs for February. Each pair of roller skates has eight
wheels. JacKues policy is to maintain 10% of the next months
production in inventory at the end of a month. How many wheels
should JacKue purchase during January?
 Question 21 Which of the following is a characteristic of a flexible
budget?
Question 22 All else being equal, the breakeven point in units will be
higher if
Question 23 The ratio of fixed costs to the contribution margin is
Question 24 Oslo Co.s industrial photo-finishing division, Rho,
incurred the following costs and expenses in 2012:
Question 25 Crisper, Inc. plans to sell 80,000 bags of potato chips in
June, and each of these bags requires five potatoes. Pertinent data
includes:
Question 26 At annual sales of $900,000, the Ebo product has the
following unit sales price and costs:
Question 27 Which of the following is a disadvantage of
participative budgeting?
Question 28 For the current period production levels, Woodwork Co.
budgeted 11,000 board feet of production and purchased 15,000 board
feet. The material cost was budgeted at $7 per foot. The actual cost for
the period was $8.50 per foot. What was Woodworks material price
variance for the period?
Question 29 In the past, four direct labor hours were required to
produce each unit of product Y. Material costs were $200 per unit, the
direct labor rate was $20 per hour, and factory overhead was 3 times
direct labor cost. In budgeting for next year, management is planning
to outsource some manufacturing activities and to further automate
others. Management estimates that these plans will reduce labor hours
by 25%, increase the factory overhead rate to 3.6 times direct labor
costs, and increase material costs by $30 per unit. Management plans
to manufacture 10,000 units. What amount should management
budget for cost of goods manufactured?
Question 30 A company produces widgets with budgeted standard
direct materials of 2 pounds per widget at $5 per pound. Standard
direct labor was budgeted at 0.5 hour per widget at $15 per hour. The
actual usage in the current year was 25,000 pounds and 3,000 hours to
produce 10,000 widgets. What was the direct labor usage variance?
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 ACC 544 Week 1 Coso Framework (2 Papers)

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This Tutorial contains 2 Papers

Imagine you are the Director of Internal Audit and the Chairman of
the Audit Committee and asks you to prepare a report for the Board of
Directors explaining the 2012 COSO framework for internal control
and the benefits for adopting the framework.
Write a report of approximately 700 to 1,050 words explaining the five
interrelated components of internal control.
Describe the benefits for adopting this framework.
Justify why this is the appropriate framework and will encourage
integrity and ethical values for the organization.
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ACC 544 Week 2 Risk Assessment (2 Papers)

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This Tutorial contains 2 Papers

The Chief Risk Officer has asked you to perform an enterprise-wide

risk assessment.
Write a proposal of approximately 700 to 1,050 words that shows
your plan for the risk assessment project.
 Identify risk areas and the criteria to be used to determine
likelihood, magnitude, velocity, and persistence.
Link risk categories to financial statement assertions.
Include fraud risks and the incentives, opportunities, and
rationalization related to fraud.
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ACC 544 Week 3 Quiz Federal Securities

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ACC 544 Week 3 Quiz Federal Securities

Question 1 Imperial Corp. is offering $450,000 of its securities

under Rule 504 of Regulation D of the Securities Act of 1933. Under
Rule 504, Imperial is required to
Question 2 A $10,000,000 offering of corporate stock intended to be
made pursuant to the provisions of Rule 506 of Regulation D of the
Securities Act of 1933 would not be exempt under Rule
Question 3 Under Section 12 of the Securities Exchange Act of
1934, in addition to companies whose securities are traded on a
national exchange, what class of companies is subject to the SECs
continuous disclosure system?
Question 4 Tweed Manufacturing, Inc. plans to issue $10 million
of common stock to the public in interstate commerce after its
registration statement with the SEC becomes effective. What, if
anything, must Tweed do in respect to those states in which the
securities are to be sold?
 Question 5 Acme Corp. intends to make a public offering in several
states of 250,000 shares of its common stock. Under the Securities Act
of 1933,
Question 6 Which of the following statements is correct with
respect to the Securities Exchange Act of 1934?
Question 7 Under the Securities Act of 1933, an accountant may be
held liable for any materially false or misleading financial statements,
including an omission of a material fact therefrom, provided the
purchaser
Question 8 Regulation D of the Securities Act of 1933 is available
to issuers without regard to the dollar amount of an offering only
when the
Question 9 The provisions of the Securities Exchange Act of 1934
Question 10 Which of the following is required under the Securities
Exchange Act of 1934 or the SECs reporting requirements issued
pursuant thereto?
Question 11 Under the provisions of the Securities Exchange Act of
1934, a corporation whose common stock is listed on a national stock
exchange
Question 12 Which of the following are exempt from the registration
requirements of the Securities Act of 1933?
Question 13 Wane Corporation has issued securities that are traded
on a national securities exchange. Wane just had a significant change
in its assets due to a large acquisition of real property. Which of the
following is true?
Question 14 Which of the following statements is(are) correct
concerning issuers of securities registered under the Securities
Exchange Act of 1934?
Question 15 Under Regulation D of the Securities Act of 1933, what
is the maximum time period during which an exempt offering may be
made?
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ACC 544 Week 3 Team Developing Internal Controls (2
Papers)
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ACC 544 Week 3 Team Developing Internal Controls

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ACC 544 Week 4 Team Internal Control for purchases,
payroll and Fixed Assets (2 Papers)

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This Tutorial contains 2 Papers

Include specific internal controls that include authorization of

transactions, segregation of duties, adequate records and
documentation, security of assets, and independent checks and
reconciliation for each business area.
The CFO, has again, asked for your assistance in developing internal
controls, but this time, in the purchases, payroll, and fixed assets
business areas.
Write a report of approximately 1,400 to 2,450 words.
Describe typical activities
Create a system of internal controls for the purchases, payroll,
and fixed assets business areas.
 Discuss the associated risk in these areas.
Include specific internal controls that include authorization of
transactions, segregation of duties, adequate records and
documentation, security of assets, and independent checks and
reconciliation for each business area.
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ACC 544 Week 5 Team Asset Governance (2 Papers)

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ACC 544 Week 5 Team Asset Governance

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ACC 544 Week 6 Evaluating Internal Controls (2 Papers)

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This Tutorial contains 2 Papers

You have been hired to evaluate internal controls for your client
organization. The CFO for your client wants a report outlining the
evaluation to share with the Board of Directors.
Evaluate the criteria to identify and report identified control
deficiencies
 Analyze the reporting requirements for both public and private
organizations.
Paper provides sufficient background on the topic and previews
major points.
At least three sources are used
Write a 1,400- to 2,450-word report showing your plan to
evaluate internal controls.
Evaluate the criteria to identify and report identified control
deficiencies.
Analyze the reporting requirements for both public and private
organizations.
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ACC 544 Week 6 Quiz (Auditing)

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ACC 544 Week 6 Quiz (Auditing)

Question 1 Which of the following statements most likely

represents a disadvantage for an entity that keeps microcomputer-
prepared data files rather than manually prepared files?
Question 2 A primary advantage of using generalized audit
packages in the audit of an advanced computer system is that it
enables the auditor to
Question 3 Which of the following statements most likely
represents a disadvantage for an entity that keeps microcomputer-
prepared data files rather than manually prepared files?
Question 4 Which of the following client computer systems
generally can be audited without examining or directly testing
computer programs of the system?
 Question 5 An independent auditor studies and evaluates a client's
computer system. The auditor's study includes tests of controls that
might include which of the following?
Question 6 If a CPA wishes to identify all checks written for an
amount over $1,000,000 that are included in a relational database, a
likely approach to obtaining the list would be through a
Question 7 Which of the following outcomes is a likely benefit of
information technology used for internal control?
Question 8 An auditor may decide not to perform tests of controls
related to the computer portion of the clients controls. Which of the
following would not be a valid reason for choosing to omit tests of
controls?
Question 9 Which of the following is an advantage of using a
value-added network for EDI transactions?
Question 10 Which of the following is an auditors client most likely
to use to perform queries requested by the auditor of a relational
database?
Question 11 Which of the following are essential elements of the
audit trail in an electronic data interchange (EDI) system?
Question 12 An auditor may use a "join" command in a database
query to combine
Question 13 A CPA might find information on the structure of
relational database tables through which language interface?
Question 14 Which of the following statements is correct concerning
internal control in an electronic data interchange (EDI) system?
Question 15 Which of the following is usually a benefit of
transmitting transactions in an electronic data interchange (EDI)
environment?
Question 16 Which of the following is usually a benefit of using
electronic funds transfer for international cash transactions?
Question 17 In building an electronic data interchange (EDI)
system, what process is used to determine which elements in the
entity's computer system correspond to the standard data elements?
 Question 18 Which of the following statements is correct concerning
the security of messages in an electronic data interchange (EDI)
system?
Question 19 In which of the following circumstances would an
auditor expect to find that an entity implemented automated controls to
reduce risks of misstatement?
Question 20 Carmel Department Store has an ERP information
system and is planning to issue credit cards to creditworthy customers.
To strengthen internal control by making it difficult for one to create a
valid customer account number, the companys independent auditor
has suggested the inclusion of a check digit which should be placed
Question 21 Which of the following characteristics distinguishes
electronic data interchange (EDI) from other forms of electronic
commerce?
Question 22 Which of the following is an engagement attribute for
an audit of an entity that processes most of its financial data in
electronic form, without any paper documentation?
Question 23 Which of the following computer-assisted auditing
techniques processes client input data on a controlled program under
the auditor's control to test controls in the computer system?
Question 24 An auditor would least likely use computer software to
Question 25 Which of the following statements is not true of the test
data approach to testing an accounting system?
Question 26 When an auditor tests a computerized accounting
system, which of the following is true of the test data approach?When
an auditor tests a computerized accounting system, which of the
following is true of the test data approach?
Question 27 A primary advantage of using generalized audit
software packages to audit the financial statements of a client that
uses an EDP system is that the auditor may
Question 28 Which of the following strategies would a CPA most
likely consider in auditing an entity that processes most of its financial
data only in electronic form, such as a paperless system?
 Question 29 Which of the following is an engagement attribute for
an audit of an entity that processes most of its financial data in
electronic form, without any paper documentation?
Question 30 Which of the following computer-assisted auditing
techniques processes client input data on a controlled program under
the auditor's control to test controls in the computer
Question 31 In auditing an entity's computerized payroll
transactions, an auditor would be least likely to use test data to test
controls concerning
Question 32 Processing data through the use of simulated files
provides an auditor with information about the operating effectiveness
of control policies and procedures.
Question 33 An auditor would most likely be concerned with which
of the following controls in a distributed data processing system?
Question 34 A retailing entity uses the Internet to execute and
record its purchase transactions. The entity's auditor recognizes that
the documentation of details of transactions will be retained for only a
short period of time. To compensate for this limitation, the auditor
most likely would
Question 35 Which of the following is a general control that would
most likely assist an entity whose systems analyst left the entity in the
middle of a major project?
Question 36 When an auditor tests the internal controls of a
computerized accounting system, which of the following is true of the
test data approach?
Question 37 Which of the following most likely represents a
significant deficiency in the internal control structure?
Question 38 Which of the following types of evidence would an
auditor most likely examine to determine whether internal control
structure policies and procedures are operating as designed?
Question 39 If a control total were computed on each of the
following data items, which would best be identified as a hash total for
a payroll EDP application?
Question 40 An auditor most likely would test for the presence of
unauthorized EDP program changes by running a
 Question 41 Which of the following controls most likely would assure
that an entity can reconstruct its financial records?
Question 42 An auditor most likely would introduce test data into a
computerized payroll system to test internal controls related to the
Question 43 Which of the following controls is a processing control
designed to ensure the reliability and accuracy of data processing?
Question 44 Which of the following are essential elements of the
audit trail in an electronic data interchange (EDI) system?
Question 45 Which of the following is an example of a validity
check?
Question 46 Which of the following control procedures most likely
could prevent EDP personnel from modifying programs to bypass
programmed controls?
Question 47 When evaluating internal control of an entity that
processes sales transactions on the Internet, an auditor would be most
concerned about the
Question 48 Which of the following procedures would an entity most
likely include in its disaster recovery plan?
Question 49 An auditor who wishes to capture an entity's data as
transactions are processed and continuously test the entity's
computerized information system most likely would use which of the
following techniques?
Question 50 In auditing an entitys computerized payroll
transactions, an auditor would be least likely to use test data to test
controls concerning
Question 51 Which of the following is a computer-assisted audit
technique that permits an auditor to use the auditors version of a
clients program to process data and compare the output with the
clients output?
Question 52 Which of the following could be difficult to determine
because electronic evidence may not be retrievable after a specific
period?
Question 53 When companies use information technology (IT)
extensively, evidence may be available only in electronic form. What is
an auditors best course of action in such situations?
 Question 54 When an auditor tests the internal controls of a
computerized accounting system, which of the following is true of the
test data approach?
Question 55 When conducting fieldwork for a physical inventory, an
auditor cannot perform which of the following steps using a
generalized audit software package?
Question 56 Which of the following is not a problem associated with
the use of test data for computer-audit purposes?
Question 57 In parallel simulation, actual client data are
reprocessed using an auditor software program. An advantage of
using parallel simulation, instead of performing tests of controls
without a computer, is that
Question 58 Which of the following is necessary to audit balances in
an on-line EDP system in an environment of destructive updating?
Question 59 Which of the following passwords would be most
difficult to crack?
Question 60 A computer-assisted audit technique that is most likely
to be effective in a continuous auditing environment is
Question 61 Smith Corporation has numerous customers. A
customer file is kept on disk storage. Each customer file contains
name, address, credit limit, and account balance. The auditor wishes
to test this file to determine whether credit limits are being exceeded.
The best procedure for the auditor to follow would be to
Question 62 When an auditor tests a computerized accounting
system, which of the following is true of the test data approach?
Question 63 An audit technique which involves actual analysis of
the logic of a computer programs processing routines is referred to as
Question 64 In auditing through a computer, the test data method is
used by auditors to test the
Question 65 A primary advantage of using generalized audit software
packages to audit the financial statements of a client that uses a
computer system is that the auditor may
Question 66 Which of the following is an advantage of generalized
computer audit packages?
 Question 67 The individual with whom an auditor would be most
likely to discuss specific access controls within a clients relational
database management system is the
Question 68 Which of the following is not a technique to
continuously test controls within a computer system?
Question 69 To obtain evidence that user identification and password
controls are functioning as designed, an auditor would most likely
Question 70 When testing a computerized accounting system, which
of the following is not true of the test data approach?
Question 71 Which of the following is not a major reason for
maintaining an audit trail for a computer system?
Question 72 In building an electronic data interchange (EDI) system,
what process is used to determine which elements in the entity's
computer system correspond to the standard data elements?
Question 73 Which of the following is not a major reason for
maintaining an audit trail for a computer system?
Question 74 Auditing by testing the input and output of a computer
system instead of the computer program itself will
Question 75 An auditor anticipates assessing control risk at a low
level in a computerized environment. Under these circumstances, on
which of the following controls would the auditor initially focus?
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ACC 544 Week 6 Quiz (Internal Controls)

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ACC 544 Week 6 Quiz (Internal Controls)

Question 1 Which of the following payroll control activities would

most effectively ensure that payment is made only for work performed?
 Question 2 Effective internal control over the payroll function would
include which of the following?
Question 3 One of the auditors objectives in observing the actual
distribution of payroll checks is to determine that every name on the
payroll is that of a bona fide employee. The payroll observation is an
auditing procedure that is generally performed for which of the
following reasons?
Question 4 A large retail enterprise has established a policy which
requires that the paymaster deliver all unclaimed payroll checks to the
internal auditing department at the end of each payroll distribution
day. This policy was most likely adopted in order to
Question 5 In the audit of which of the following types of profit-
oriented enterprises would the auditor be most likely to place special
emphasis on testing the controls over proper classification of payroll
transactions?
Question 6 The reliance placed on substantive tests in relation to the
reliance placed on internal control varies in a relationship that is
ordinarily
Question 7 An auditor uses the assessed level of the risk of material
misstatement to
Question 8 The purpose of segregating the duties of hiring personnel
and distributing payroll checks is to separate the
Question 9 An audit client failed to maintain copies of its procedures
manuals and organizational flowcharts. What should the auditor do in
an audit of financial statements?
Question 10 As a result of tests of controls, an auditor assesses
control risk too high. This incorrect assessment most likely occurred
because
Question 11 To provide assurance that each voucher is submitted
and paid only once, an auditor most likely would examine a sample of
paid vouchers and determine whether each voucher is
Question 12 A client erroneously recorded a large purchase twice.
Which of the following controls would be most likely to detect this
error in a timely and efficient manner?
 Question 13 A clients materials-purchasing cycle begins with
requisitions from user departments and ends with the receipt of
materials and the recognition of a liability. An auditors primary
objective in reviewing this cycle is to
Question 14 The company being audited has an internal auditor that
is both competent and objective. The independent auditor wants to
assign tasks for the internal auditor to perform. Under these
circumstances, the independent auditor may
Question 15 An effective control that protects against the
preparation of improper or inaccurate disbursements would be to
require that all checks be
Question 16 During a financial statement audit an internal auditor
may provide direct assistance to the independent CPA in performing
Question 17 When assessing internal auditors' objectivity, an
independent auditor should
Question 18 Which of the following factors most likely would assist
an independent auditor in assessing the objectivity of the internal
auditor?
Question 19 Which of the following is the most effective control to
detect vouchers that were prepared for the payment of goods that were
not received?
Question 20 Miller Retailing, Inc. maintains a staff of three full-time
internal auditors who report directly to the controller. In planning to
use the internal auditors to provide assistance in performing the audit,
the independent auditor most likely will
Question 21 The accounts payable department receives the purchase
order form to accomplish all of the following except
Question 22 The independent auditor should acquire an
understanding of the internal audit function as it relates to the
independent auditors consideration of internal control because
Question 23 For effective internal control purposes, the vouchers
payable department generally should
Question 24 For which of the following judgments may an
independent auditor share responsibility with an entitys internal
auditor who is assessed to be both competent and objective?
 Question 25 If the independent auditor decides that the work
performed by internal auditors may have a bearing on the independent
auditors own procedures, the independent auditor should consider the
objectivity of the internal auditors. One method of judging objectivity
is to
Question 26 While obtaining an understanding of a clients risk
assessment policies, an auditor ordinarily considers how management
Question 27 Managements attitude toward aggressive financial
reporting and its emphasis on meeting projected profit goals most
likely would significantly influence an entitys control environment
when
Question 28 Which of the following statements is correct regarding
internal control?
Question 29 Which of the following factors is most relevant when an
auditor considers the clients organizational structure in the context of
control risk?
Question 30 Which of the following analytical procedures most
likely would be used during the risk assessment stage of an audit?
Question 31 Analytical procedures performed during the risk
assessment phase of an audit should focus on
Question 32 Which of the following is an analytical procedure that
an auditor most likely would perform when performing the risk
assessment of an audit?
Question 33 Which of the following most likely would cause an
auditor to consider whether a clients financial statements contain
material misstatements?
Question 34 To help plan the nature, timing, and extent of
substantive auditing procedures, preliminary analytical procedures
should focus on
Question 35 When a customer fails to include a remittance advice
with a payment, it is a common practice for the person opening the
mail to prepare one. Consequently, mail should be opened by which of
the following four company employees?
 Question 36 Which one of the following would the auditor consider
to be an incompatible operation if the cashier receives remittances
from the mailroom?
Question 37 An auditors tests of controls for completeness for the
revenue cycle usually include determining whether
Question 38 An auditor reviews a clients accounting policies and
procedures when considering which of the following planning
matters?
Question 39 An entity with a large volume of customer remittances
by mail could most likely reduce the risk of employee misappropriation
of cash by using
Question 40 An auditor has identified the controller's review of the
bank reconciliation as a control to test. In connection with this test, the
auditor interviews the controller to understand the specific data
reviewed on the reconciliation. In addition, the auditor verifies that the
bank reconciliation is properly prepared by the accountant and
reviewed by the controller as evidenced by their respective sign-offs.
Which of the following types of audit procedures do these actions
illustrate?
Question 41 Which of the following best represents a key control for
ensuring sales are properly authorized when assessing control risks
for sales?
Question 42 An auditor who uses a transaction cycle approach to
assessing control risk most likely would test control activities related to
transactions involving the sale of goods to customers with the
Question 43 To determine whether internal control relative to the
revenue cycle of a wholesaling entity is operating effectively in
minimizing the failure to prepare sales invoices, an auditor most likely
would select a sample of transactions from the population represented
by the
Question 44 For effective internal control, the billing function
should be performed by the
Question 45 At which point in an ordinary sales transaction of a
wholesaling business would a lack of specific authorization be of least
concern to the auditor in the conduct of an audit?
 Question 46 Which of the following fraudulent activities most likely
could be perpetrated due to the lack of effective internal control in the
revenue cycle?
Question 47 To verify that all sales transactions for which shipment
has occurred have been recorded, a test of transactions should be
completed on a representative sample drawn from
Question 48 After testing a clients internal control activities, an
auditor discovers a number of significant deficiencies in the operation
of a clients internal control. Under these circumstances the auditor
most likely would
Question 49 Which of the following is true regarding significant
deficiencies?
Question 50 During the audit the independent auditor identified the
existence of a significant deficiency in the clients internal control and
communicated this finding in writing to the clients management and
to those charged with governance. The auditor should
Question 51 Which of the following statements is correct concerning
an auditors communication on internal control related matters noted
in an audit?
Question 52 Which of the following would not typically be a control
relied upon during an audit?
Question 53 The auditor would be least likely to be concerned about
internal control as it relates to
Question 54 When preparing a record of a clients internal control,
the independent auditor sometimes uses a flowchart, which can best be
described as a
Question 55 One important reason why a CPA, during the course of
an audit engagement, prepares internal control flowcharts is to
Question 56 In an audit of financial statements, an auditors
primary consideration regarding a control is whether the control
Question 57 Effective internal control requires organizational
independence of departments. Organizational independence would be
impaired in which of the following situations?
Question 58 An auditor would most likely be concerned with
controls that provide reasonable assurance about the
 Question 59 Proper segregation of functional responsibilities calls
for separation of the
Question 60 Which of the following sets of duties would ordinarily
be considered basically incompatible in terms of good internal control?
Question 61 A primary objective of procedures performed to obtain
an understanding of internal control is to provide an auditor with
Question 62 Which of the following factors is most likely to affect
the extent of the documentation of the auditors understanding of a
clients system of internal controls?
Question 63 Walk-throughs provide evidence that helps auditors to
Question 64 An auditors tests of controls over the issuance of raw
materials to production would most likely include
Question 65 Well functioning internal control for the
inventory/production functions would provide that finished goods are
to be accepted for stock only after presentation of a completed
production order and a(n)
Question 66 Tests of controls are performed in order to determine
whether
Question 67 Which of the following would be least likely to be
included in an auditors tests of controls?
Question 68 Which of the following is not a step in an auditors
decision to conclude that controls operate effectively?
Question 69 When an auditor plans to rely on controls that have
changed since they were last tested, which of the following courses of
action would be most appropriate?
Question 70 Which of the following is a step in an auditors decision
to assess the risk of material misstatement at a low level by relying on
controls?
Question 71 A client maintains a large data center where access is
limited to authorized employees. How may an auditor best determine
the effectiveness of this control activity?
Question 72 Which of the following is an inherent limitation of
internal controls?
Question 73 An independent auditor has concluded that the clients
records, procedures, and representation can be relied upon based on
tests made during the year when internal control was found to be
effective. The auditor should test the records, procedures, and
representations again at year-end if
Question 74 When considering internal control to determine
whether the necessary procedures are designed and operating
effectively, an auditor must
Question 75 Which of the following is required documentation in an
audit in accordance with generally accepted auditing standards?
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