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  1. Which of the following controls would most likely reduce the risk of diversion of customer receipts by client employees?
    A bank lock box system
  2. To provide assurance that each voucher is submitted and paid only once, the auditors most likely would examine a sample of paid vouchers and determine whether each voucher is:
    Stamped "paid" by the check signer
  3. In testing controls over cash disbursements, the auditors most likely would determine that the person who signs the checks also
    is responsible for mailing the checks
  4. to gather evidence regarding the balance per bank in a bank reconcilliation, the auditors would examine:
    • cutoff bank statement
    • year end bank statement
    • bank confirmation

    They would NOT examine the general ledger
  5. You have been assigned to the year end audit of a financial institution and are planning the timing of audit procedures relating to cash, You decide that it would be preferable to:
    coordinate the count of cash with the count of marketable securities and other negotiable assets
  6. Which of the following procedres would the auditors most likely perform to test controls relating to management's assertion about the completeness of cash receipts for cash sales at a retail outlet?
    Observe the consistency of the employees' use of cash register and tapes
  7. Reconcilliation of the bank account should NOT be preformed by an individual who also
    processes cash disbursements
  8. The auditors suspect that a clients casheir is misapropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezelment scheme, the auditors would most likely compare the
    details of bank deposit slips with details of credits to cusomer accounts
  9. In order to gaurd against the misappropriation of company owned marketable securities, which of the following is the best couse of action that can be taken by a company with a large portfolio of marketable securites
    require that the safekeeping function for securities be assigned to a bank or stockbroker that will act as a custodial agent
  10. Hall compnay had large amounts of funds to inverst on a temporary basis. the board of directors decided to purchse securities and derivatives and assigned the future purchas and sale decisions to a responsible finanacial executive. The best person or persons to make periodic review of the investment activity would be
    an investment committee of the board of directors
  11. the auditors who physically examine securities should insist that a client representative be present in order to:
    Acknowledge the receipt of sercurities returned
  12. The best way to verify the amounts of dividend revenue received during the year is:
    verification by reference to dividend record books
  13. Which of the following is least likely to be considered and inherent rick relating to receivables and revenues
    over-recorded sales due to a lack of control over the sales entry function
  14. which if the following would provide the most assurance concerning the valuation of accounts receivable
    assess the allowance for uncollectible accounts for reasonableness
  15. Which of the following is most likely to be an example of fraudulent financial reporting relating to sales
    recording sales when the customer is likely to return the goods
  16. Which of the following is an example of misappropriation of assets relating to sales
    theft of cash register sales
  17. There is presumption that auditors will confirm accounts receivable unless the audtitors' assessment of the risk of material misstatement is low
    and accounts receivable are immaterial, or the use of confirmations would be ineffective
  18. which of the following is NOT among the criteria that ordinarily exist for revenue to be recognized
    delievery has occured or is scheduled to occur in the near future
  19. to determine that all sales have been recorded, the auditors would select a sample of transactions from the
    shipping documents file
  20. Which of the following would most likely be detected by an auditor's review of the client's sales cutoff?
    inflated sales for the year
  21. to test the existence assertion for recorded receivables, the auditors would select a sample from the
    accounts receivable subsidiary ledger
  22. Which assertion relating to the sales is most directly addressed when tha auditors compare a sample of shipping documents to related sales invoices
  23. Cooper, CPA, is auditing the financial statements of a small rural municipality. The receivable balances represent residents' delinquent real estate taxes. Internal control at the municipality is weak. to determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely
    Send positive confirmation requests
  24. Identify the control that is most likely to prevent the concealment of a cash shortage resulting from teh improper writeoff of a trade account receivable
    write-offs must be approved by a responsible official after the review of credit department recomendations and supporting evidence
  25. Which of the following is least likely to be among the auditors' objectives in the audit of inventories and COGS
    establish that the client includes only inventory on hand at year end in inventory totals
  26. the receiveing department is least likley to be responsible for the
    preparation of a shipping document
  27. the document issued by a common carrier acknowledging the receipt of goods and setting the forth provisions of the transportation agreement is the
    bill of lading
  28. which of the following should be included as a part of inventory costs of a manufacturing company
    • direct labor
    • raw materials
    • factory overhead
  29. the organization established by congress to narrow the options in cost accounting that are available under generally accepted accounting principles is the
    cost accounting standards board
  30. When a primary risk related to an audit is possible overstated inventory, the assertion most directly related is
  31. instead of taking a physical inventory count on the balance-sheet date, the client may take physical counts prior to the year-end if internal control is adequate and
    well kept records of perpetual inventory are maintained
  32. The auditors analytical procedres will be facilitated if the client
    uses a standard cost system that produces variance reports
  33. When perpetual inventory records are maintained in quantities and in dollars, and internal conrol is weak, the auditor would probably
    want the client to schedule the physical inventory count at the end of the year
  34. Which of the following is the best audit procedure for the discovery of damaged merchandise in a client's ending inventory
    observe merchandise and raw materials during the clients physical inventory taking
  35. Company does not make an annual physical count of year-end inventories, but instead makes weekly test counts on the basis of a statistical plan. During the year, CPA observes such counts as she deems necessary and is able to satisfy herself as the the reliability of the client's procedures. In reporting the results of her examination
    can issue an unqualified opinion without disclosing that she did not observe year end inventories
  36. the primary objective of a CPA's observation of a clients physical inventory count is to
    obtain direct knowledge that the inventory exists and have been properly counted
  37. to assure accountability for fixed asset retirements, management should implement an internal control that includes
    utilitzation of serially number retirement work orders
  38. the auditors may conclude that depreciation charges are insuffucient by noting
    excessive recurring losses on assets retired
  39. which of the following is an internal control weakness related to factory equipment
    all purchases of factory equipment are required to be made by the department in need of the equipment
  40. which of the following accouts should be reviewed by the auditors to gain reasonable assurance that additions to property plant and equipment are not understated
  41. the auditors are most likely to seek information from teh plant manager with respect to the
    existence of obsolete information
  42. to strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic
    inspection of equipment and reconciliation with accounting records
  43. which of the following statements is not typical of property plant and equipment as compared to most current asset accounts
    a property plant and equipment cutoff near year end has a more significant effect on net income
  44. for the audit of a continuing nonpublic client, the emphasis of the testing for property account is on
    transactions that occurred during the year
  45. audit of which of the following accounts is most likely to reveal evidence relating to recorded retirements of equipment
    accumulated depreciation
  46. an effective procedure for identifying unrecorded retirements of equipment is to
    select items of equipment in the accounting records and then locate them in the plant
  47. which of the following is not an overall test of the annual povision for depreciation expense
    test deductions from accumulated depreciation for assets purchased during the year
  48. the audit of intangible assets typically involves
    • vouching the cost of assets
    • testing allocation methods
  49. Which of the following procedures is least likely to be completed before the balance sheet date
    search for unrecorded liabilities
  50. an audit of the balances in the accounts payale account is ordinarily not designed to
    detect accounts payable that are substantially past due
  51. which of the following is the best audit procedure for determining the existence of unrecorded liabilities
    examine selected cash disbursements in the period subsequent to year end
  52. Audtitor confirmation of accounts payable balances at the balance sheet date may be unecessary because
    there is likely to be other reliable external evidence available to support the balances
  53. a client erroneously recorded a large purchase wice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner
    reconciling vendors monthly statements with subsidiary payable ledger accounts
  54. for effective internal control, the accounts payable department should compare the information n each vendors invoice with the
    receiving report and the purchase order
  55. when confirming accounts payable, the approach is most likely to be one of
    selecting the accounts of companies with whom the client has previously done the most business, plus a sample of other accounts
  56. in an audit the valuation of year-end accounts payable is most likely to be addressed by
  57. ordinarily, the most significant assertion relating to accounts payable is
  58. The least likely approach in auditing managements estimate relating to an accrues liability is to
    send confirmations relating to the estimate
  59. to determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be canceled by the
    individual who signs the checks
  60. in performing a test of controls, the auditors vouch a sample of entries in the purchases journal to the supporting documents. Which assertion would this test of controls most likely test
  61. Which of the following is least likely to be an audit objective for debt
    determing that the client has rights to receive proceeds relating to the redemption of debt
  62. the auditors would be most likely to find unrecorded long-term liabilities by analyzing
    interest payments
  63. a likely reason that considerating of client complieance with debt provisions is important to an audit is that violation of such debt provisions may affect the total recorded
    current liabilities
  64. a transfer agent and a registrar are most likely to provide the auditor with evidence on
    shares issued and outstanding
  65. the audit procedure of conformation is least appropriate with respect to
    holders of common stock
  66. an auditir is most likely to trace treasury stock purchase transactions to the
    number stock certificates on hand
  67. In the continuing audit of a manufacturing company of medium size, which of the following areas would you expect to require the least amount of audit time
    owners' equity
  68. the auditors can best verify a client's bond sinking fund transactions and year-end balance by
    confirmation with the bond trustee
  69. the auditors program for the examination of long-term debt should include steps that require the
    examinations of compies of debt agreements
  70. all corporae capital stock transactions should ultimately ne traced to the
    minutes of the board of directors
  71. which of the following is most likely to be an audit objective in the audit of owners' equity
    determine that the presentation and disclosure of owners' equity is appropriate
  72. in an audit of a sole proprietorship, a common difficulty is the lack of
    segregation of personal net worth and business capital
  73. which of the follwoing is least likely to be considered a substantive procedure relating to payroll
    test whether employee time reports are approved by supervisors
  74. which of the following is the best way for the auditors to determine that every name on a company's payroll is that of a bona fide employee presently on the job
    make a surprise observation of the company's regular distribution of paychecks on a test basis
  75. as a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should
    consider the possibility of a misstatement in the financial statements
  76. when auditing the statement of cash flows, whcih of the following would an auditor not expect to be a source of reciepts and payments
  77. the search fro unrecorded liabilities for a public company includes procedures usually performed through then
    date of the auditors report
  78. The aggregated misstatement in the financial statements is made up of
    • known misstatements
    • projected misstatements
    • other missstatements
  79. a possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to as a
    loss contingency
  80. which of the following is most likely to be considered a type 1 subsequent event
    customer checks deposited prior to year end, but determined to be uncollectible after year end
  81. the clients representation letter is formally dated when
    the date the auditor completes the audit
  82. which of the following procedures is most likely to be included in the final review stage of an audit
    perform analytical procedures
  83. subsequent to the issuance of the auditors report the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts, after determining that the information is reliable, the auditor should next
    determine whether there are persons relying or likely o rely on the financial statments who would attach importance to the information
  84. which of the following events occuring on jan 5 20x2 is most likely to result in an adjusting entry to the 20x1 statements
    settlement of litigation
  85. a material departure from generally accepted accounting principles will result in auditor consideration of
    whther to issue an adverse opinion rather than a qualified opionion
  86. the auditors report should be dated as of the date the
    auditrs have accumulated sufficient evidence
  87. in an audit report on combined financial atatements, reference to the fact that a portion of the audit was performed bu a compnent auditor is
    not to be constructed as a qualification, but rather as a division of responsibility between the two CPA firms
  88. assume that the opinion paragraph of an auditors' report begins as follows: "with the explaination given in Note 6... the financial statements referred to above present fairly... " this is
    an improper type of reporting
  89. the auditors who wish to draw reader attention to a financial statement note disclosure on significant transactions with related parties should disclose this fact in
    an emphasis of matter paragraph to the auditors report
  90. what type or types of audit opinion are appropriate when financial statements are materially and perversely missstated
  91. which of the following ordinarily involves the addition of an emphasis of matter paragraph to an audit report
    a qualified opnion
  92. an audit report for a public client indicated that the audit was performed in accordance with
    standards of the PCAOB
  93. An audit report for a public client indicates that the audit was performed in conformity with
  94. When the properly disclosed in the finacial statements, the likely result of substantial doubt about the ability of the client to continue as a going concern is the issuance of which of the following audit opintions
    Unmodified with emphasis of matter
  95. a change in accounting principles that the auditors believe is not justified is likely to result in which of the following types of audit opinions
  96. which of the following is least likely to result in inclusion of an emphasis of matter paragraph in an audit report
    a decision no to confirm accounts receivable
  97. in an integrated audit, which of the following must the auditors communicate to the audit committee
    • known material weaknesses
    • known significant deficiencies
  98. in an integrated audit, which of the follwoing leads to an adverse opnion on internal control
    known material weaknesses
  99. in an integrated audit, which of the following must be communicated by management to the audit committee
    • known material weaknesses
    • known significant deficiencies
  100. which of the following is most likely to be considered a material weakness in internal control
    ineffective oversight of financial reporting by the audit committee
  101. which of the following is defined as a weakness in internal control that allows a reasonable posibility of a misstatement that is material
    material weakness
  102. the auditors identified a material weakness in internal control in august. the client was informed and the client corrected the material weakness prior to year end, the auditors concluded that management eliminated the material weakness prior to year end. the appropriate audit report on internal control is
  103. which of the following need not be included in management's report on internal control of the sarbanes oxley act
    managements acknowledgement of its responsibility to establish and maintain internal control that detects all significant deficiencies
  104. management's documentation of internal control ordinarily should include information on
    controls designed to prevent fraud
  105. a material weakness is a control deficiency that results in a reasonable possibility that a misstatement of at least what amount will not be prevented or detected
    a material amount
  106. a procedure that involves tracing a transaction from origination through the company's financial report is referred to as a
    walk through
  107. which of the following is not a typical question asked during a walk through
    what is the largest fraudulent transaction you ever processed
  108. an audit of internal control over financial reporting ordinarily assesses internal control
    as of the last day of the fiscal period
  109. ehich of the following is not typically performed when the auditors are performing a review of client financial statements
    confirmation of accounts receivable
  110. which of the following must be obtained in a review of a nonpublic company
    representation letter
  111. a CPA who is not independent may perform which of the following services for a nonpublic company
  112. when performing a review of a nonpublic company, which is least likely to be included in auditor inquires of management members with responsibility for financial accounting matters
    communications with relate parties
  113. the proper report by an auditor relating to summarized financial statements includes
    an opnion on whether the summarized information is fairly stated in all material respects in relation to the basic financial statements
  114. concerning interin quarterly financial statements, management of public companies
    must engage CPAs to review the statements
  115. proper compilation report on financial statements that omit note disclosures
    indicates that management has omitted such information
  116. which of the following forms of accountant association always lead to a report intended solely for ceritan specified parties
    agreed-upon procedures
  117. which assertion is generally most difficult to attest to with respect to personal financial statements
  118. fiancial statements prepared following which of the following are most likely to be considered a special purpose financial reporting framework
  119. In which of the following reports should a CPA not express negative assurance
    a standard compilation report on financial statements of a nonpublic entity
  120. comfort letters to underwriters are normally signed by the
    independent auditor
  121. a report on the attestation engagement should
    state the practitioners conclusion about the subject matter or assertion
  122. when an accountiat examines a financial forecast that fails to disclose several significant addumptions used to produce the forecast, the accountant should describe the assumptions in the accountants report and issue an
    adverse opninion
  123. which of the following is not an objective of a CPA's examination of a clients MD and A
    the presentation is in conformity with rules and regulations adopted by the SEC
  124. A CPA's report relating to a SysTrust engagement is most likely to include
    an opinion on management's assertion that the system mees one or more of the SysTrust principles
  125. when performing an examination, if a CPA finds one r more significant assumptions are not reasonable for a forecast,t he most appropriate report is
  126. the accounting profession is currently developing assurance services related to which of the following international information formats
  127. When reporting on a companies compliance with a law, the CPAs may report on
    • compliance with the law itself
    • effectiveness of internal control over compliance
  128. Which is least likely
    a service that is not an assurance service, but is an attest service
  129. which of the following is least likely to be the subject matter of a attestation engagement
    suitable criteria
  130. which of the following is not a basic type of attestation engagement
  131. the assurance service being developed that address user and perparer needs regarding issues of security, availability, processing integrity, confidentiality, and privacy within e-commerce and other systems are referred to as
    trust services
  132. Internal auditing can be best described as
    a control function
  133. the independence of the internal auditing department will most likely be assured if it reports to the
    audit committee of the board of directors
  134. when performing an operational audit, the purpose of a preliminary survey is to
    Identify areas that should be included in the audit program
  135. operational auditing is primarily oriented toward
    future improvements to accomplish the goals of management
  136. which of the following bodies promulgates standards for audits of federal financial assistance programs
    governement accountability office
  137. as compared to an audit in accordance with GAAS, an audit in accordance with Generally accepted Government auditing standards requires the auditors to
    issue an additional report on compliance with laws and regulations and internal control
  138. in compliance attestation engagement, CPAs may address and organizations
    • compliance with specified requirements
    • internal control over compliance with specific laws and regulations
  139. the portion of internal control most directly related to a CPAs engagement to attest to complaince with laws and regulations is
    internal control over compliance
  140. when issuing an unqualified audit report in compliance with attestation engagement, the CPA may report on
    • managements assertion
    • subject matter
  141. when issuing a qualified audit report in a compliance attestation engagement, the CPA may report on
    subject matter
  142. an important aspect of performing an audit in accordance with the SIngle audit act is to identify
    major federal financial assistance programs
  143. the organization that administers the certified internal auditor program is the
    institue of internal auditors
Card Set:
2012-05-15 21:38:47

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