Audit Test 2

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Author:
analog22
ID:
271359
Filename:
Audit Test 2
Updated:
2014-04-21 16:24:25
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Audit
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Description:
Audit Test 2 Ch 6,7,10
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  1. Which
    of the following procedures most likely would be included as part of an
    auditor's tests of controls?
    •  B. 
    • Inspection



    Response Feedback:

    • Correct!  Inspection
    • would most likely be included as part of an auditor's tests of controls.
  2. A primary purpose of internal controls is to
    Meet objectives of maintaining sound documents and records and accurate financial reporting



    Response Feedback:

    Correct!  A primary purpose of internal controls is to meet objectives of maintaining sound documents and records and accurate financial reporting.
  3. Which of the following audit tests would be regarded as a test of controls?
    • Tests of the signatures on canceled checks to the board of director's
    • authorizations




    Response Feedback:

    • Correct!  Tests
    • of the signatures on canceled checks to the board of director's
    • authorizations would
    • be regarded as a test of controls.
  4. When an auditor increases the planned assessed level of control risk because certain
    control activities were determined to be ineffective, the auditor would most
    likely increase the
    Extent of tests of details



    Response Feedback:

    • Correct!  When an auditor increases the planned assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most
    • likely increase the extent of tests of details
  5. An auditor would most likely be concerned with internal control policies and
    procedures that provide reasonable assurance about the
    Entity's ability to accurately process and summarize financial data




    Response Feedback:

    • Correct!  An auditor would most likely be concerned with internal control policies and
    • procedures that provide reasonable assurance about the entity's
    • ability to accurately process and summarize financial data.
  6. Prior to issuing a report on internal controls over financial reporting, an auditor is
    required to:
    • Communicate to management, in writing, all control deficiencies identified during the audit
    • and inform the audit committee when such a communication has been made


    Response Feedback:

    • Correct!  Prior to issuing a report on internal controls over financial reporting, an auditor is
    • required to communicate
    • to management, in writing, all control deficiencies identified during the audit
    • and inform the audit committee when such a communication has been
    • made.
  7. The main goal of auditing internal control is:
    To form an opinion on the ability of internal controls to prevent fraud

    Response Feedback:

    • Incorrect. The main goal of auditing internal control is to evaluate the effectiveness of controls over all relevant financial statement
    • disclosures in the financial statements.
  8. An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act
    means
    • The auditor must conduct two audits, one on the effectiveness of internal control
    • and one on the financial statements, in an integrated way




    Response Feedback:

    • Correct!  An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means
    • the auditor must conduct two audits, one on the effectiveness of internal control
    • and one on the financial statements, in an integrated way.
  9. A deficiency that implies that there is reasonable possibility of misstatement in
    the financial statements that is significant but not material is
    A significant deficiency



    Response Feedback:

    • Correct!  A deficiency that implies that there is reasonable possibility of misstatement in
    • the financial statements that is significant but not material is a significant deficiency.
  10. According to the PCAOB, who is responsible for the reliability of the internal controls
    over financial reporting process of an entity
    The entity's CEO and/or CFO



    Response Feedback:

    • Correct!  According to the PCAOB, the entity's CEO and/or CFO are responsible for the
    • reliability of the internal controls over financial reporting process of an
    • entity.
  11. What is channel stuffing?
    A company records revenue before delivery terms can be arranged


    Response Feedback:

    • Incorrect. Channel Stuffing is
    • when a company induces distributors to buy substantially more inventory than they
    • can promptly resell.
  12. The confirmation of customers' accounts receivable rarely provides reliable evidence
    about the completeness assertion because
    Customers may not be inclined to report understatement errors in their accounts



    Response Feedback:

    • Correct! The confirmation of customers' accounts receivable rarely provides reliable evidence
    • about the completeness assertion because customers may not be inclined to report understatement errors in their
    • accounts.
  13. Which of the following control activities may prevent the failure to bill customers
    for some shipments?
    Sales journal entries should be reconciled to daily sales summaries

    Response Feedback:

    • Incorrect.  Each shipment should be supported by a prenumbered sales invoice that is accounted for; this may prevent the failure to bill customers for some
    • shipments.
  14. Audit documents often include a client-prepared aged trial balance of accounts receivable as of the balance sheet date. This aging is used by the auditor to
    Evaluate the allowance for doubtful accounts

    Response Feedback:

    Correct! Audit documents often include a client-prepared aged trial balance of accounts receivable as of the balance sheet date. This aging is used by the auditor to evaluate the allowance for doubtful accounts.
  15. Which one of the following would the auditor consider to be an incompatible operation
    if the cashier receives remittances from the mailroom?
    The cashier makes the daily deposit at a local bank

    Response Feedback:

    Incorrect. The auditor consider the cashier posting the receipts to the accounts receivable subsidiary ledger cards to be an incompatible operation if the cashier receives remittances from the mailroom.

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