Exam (elaborations)
AICPA Mock Exam – Questions & Answers (Pass!!!)
- Module
- Institution
AICPA Mock Exam – Questions & Answers (Pass!!!)
[Show more]
Seller
Follow
LeCrae
Reviews received
Content preview
AICPA Mock Exam – Questions & Answers (Pass!!!)Which of the following characteristics *most likely* would heighten an
auditor's concern about the risk of material misstatements arising from
fraudulent financial reporting?
a. The entity's industry is experiencing declining customer demand.
b. Employees who handle cash receipts are *not* bonded.
c. Bank reconciliations usually include in-transit deposits.
d. Equipment is often sold at a loss before being fully depreciated.
Correct Ans - *a. The entity's industry is experiencing declining
customer demand.*
Choice "a" is correct. In assessing the risk related to material
misstatements in an entity's financial statements, the auditor would
consider situations that threaten financial stability or profitability, since
such situations might provide an incentive to fraudulently misstate the
financial statements. Included as one of these characteristics is declining
customer demand.
Choice "b" is incorrect. Even though the bonding of employees who handle
cash is recommended, it is not a significant characteristic in assessing the
risk related to material misstatement in an entity's financial statements.
Choice "c" is incorrect. Bank reconciliations with in-transit deposits are
*not unusual* and would not heighten the auditor's concern about the risk
of material misstatement. In-transit deposits can be verified with the bank
at a later date.
Choice "d" is incorrect. Since depreciation does not adjust an asset to
market value, the sale of equipment at a loss before being fully depreciated
is *not unusual* and would not heighten an auditor's concern.
Which of the following fraudulent activities most likely could be
perpetrated due to the lack of effective internal controls in the revenue
cycle?
a. Fictitious transactions may be recorded that cause an understatement of
revenues and an overstatement of receivables.
b. Claims received from customers for goods returned may be intentionally
recorded in other customers' accounts.
c. Authorization of credit memos by personnel who receive cash may
permit the misappropriation of cash.
d. The failure to prepare shipping documents may cause an overstatement
of inventory balances. Correct Ans - c. Authorization of credit
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller LeCrae. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £8.16. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79223 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now