cpa audit review ch6 review 1

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  1. Fact Pattern:  A sales transaction record designed to contain the information presented below.

    Column               Information

    1-10                    Customer account number
    11-30                  Customer name
    31-38                  Amount of sale
    39-44                  Sales date
    45-46                  Store code number
    47-49                  Sales clerk number
    50-59                  Invoice number

    If the last letter of a customer’s name is erroneously entered in column 31, which of the following is most likely to detect the error during an input edit run?

    A.A check digit.
    B.A limit check.
    C.A field check.
    D.A logic check.
    C.A field check.

    The erroneous entry of a customer’s name into the field that should contain the amount of the sale is detected by a field check. This control identifies an alphabetic character in a field that should contain only numeric characters.
    (this multiple choice question has been scrambled)
  2. Smith Corporation has numerous customers. A customer file is kept on disk storage. Each customer record contains the name, address, credit limit, and account balance. The auditor wishes to test this file to determine whether credit limits are being exceeded. The best procedure for the auditor to follow is to
    Develop a program to compare credit limits with account balances and print out the details of any account with a balance exceeding its credit limit.

    The auditor should consider developing a program to compare the balances with the credit limits and to print out the exceptions. The auditor can then focus on those customers whose credit limits may have been exceeded.
  3. Which of the following employees should report to the chief financial officer?

    A.Sales clerk.
    B.Credit manager.
    C.Internal auditor.
    Credit manager.

    The CFO’s primary responsibility is to safeguard assets. Although credit approval is an authorization process, assets are lost if credit is improperly granted. Thus, the credit manager should be responsible to one who has no vested interest in the granting of credit.
  4. An auditor’s tests of controls for completeness of the revenue cycle usually include determining whether
    An invoice is prepared for each shipping document.

    Tests of completeness determine whether all assets, liabilities, and equity interests are recorded properly. They emphasize the events rather than the existence of the documents. When a shipping document does not have a matching invoice, the relevant revenue is not recorded. The invoice is used to prepare the necessary journal entries.
  5. In updating a computerized accounts receivable file, the total used as a batch control to verify the accuracy of posting cash remittances is
    Cash deposits plus discounts taken by customers.

    The control total for the posting of accounts receivable should be the total amount of reductions in accounts receivable. The total of the cash deposits plus the discounts taken by customers should equal the total reduction in accounts receivable for the batch of transactions processed. This batch control is a financial total, one which has inherent informational significance as opposed to such other batch controls as hash totals or record counts.
  6. Fact Pattern:  Management discovers that a supervisor at one of its restaurant locations removes excess cash and resets sales totals throughout the day on the point-of-sale (POS) system. At closing, the supervisor deposits cash equal to the recorded sales on the POS system and keeps the rest. The supervisor forwards the close-of-day POS reports from the POS system along with a copy of the bank deposit slip to the company’s revenue accounting department. The revenue accounting department records the sales and the cash for the location in the general ledger and verifies the deposit slip to the bank statement. Any differences between sales and deposits are recorded in an over/short account and, if necessary, followed up with the location supervisor. The customer food order checks are serially numbered, and it is the supervisor’s responsibility to see that they are accounted for at the end of each day. Customer checks and the transaction journal tapes from the POS system are kept by the supervisor for 1 week at the location and then destroyed.

    Which of the following controls allowed the fraud to occur?

    A.The forwarding of the close-of-day POS reports to revenue accounting.
    B.The matching of the bank deposit slips to the bank statement by revenue accounting.
    C.The accounting for customer food checks by the supervisor.
    D.The deposit of cash receipts by the supervisor.
    C. The accounting for customer food checks by the supervisor.

    An inappropriate segregation of duties existed because the supervisor was responsible for accounting for customer food checks and depositing receipts and had the ability to reset POS totals throughout the day.
    (this multiple choice question has been scrambled)
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cpa audit review ch6 review 1
cpa audit review ch6 review 1
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