ACCT 444 Week 5 Quiz

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ACCT 444 Week 5 Quiz

1. (TCO 6) The auditor looks for an indication on duplicate sales invoices to see whether the invoices have been verified. This is an example of (Points : 3) a test of details of balances. a test of control. a substantive test of transactions. both a test of control and a substantive test of transactions. 1. (TCO 6) Tests of controls may include which of the following types of evidence? (Points : 3) Observation Reperformance Inquiries All of the above 1. (TCO 6) For efficiency, tests of controls are frequently done at the same time as (Points : 3) analytical procedures. compliance tests. tests of transactions. tests of details of balances. 2. (TCO 6) Analytical procedures are defined in the auditing standards as (Points : 3) compliance tests. substantive tests. tests of controls. helpful procedures not possessing the validity of other tests available to the auditor. 2. (TCO 6) Which of the following is not a direct result of performing analytical procedures? (Points : 3) Identify areas of potential misstatements. Reduce detailed audit risk. Understand the client’s business. Identify specific errors in the accounts. 2. (TCO 6) Analytical procedures may be classified as being primarily (Points : 3) tests of controls. substantive tests. tests of ratios. tests of details of balances. 3. (TCO 6) Which of the following audit tests is usually the least costly to perform? (Points : 3) Analytical procedures Tests of controls Tests of balances Substantive tests of transactions 3. (TCO 6) Which of the following audit tests is usually the most costly to perform? (Points : 3) Analytical procedures Tests of controls Tests of balances Substantive tests of transactions 4. (TCO 6) Which of the following tests commonly occur together? (Points : 3) Substantive tests of transactions and tests of controls Substantive tests of transactions and obtaining an understanding of internal controls Analytical procedures and tests of controls All of the above 4. (TCO 6) Which of the following relationships between types of tests and audit evidence is not correct? (Points : 3) Tests of details and documentation Tests of controls and observation Tests of details and observation Substantive tests of transactions and reperformance 5. (TCO 6) The sequence of steps in gathering evidence as the basis of the auditor’s opinion are (Points : 3) substantive tests, initial assessment of control risk, and tests of controls. initial assessment of control risk, substantive tests, and tests of controls. initial assessment of control risk, tests of controls, and substantive tests. tests of controls, initial assessment of control risk, and substantive tests. 5. (TCO 6) The purpose of tests of controls is to provide reasonable assurance that the (Points : 3) accounting treatment of transactions and balances is valid and proper. internal control procedures are functioning as intended. entity has complied with GAAP disclosure requirements. entity has complied with requirements of quality control. 6. (TCO 9) It is important that sales be billed and recorded in the journal as soon as possible after (Points : 3) the order is received. the order is received and credit is approved. credit is approved and it is verified that there is enough inventory to fill the order. the shipment takes place. 6. (TCO 9) The use of prenumbered sales invoices is meant to prevent (Points : 3) the failure to bill or record sales. duplicate billings and recording of sales. both A and B are correct. neither A nor B is correct. 6. (TCO 9) Prenumbered documents will only be useful for control purposes if (Points : 3) a different numerical sequence is used for each company. the sequence is accounted for periodically. employees do not have access to the complete sequence. All of the above 7. (TCO 9) Which one of the following is not an auditor’s concern about a key authorization point in the sales or collection cycle? (Points : 3) The receiving room must have authorization before releasing items to inventory control. Credit must be authorized before the sale. Goods must be shipped after the authorization. Prices must be authorized. 7. (TCO 9) At which point in an ordinary sales transaction would a lack of specific authorization be of least concern to the auditor? (Points : 3) Granting of credit Shipment of goods Determination of discounts Selling of goods for cash 8. (TCO 9) The credit-granting functions should be separated from which of the following? (Points : 3) Purchasing functions Manufacturing function Sales function None of the above 9. (TCO 9) When designing substantive tests of transactions for sales, the auditor is concerned with the possibility of several types of misstatements. Which of the following is not one of the types of these misstatements? (Points : 3) Sales being included in the journal for which no shipment was made Sales to related parties, such as officers and subsidiaries Sales recorded more than once Shipments being made to nonexistent customers and recorded as sales   10. (TCO 9) A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that (Points : 3) cash receipts recorded in the cash receipts journal are reasonable. cash receipts are properly classified. recorded cash receipts result from legitimate transactions. existing cash receipts are recorded. 10. (TCO 9) Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom? (Points : 3) The cashier prepares the daily deposit. The cashier makes the deaily deposit at a local bank. The cashier posts the receipts to the accounts receivable subsidiary ledger cards. The cashier endorses the checks.