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SECT 3 Exam Part 2 Option A

Mark Whitney Started: March 30, 2012 11:50 Questions: 30 Finish 1.
(Points: 1)

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Inthecontextofanauditofnancialstatements,substan vetestsareauditproceduresthat

1. 2. 3. 4.

Aredesignedtodiscoversignicantsubsequentevents. Willincreasepropor onatelywiththeauditorsrelianceoninternalcontrol. Maybeeithertestsoftransac ons,directtestsofnancialbalances,oranaly caltests. Maybeeliminatedundercertaincondi ons.

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2.

(Points: 1)

Whichofthefollowingisasubstan vetestthatanauditorismostlikelytoperformtoverifytheexistenceandvalua onof recordedaccountspayable?

1. for.

Inves ga ngtheopenpurchaseorderletoascertainthatprenumberedpurchaseordersareusedandaccounted

2. Receivingtheclientsmail,unopenedforareasonableperiodof mea eryearendtosearchforunrecorded vendorsinvoices. 3. 4. Vouchingselectedentriesintheaccountspayablesubsidiaryledgertopurchaseordersandreceivingreports. Conrmingaccountspayablebalanceswithknownsupplierswhohavezerobalances.

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3.

(Points: 1)

Inverifyingdebitstoperpetualinventoryrecordsofanonmanufacturingrm,theauditorismostinterestedinexaminingthe purchase

1.

Orders.

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2. 3. 4.

Invoices. Requisi ons. Journal.

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4.

(Points: 1)

DaconoCompanyusesitssalesinvoicesforpos ngperpetualinventoryrecords.Inadequateinternalcontroloverthe invoicingfunc onallowsgoodstobeshippedthatarenotinvoiced.Theinadequatecontrolscouldcausean

1. 2. 3. 4.

Overstatementofrevenues,receivables,andinventory. Overstatementofrevenuesandreceivables,andanunderstatementofinventory. Understatementofrevenues,receivables,andinventory. Understatementofrevenuesandreceivables,andanoverstatementofinventory.

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5.

(Points: 1)

Whenfewpropertyandequipmenttransac onsoccurduringtheyear,thecon nuingauditorusuallyobtainsan understandingofinternalcontrolandperforms

1. 2. 3. 4.

Analy calprocedurestoverifycurrentyearaddi onstopropertyandequipment. Testsofcontrolsinordertorelyonthecontrols. Athoroughexamina onofthebalancesatthebeginningoftheyear. Extensivetestsofcurrentyearpropertyandequipmenttransac ons.

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6.

(Points: 1)

Foreec veinternalcontrol,employeesmaintainingtheaccountsreceivablesubsidiaryledgershouldnotalsoapprove

1.

Writeosofcustomeraccounts.

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2. 3. 4.

Employeeover mewages. Cashdisbursements. Creditgrantedtocustomers.

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7.

(Points: 1)

Conrma onofaccountspayablewithcreditorsismostappropriatewhen

1. 2. 3.

Themajorityofaccountspayablebalancesareowedtorelatedpar es. Accountspayablebalancesareimmaterial. Creditorstatementsarenotavailableandinternalcontroloveraccountspayableisunsa sfactory.

4. Internalcontroloveraccountspayableiseec ve,andsucientevidenceexiststominimizetheriskofamaterial misstatement. Save Answer

8.

(Points: 1)

Cutotestsdesignedtodetectcreditsalesmadebeforetheendoftheyearthathavebeenrecordedinthesubsequentyear provideassuranceaboutmanagementsasser onof

1. 2. 3. 4.

Presenta on. Existence. Completeness. Rights.

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9.

(Points: 1)

Whichofthefollowingcombina onsofproceduresisanauditormostlikelytoperformtoobtainevidenceaboutxedasset addi ons?

1.

Recompu ngcalcula onsandobtainingwri enmanagementrepresenta ons.

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2. 3. 4.

Conrmingownershipandcorrobora ngtransac onsthroughinquiriesofclientpersonnel. Inspec ngdocumentsandphysicallyexaminingassets. Observingopera ngac vi esandcomparingbalancestopriorperiodbalances.

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10.

(Points: 1)

Anauditorisdeterminingifinternalcontrolrela vetotherevenuecycleofawholesalingen tyisopera ngeec velyin minimizingthefailuretopreparesalesinvoices.Theauditormostlikelywouldselectasampleoftransac onsfromthe popula onrepresentedbythe

1. 2. 3. 4.

Customerorderle. Shippingdocumentle. Salesinvoicele. Cashreceiptsle.

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11.

(Points: 1)

Purchasecutoproceduresshouldbedesignedtotestwhetherallinventory

1. 2. 3. 4.

Purchasedandreceivedbeforeyearendwasrecorded. Purchasedandreceivedbeforeyearendwaspaidfor. Ownedbythecompanyisinthepossessionofthecompanyatyearend. Orderedbeforeyearendwasreceived.

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12.

(Points: 1)

Property,plant,andequipment(PP&E)istypicallyjudgedtobeoneoftheaccountsleastsuscep bletofraudbecause

1. 2.

Theinherentriskisusuallylow. Internalcontrolisinherentlyeec veregardingthisaccount.

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3. 4.

Theamountsrecordedonthebalancesheetformostcompaniesareimmaterial. Thedepreciatedvaluesarealwayssmallerthancost.

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13.

(Points: 1)

Whichofthefollowingauditproceduresisbestforiden fyingunrecordedtradeaccountspayable?

1. Reconcilingvendorsstatementstotheleofreceivingreportstoiden fyitemsreceivedjustpriortothebalance sheetdate. 2. Reviewingcashdisbursementsrecordedsubsequenttothebalancesheetdatetodeterminewhethertherelated payablesapplytothepriorperiod. 3. Inves ga ngpayablesrecordedjustpriortoandjustsubsequenttothebalancesheetdatetodeterminewhether theyaresupportedbyreceivingreports. 4. Examiningunusualrela onshipsbetweenmonthlyaccountspayablebalancesandrecordedcashpayments.

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14.

(Points: 1)

Beforeapplyingprincipalsubstan veteststoanen tysaccountsreceivableataninterimdate,anauditorshould

1. 2. 3. 4.

Considerthelikelihoodofassessingtheriskofincorrectrejec ontoolow. Assessthedicultyincontrollingtheincrementalauditrisk. Ascertainthataccountsreceivableareimmaterialtothenancialstatements. Projectsamplingriskatthemaximumfortestscoveringtheremainingperiod.

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15.

(Points: 1)

Whenanauditordoesnotreceiverepliestoposi verequestsforyearendaccountsreceivableconrma ons,theauditor mostlikelywould

1.

Inspecttheallowanceaccounttoverifywhethertheaccountsweresubsequentlywri eno.

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2. 3. 4.

Increasetheassessedlevelofdetec onriskforthevalua onandcompletenessasser ons. Increasetheassessedleveloftheinherentriskfortherevenuecycle. Sendthecustomerasecondconrma on.

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16.

(Points: 1)

Underwhichofthefollowingcircumstanceswouldtheuseoftheblankformofconrma onsofaccountsreceivablemost likelybepreferabletoposi veconrma ons?

1. 2. 3. 4.

Therecipientsarelikelytosigntheconrma onswithoutdevo ngpropera en ontothem. Thecombinedassessedlevelofinherentriskandcontrolriskislow. Analy calproceduresindicatethatfewexcep onsareexpected. Subsequentcashreceiptsareunusuallydiculttoverify.

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17.

(Points: 1)

Themosteec veauditprocedurefordeterminingthecollectabilityofanaccountreceivableisthe

1. 2. 3. 4.

Reviewofauthoriza onofcreditsalestothecustomerandtheprevioushistoryofcollec ons. Examina onoftherelatedsalesinvoice(s). Reviewofthesubsequentcashcollec ons. Conrma onoftheaccount.

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18.

(Points: 1)

Indeterminingwhethertransac onshavebeenrecorded,thedirec onoftheaudittes ngshouldbefromthe

1. 2.

Generalledgerbalances. Originalsourcedocuments.

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3. 4.

Adjustedtrialbalance. Generaljournalentries.

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19.

(Points: 1)

Whichofthefollowingisthegreatestdrawbackofusingsubsequentcollec onsevidencedonlybyadepositslipasan alterna veprocedurewhenresponsestoposi veaccountsreceivableconrma onsarenotreceived?

1. Byexaminingadepositsliponly,theauditordoesnotknowwhetherthepaymentisforthereceivableatthebalance sheetdateorasubsequenttransac on. 2. 3. 4. Adepositslipisnotreceiveddirectlybytheauditor. Checkingofsubsequentcollec onscanneverbeusedasanalterna veaudi ngprocedure. Acustomermaynothavemadeapaymentona melybasis.

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20.

(Points: 1)

Anauditorinspectsaclientsinvestmentrecordstodeterminethatanytransfersbetweencategoriesofinvestmentshave beenproperlyrecorded.Theprimarypurposeofthisprocedureistoobtainevidenceconcerningrelevantnancialstatement asser onsabout

1. 2. 3. 4.

Classica onandunderstandability,andvalua onandalloca on. Existenceoroccurrence,andclassica onandunderstandability. Rightsandobliga ons,andexistence. Valua onandalloca on,andrightsandobliga ons.

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21.

(Points: 1)

Allofthefollowingareexamplesofsubstan veteststoverifythevalua onofnetaccountsreceivableexceptthe

1. 2.

Recomputa onoftheallowanceforbaddebts. Comparisonoftheallowanceforbaddebtswithpastrecords.

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3. 4.

Inspec onoftheagingscheduleandcreditrecordsofpastdueaccounts. Inspec onofaccountsforcurrentversusnoncurrentstatusinthestatementofnancialposi on.

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22.

(Points: 1)

Intheauditofwhichofthefollowinggeneralledgeraccountswilltestsofcontrolsbepar cularlyappropriate?

1. 2. 3. 4.

Bankcharges. Equipment. Bondspayable. Sales.

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23.

(Points: 1)

Anauditorsuspectsthataclientscashierismisappropria ngcashreceiptsforpersonalusebylappingcustomerchecks receivedinthemail.Ina emp ngtouncoverthisembezzlementscheme,theauditormostlikelywouldcomparethe

1. 2. 3. 4.

Dateschecksaredepositedperbankstatementswiththedatesremi ancecreditsarerecorded. Individualbankdepositslipswiththedetailsofthemonthlybankstatements. Dailycashsummarieswiththesumsofthecashreceiptsjournalentries. Datesuncollec bleaccountsareauthorizedtobewri enowiththedatesthewriteosareactuallyrecorded.

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24.

(Points: 1)

Inassessingtheobjec vityofinternalauditors,anindependentauditorshould

1. 2. 3.

Evaluatethequalitycontrolprogramineectfortheinternalauditors. Testasampleofthetransac onsandbalancesthattheinternalauditorsexamined. Determinetheorganiza onalleveltowhichtheinternalauditorsreport.

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4.

Examinedocumentaryevidenceoftheworkperformedbytheinternalauditors.

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25.

(Points: 1)

Whichofthefollowingcontrolsmostlikelyaddressesthecompletenessasser onforinventory?

1. 2. 3. 4.

Thereisasepara onofdu esbetweenpayrolldepartmentandinventoryaccoun ngpersonnel. Employeesnotresponsibleforcustodyofnishedgoodsdonotperformthereceivingfunc on. Workinprocessaccountisperiodicallyreconciledwithsubsidiaryrecords. Receivingreportsareprenumberedandperiodicallyreconciled.

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26.

(Points: 1)

Theobjec veoftestsofdetailsoftransac onsperformedassubstan vetestsisto:

1. 2. 3. 4.

Evaluatewhethermanagementscontrolsoperatedeec vely. A ainassuranceaboutthereliabilityoftheinforma onsystemrelevanttonancialrepor ng. Complywithgenerallyacceptedaudi ngstandards. Detectmaterialmisstatementsinthenancialstatements.

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27.

(Points: 1)

Toobtainevidenceastothereasonablenessandcompletenessofinventorybalances,auditorso enperformanaly cal procedures.Whichofthefollowingquanita verela onshipsisnotapplicabletoinventorybalances?

1. 2. 3. 4.

Inventoryturnoverra os. Thegrossprotpercentage. Numberofdayssalesininventory. Debittoequityradio.

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28.

(Points: 1)

A eraccoun ngforasequenceofinventorytags,anauditortracesasampleoftagstothephysicalinventorylis ngtoobtain evidencethatallitems

1. 2. 3. 4.

Representedbyinventorytagsareincludedinthelis ng. Representedbyinventorytagsarebonade. Includedinthelis nghavebeencounted. Includingthelis ngarerepresentedbyinventorytags.

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29.

(Points: 1)

Whenaudi ngmerchandiseinventoryatyearend,theauditorperformsapurchasecutotesttoobtainevidencethat

1. 2. 3. 4.

Allgoodspurchasedbeforeyearendarereceivedbeforethephysicalinventorycount. Allgoodsownedatyearendareincludedintheinventorybalance. Nogoodsobservedduringthephysicalcountarepledgedorsold. Nogoodsheldonconsignmentforcustomersareincludedintheinventorybalance.

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30.

(Points: 1)

Whichofthefollowingproceduresisconsideredatestofcontrols?

1. 2. 3. 4.

Anauditorreviewstheen tyscheckregisterforunrecordedliabili es. Anauditorreviewstheauditworkpaperstoensurepropersigno. Anauditorevaluateswhetherageneraljournalentrywasrecordedattheproperamount. Anauditorinterviewsandobservesappropriatepersonneltodeterminesegrega onofdu es.

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