examen 3 auditoria: multiple choice

The auditors should always count small petty cash funds at year-end to make sure that balance is not overstated on the financial statements.

Control over the receipt of cash sales is best achieved when two or more employees participate in each transaction.

Mailroom personnel of a company should prepare a control listing of incoming cash receipts and deposit them intact daily.

Signed checks should be returned to the cash disbursements clerk for mailing.

Lapping of accounts receivable by an employee can occur when there is adequate segregation of duties with respect to cash disbursements.

Confirmations for cash balances should be mailed only to the financial institutions with which the client has a cash balance at year-end.

A proof of cash is an audit procedure that is performed on almost every engagement.

A compensating balance agreement always requires that cash be reclassified as a noncurrent asset

Verification of cash and other liquid assets on the same date may prevent substitution of one form of asset for another.

For investments in securities accounted for by the equity method, the auditors are primarily concerned with verifying the fair value of the investments.

The department approving a sales transaction should be the billing department

Accounts receivable that are written off should not be turned over to a collection agency

An aged trial balance of accounts receivable may provide evidence on the adequacy of the allowance for uncollectible accounts.

Confirmation of accounts receivable by direct communication with the debtor tests the existence of accounts receivable

Confirmation requests should contain a "business reply" envelope addressed to the auditors at the client's address.

Certified public accountants use positive accounts receivable confirmation requests more frequently than negative accounts receivable confirmation request

Confirmation of accounts receivable provides absolute assurance that no lapping or other manipulation affecting accounts receivable exists.

Analytical procedures are used by auditors to gain evidence about the adequacy of the allowance for uncollectible accounts

When it is impossible to confirm accounts receivable, the auditors may be able to satisfy themselves as to the existence of accounts receivable by alternative procedures.

Material accounts receivable from related parties should be stated separately from other receivables

Observation of inventories is a required audit procedure under all circumstances.

The receiving department should accept only goods for which there is an approved purchase order on hand.

For good internal control over purchase transactions, purchases should be documented by a purchase requisition by the department needing the goods.

Auditors should not review the client's planning of the physical inventory

The proper cutoff of inventories is best achieved when receiving reports and purchase invoices surrounding the year-end are examined

The lower-of-cost-or-market test by the auditors is generally designed to assure that inventories are valued at or above their net realizable values.

When the auditors cannot satisfy themselves as to the accuracy of ending inventory and a material misstatement may exist, they normally may still give an unmodified (unqualified) opinion on the client's income statement.

To test the client's cutoff of inventories, the auditors will make a record of the serial number of the final receiving and shipping documents used prior to the taking of the physical inventory.

The use of a tagging system for inventory taking is designed to prevent double counting of goods.

The examination of warehouse receipts is sufficient verification of a material amount of goods stored in public warehouses.

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to:

A) Verify the cash balance reported on the bank confirmation inquiry form.

B) Verify reconciling items on the client’s bank reconciliation.

C) Detect lapping.

D) Detect kiting

By preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally be able to detect:

A) An unrecorded deposit made at the bank at the end of the month.

B) A second payment of an account payable which had already been paid in full two months earlier.

C) An embezzlement of cash receipts that occurred before they had been deposited into the bank was not recorded in the cash receipts journal.

D) A receivable collected that had previously been written off as uncollectible.

Your client left the cash receipts journal open after year-end for an extra day and included January 1 cash receipts in the 12/31/XX totals. All of those cash receipts were due to cash sales. Assuming the client uses a periodic inventory system with a 12/31/XX count of the physical inventory, which of the following is most likely to be true relating to the year XX financial statements?

A) Sales are understated.

B) Accounts receivable are understated.

C) Inventory is overstated.

D) Net income is overstated

Which procedure is an auditor most likely to use to detect a check outstanding at year-end that was not recorded as outstanding on the year-end bank reconciliation?

A) Prepare a bank transfer schedule using the client's cash receipts and cash disbursements journal.

B) Receive a cutoff bank statement directly from the client's bank.

C) Prepare a four column bank reconciliation using the year-end bank statement.

D) Confirm the year-end balance using the standard form to confirm account balance information with financial institutions

Which of the following controls would be most likely to reduce the risk of diversion of customer receipts by a company's employees?

A) A bank lockbox system.

B) Approval of all disbursements by an individual independent of cash receipts.

C) Monthly bank cutoff statements.

D) Prenumbered remittance advices.

By preparing a four-column bank reconciliation ("proof of cash") for the last month of the year, an auditor will generally be able to detect:

A) An unrecorded check written at the beginning of the month which was cashed during the period covered by the reconciliation.

B) A cash sale which was not recorded on the books and was stolen by a bookkeeper. C) An embezzlement of unrecorded cash receipts on receivables before they had been deposited into the bank. D) A credit sale which has been recorded twice in the sales journal.

Anderson embezzled $20,000 from her company's account in Bank X. At year-end, she hid the shortage by making a deposit on December 31 in Bank X, drawn on Bank Y. She has not recorded the transaction on the books. This is an example of:

A) Lapping.

B) Kiting.

C) Effective cash management.

D) Related party transactions.

Anderson embezzled $20,000 from her company's account in Bank X. At year-end, she hid the shortage by making a deposit on December 31 in Bank X, drawn on Bank Y. She has not recorded the transaction on the books. Which of the following is most likely to be effective in detecting this fraud?

A) Bank confirmation.

B) Bank transfer schedule prepared using only the cash receipts and cash disbursements journals.

C) Comparison of bank cutoff statement to the cash receipts and disbursements records.

D) Receivable confirmation.

Which of the following is not a universal rule for achieving internal control over cash?

A) Separate recordkeeping from accounting for cash to the extent possible.

B) Depo Separate recordkeeping from accounting for cash to the extent possible. sit each day's cash receipts intact.

C) Separate cash handling from recordkeeping.

D) Have monthly bank reconciliations prepared by employees not responsible for the issuance of checks

Which of the following is not a control over cash disbursements?

A) Disbursements should be made by check.

B) Check signature should be made by finance department.

C) Documents supporting the payment of a disbursement should be canceled by the person preparing the check to prevent reuse.

D) Voided checks should be defaced and filed with paid checks.

Which of the following is the best audit procedure for the detection of lapping?

A) Comparison of postings of cash receipts to accounts with the details of cash deposits.

B) Confirmation of the cash balance.

C) Reconciliation of the cash account balances.

D) Preparing a proof of cash.

Internal control over marketable securities is enhanced when:

A) Securities are held by the cashier.

B) Securities are registered in the name of the custodian.

C) Detailed records of securities are maintained by the custodian of the securities.

D) Custody of securities is maintained by a stockbroker or bank.

Which one of the following audit procedures would give the least assurance of the existence of investment in stocks and bonds account at the audit date?

A) Confirmation from the broker.

B) Inspection of year-end brokers' statements.

C) Vouching all changes during the year to brokers' advises and statements.

D) Examination of paid checks issued in payment of securities purchased

The auditors should insist that a representative of the client be present during the physical examination of securities in order to:

A) Lend authority of the auditor's directives.

B) Detect forged securities.

C) Coordinate the return of all securities to proper locations.

D) Acknowledge the receipt of securities returned.

The auditors' count of the client's cash should be coordinated to coincide with the:

A) Consideration of the internal controls with respect to cash.

B) Close of business on the balance sheet date.

C) Count of investment securities.

D) Count of inventories.

To gather evidence regarding the balance per bank reconciliation, an auditor could examine all of the following except:

Which of the following cash transfers is most likely to result in a misstatement of cash at December 31, 20X7? Bank Transfer Schedule

Disbursement Receipt

Recorded in books

Paid by bank

Recorded in books

Received by bank

A) 12/31/X7 1/4/X8 12/31/X7 12/31/X7

B) 1/4/X8 1/5/X8 12/31/X7 1/4/X8

C) 12/31/X7 1/5/X8 12/31/X7 1/4/X8

D) 1/4/X8 1/11/X8 1/4/X8 1/4/X8

A) Transfer A.

B) Transfer B.

C) Transfer C.

D) Transfer D.

For purposes of an audit of financial statements, electronic confirmation of cash balances:

A) Is acceptable when properly controlled.

B) Is acceptable, but only when combined with a non-electronic approach.

C) Is only acceptable for immaterial accounts.

D) Is not acceptable.

Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department?

A) Comparing the vendor's invoice with the receiving report.

B) Canceling supporting documentation after payment.

C) Verifying the mathematical accuracy of the vendor's invoice.

D) Preparing the check for signature by an authorized person.

Which of the following has made it difficult to engage in kiting in recent years?

A) Electronic processing of checks.

B) The use of machine readable account numbers on checks.

C) The consolidation of financial institutions.

D) The use of payroll processers.

To test the existence assertion for recorded receivables, an auditor would select a sample from the:

A) Sales orders file.

C) Accounts receivable subsidiary ledger.

D) Shipping documents (bills of lading) file.

Which of the following is least likely to be used as an alternate procedure for handling non replies to accounts receivable confirmation requests?

A) Examine bills of lading.

B) Physical examine items sold

C) Examine correspondence.

D) Examine subsequent cash receipts.

Your client performed the physical count of inventory as of November 30, one month prior to year-end. Subsequently, your client closed the sales journal on 12/29/XX, two days before year-end, and reported those two days' credit sales in January of the next year. Assuming the client uses a perpetual inventory system, which of the following is most likely to be overstated relating to the year XX financial statements?

A) Sales.

B) Cash.

C) Inventory.

D) Accounts receivable.

Which of the following would be least likely to diminish the validity of evidence obtained through confirmation of accounts receivable?

A) The confirmation requests are sent on the client's letterhead.

B) The confirmation requests are mailed to customers by the internal auditors.

C) The client's mailroom personnel closely monitor and inspect confirmation requests during mailing.

D) The return address on the envelope used to send the confirmation request is that of the client.

When control risk for the existence assertion is assessed at a high level, which of the following is a likely effect with respect to the auditors' confirmation of receivables?

A) The account balances as of year-end will generally be confirmed.

B) The auditors will in general use blank rather than positive confirmation requests.

C) The auditors will be required to confirm accounts as of an interim date (during the year under audit) and as of year-end.

D) Confirmation will not in general be used as the auditor will rely primarily upon support such as vendors' invoices, purchase orders and receiving reports

What type of error is the certified public accountant (CPA) most likely to discover when he/she examines all shipping reports dated in January of 20X1, shipped free on board (FOB) shipping point, which were recorded in December of 20X0 as credit sales? A) Accounts receivable are understated at December 31, 20X0.

B) Accounts receivable are overstated at December 31, 20X0.

C) Operating expenses are overstated for the 12 months ended December 31, 20X0.

D) Sales returns and allowance are overstated at December 31, 20X0.

Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal control over 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 (and unpaid for) may be intentionally recorded in other customers' accounts permitting a misappropriation of cash.

C) Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash.

D) The failure to prepare shipping documents may lead to an understatement of inventory balances.

Which of the following is a likely procedure to test the adequacy of the allowance for doubtful accounts?

A) Examine cash receipts received after year-end.

B) Confirm receivables.

C) Examine dates of purchase orders.

D) Foot the receivables lead schedule.

Which of the following is most likely to be used in determining a proper amount to be included in the allowance for doubtful accounts?

A) Accounts receivable divided by Cost of goods sold.

B) Aging of accounts receivable.

C) Cash Sales divided by Accounts receivable.

D) Year 2 accounts receivable compared to year one accounts receivable.

For effective internal control, the billing function should not be performed by the:

A) Sales department.

B) Accounting department.

C) Finance department.

D) Information Processing department.

Which of the following is consistent with effective internal control over sales transactions?

A) The accounting department prepares a shipping report authorizing the shipment of goods.

B) The accounting department accounts for all receiving reports.

C) The billing department accounts for all shipping documents.

D) The accounts payable department annually approves the extension of credit to

To obtain the best evidence regarding the completeness of recorded accounts receivable, the auditors:

A) Trace a sample of the bills of lading to sales invoices.

B) Confirm a sample of accounts payable.

C) Review the aging of accounts receivable.

D) Trace a sample of recorded sales to shipping documents

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. Of the following, which combination is it most likely that the auditors will use?

A) The positive form for small balances, and the negative form for large balances.

B) The positive form used for large balances and the negative form for the small balances.

C) The positive form used for trade receivables and the negative form for other receivables.

D) The positive form when controls related to receivables are satisfactory, and the negative form when controls related to receivables are unsatisfactory.

Tracing copies of sales invoices to shipping documents will provide evidence that all:

A) Shipments to customers were recorded as receivables.

B) Billed sales were shipped.

C) Debits to the subsidiary accounts receivable ledger are for sales shipped.

D) Shipments to customers were billed.

A certified public accountant (CPA) examines a sample of credit memoranda to ensure they were signed by an officer of the company. This is an example of a:

A) Test of a control.

B) Substantive test.

C) Cutoff test.

D) Statistical test.

If the objective of an auditor's test of details is to detect the overstatement of sales, the auditor should trace transactions from the:

A) Sales journal to the shipping documents.

B) Shipping documents to the cash receipts journal. C) Cash receipts journal to the customer's purchase orders.

D) Customer's purchase orders to the sales journal.

An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors' invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all:

A) Cash disbursements.

B) Approved vouchers.

C) Receiving reports.

D) Vendors' invoices.

Which of the following is not true relating to the auditors' observation of the client's physical inventory?

A) The auditors should evaluate the client's planning of the physical inventory.

B) The auditors should supervise the taking of the inventory.

C) The auditors should evaluate the adequacy of the client's counting procedures.

D) The auditors should take test counts of the client's inventory.

A receiving department compares inventory items received with copies of purchase orders. The purchase orders list the name of the vendor and do not list the quantities of the material ordered. Using the purchase orders, the receiving department is most likely to detect:

A) Deliveries for which no purchase order was issued. B) Unapproved sales orders.

C) Partial deliveries.

D) Deliveries of a greater quantity of items than those ordered.

Which of the following audit procedures most likely would provide assurance that a manufacturing entity's inventory valuation is proper?

A) Testing the entity's computation of standard overhead rates.

B) Obtaining confirmation of inventories pledged under loan agreements.

C) Reviewing a cutoff procedure for inventories.

D) Tracing test counts to the entity's inventory listing.

Which of the following is not a reason for the special significance attached by the auditors to the verification of inventories?

A) The determination of inventory valuation directly affects net income.

B) The existence of inventories is inherently difficult to substantiate.

C) Special valuation problems often exist for inventories.

D) Inventories are often the largest current asset of an enterprise.

The client's physical count of inventories is lower than the inventory quantities in the perpetual records. This could be the result of a failure to record:

A) Purchases.

B) Purchase discounts.

C) Sales.

D) Sales discounts.

An auditor has accounted for a sequence of inventory tags and is now going to trace information on a representative number of tags to the inventory summary sheets. Which assertion does this procedure relate to most directly?

A) Completeness.

B) Existence.

C) Legality.

D) Valuation.

The use of a "blind" purchase order is designed to prevent errors by the:

A) Purchase department.

B) Receiving department.

C) Stores department.

D) Accounting department.

To assure that all purchases are authorized before payment is made, accounting department personnel should match the vendor's invoice to:

A) The purchase requisition.

B) The receiving report.

C) The purchase order.

D) The voucher.

Which of the following is not a procedure that typically is used by the auditors in their examination of a client's goods held in the custody of a public warehouse?

A) Confirmation.

B) Obtaining reports on internal control at the warehouse.

C) Observation.

D) Communicate with the regulatory agency about the legitimacy of the public warehouse.

Which of the following best describes the reason for the auditors' review of the client's cost accounting system?

A) To obtain evidence regarding the quantities of good described as work in process.

B) To obtain evidence about the valuation of work in process, finished goods, and cost of goods sold.

C) To obtain evidence about the profit margin on specific jobs.

D) To obtain evidence about compliance with Cost Accounting Standards.

A client's physical count of inventories was higher than the inventory quantities per the perpetual records. This situation could be the result of the failure to record:

A) Sales.

B) Sales discounts.

C) Purchases.

D) Purchase returns.

From the auditor’s point of view, inventory counts are more acceptable prior to the year-end when:

A) Internal control is weak.

B) Accurate perpetual inventory records are maintained.

C) Inventory is slow-moving.

D) Significant amounts of inventory are held on a consignment basis.

Which of the following is least likely to be performed efficiently using data analytics?

A) Identification of purchases recorded more than once.

B) Identification of overvalued inventory items based on sales of those items.

C) Identification of defective inventory items.

D) Identification of slow-moving inventory items.