CMY1501 Exam Pack (Multiple Choice Questions & Answers)
Acceptable Audit Risk is ordinarily set by the auditor during planning and..... - ANSWER---Held constant for each major cycle and account
Acceptable Audit Risk is ordinarily set by the auditor during planning and..... -
ANSWER---Held constant for each major cycle and account
Which of the following is not a direct outcome of performing analytical procedures? -
ANSWER---Identify specific errors in the accounts
Which of the following audit tests is usually the most costly o perform? - ANSWER---
Tests of balances
The highest cost audit will be incurred when the auditor expected that the internal
control system would..... - ANSWER---be effective, but the auditor found extensive
control test deviations and significant errors during tests of transactions
Extended performance of tests of controls is most likely when..... - ANSWER---it is a
first-year audit
Many auditors perform extensive analytical procedures on all audits because...... -
ANSWER---They are relatively inexpensive
Auditing standards require the auditor to perform analytical procedures, but it is optional
for the auditor to perform analytical procedures during the....... - ANSWER---Testing
phase
If the results of the tests of controls, substantive test of transactions, and analytical
procedures are not consistent with the predictions, the test of details of balances will
be...... - ANSWER---Changed
Tests of controls address each of the following questions except...... - ANSWER---Why
were the procedures performed?
Which of the following audit tests would be regarded as a test of controls? - ANSWER---
Tests of the signatures on canceled checks to board of directors authorizations
An auditor evaluates the clients system of internal control in order to..... - ANSWER---
determine the extent of substantive tests which must be performed
Which of the following is ordinarily designed to detect possible material dollar errors on
the financial statements? - ANSWER---Analytical review
More types of evidence are obtained by using this test than by using any other type of
test.... - ANSWER---Tests of balances
When a customer fails to include a remittance advise with a payment, it is common for
the person opening the mail to prepare one. Consequently, mail should be opened by
which of the following four company employees? - ANSWER---Receptionist
A key 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...... - ANSWER---existing cash receipts are recorded
Which of the following internal controls would most likely reduce charge-offs of
uncollectible accounts receivable? - ANSWER---Employees involved in the credit
granting function are separated from the sales function
Auditors sometimes use comparison of ratios as audit evidence. For examples, an
unexplained decrease in the ratio of gross profit to sales may suggest which of the
following possibilities? - ANSWER---Unrecorded sales
, An auditor performing substantive tests of transactions for sales. One step is to trace a
sample of debit entries from the accounts receivable master file back to the supporting
duplicate sales invoices. What would the auditor intend to establish by this step? -
ANSWER---Debit entries in the accounts receivable master file are properly supported
by sales invoices
At which point in an ordinary sales transactions of a wholesaling business would a lack
of specific authorization be of least concern to the auditor? - ANSWER---Selling of
goods for cash
Smith manufacturing companys accounts receivable clerk has a friend who is also
Smith's customer. The accounts receivable clerk, on occasion, has issued fictitious
credit memorandums to his friend for goods supposedly returned. The most effective
procedure for preventing this activity is to...... - ANSWER---Require receiving reports to
support all credit memorandums before they are approved
The primary purpose of accounts receivable confirmation is to satisfy the...... -
ANSWER---existence, accuracy, and cutoff objectives
The most reliable evidence from confirmation is obtained when they are sent...... -
ANSWER---as close to the balance sheet date as possible
Which of the following is not an important consideration in determining the sample size
of confirmations? - ANSWER---Total annual credit sales
The following statements relate to the process of selecting items to include in the
confirmation sample. Which of the following is not a true statement? - ANSWER---In
most audits, the emphasis should be on sampling equally throughout the population
Marked wrong on one test for some reason??????
The CPA learns that collections of accounts receivable during the first ten days of
January were entered as debits to cash and credits to accounts receivable as of
December 31. The effect generally will be to....... - ANSWER---Leave both working
capital and the current ratio unchanged at December 31
Returns of positive-confirmation requests for AR were very poor. As an alternative
procedure, the auditor decided to check subsequent collections. The auditor has
satisfied himself that the client satisfactorily listed the customer for which a confirmation
was not received that he would add all amounts shown for that customer on each
validated deposit slip for the next two months following the balance-sheet date. The
major fallacy in the auditor's procedure is that....... - ANSWER---By looking only at the
deposit slip the auditor would not know if the payment was for the receivable at the
balance-sheet date or a subsequent transaction.
Which of the following internal control procedures will most likely prevent the
concealment of a cash shortage resulting from the improper write-off of a trade account
receivable? - ANSWER---Write-offs must be approved by a responsible officer after
review of credit department recommendations and supporting evidence
The audit working papers often include a client-prepared, aged trial balance of AR as of
the balance sheet date. This aging is best used by the auditor to..... - ANSWER---
Estimate credit losses
Which of the following statements regarding auditor documentation of the client's
internal control structure? - ANSWER---No one particular form of documentation is
necessary, and the extent of documentation may vary
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