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QUESTION

1. If the predominantly substantive approach preliminary audit strategy is used, planned detection risk will be:moderate or high.at the higher level.high or very high.low or very low. The correc

1.      If the predominantly substantive approach preliminary audit strategy is used, planned detection risk will be:

  1. moderate or high.
  2. at the higher level.
  3. high or very high.
  4. low or very low.

The correct option is .

Feedback: Section 12.2 Determining detection risk

2.      If the lower assessed level of control risk approach preliminary audit strategy is used, planned detection risk will be:

  1. at the lower level.
  2. moderate or high.
  3. at the higher level.
  4. high or very high.

The correct option is .

Feedback: Section 12.2 Determining detection risk

3.      If the predominantly substantive approach preliminary audit strategy is used, the planned level of substantive procedures will be:

  1. at the lower level.
  2. moderate or high.
  3. at the higher level.
  4. low or very low.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

4.      If the lower assessed level of control risk approach preliminary audit strategy is used, the planned level of substantive procedures will be:

a.       at the lower level.

b.      moderate or high.

c.       at the higher level.

d.      high or very high.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

5.      Which of these would be a reason for adopting a predominantly substantive approach?

  1. accounts are affected by more than one transaction class.
  2. detection risk has been assessed as high.
  3. there are no significant control procedures that pertain to the assertion.
  4. control risk has been assessed as low.

The correct option is .

Feedback: Section 12.2 Determining detection risk

6.      For small clients it is often more efficient to adopt the predominantly substantive approach. Which of the following is a reason for this:

  1. they may not have adequate resources to implement all appropriate controls.
  2. controls may not be effective.
  3. the size of the entity may make it inefficient for the auditor to rely on these controls.
  4. all of the above.

The correct option is .

Feedback: Section 12.2 Determining detection risk

7.      Which of these would not necessarily be considered to be a risk factor for potential misstatements?

  1. there is intense price competition in the industry of operation.
  2. profit margin has increased and inventory turnover days has decreased
  3. an employee in the cash office was passed over for a promotion.
  4. segregation of duties is not practiced.

The correct option is .

Feedback: Section 12.1 Assessing the risk of material misstatement

8.      For a particular account balance assertion, the auditor is most likely to be able to avoid substantive tests of details with which of these set of risk assessments?

Inherent

Control

Results of analytical procedures

A.

Maximum

Maximum

Unexpected

B.

Maximum

Maximum

Expected

C.

Low

Low

Expected

D.

Low

Low

Unexpected

  1. A
  2. B

c.  C

d.  D

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

9.      Which of these is not considered a substantive procedure?

  1. analytical procedures.
  2. tests of controls.
  3. tests of detail of transactions.
  4. tests of detail of balances.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

10.   The least costly form of testing is usually:

a.  analytical procedures.

b. tests of controls.

c. tests of detail of transactions.

d. tests of detail of balances.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

11.   Which of these is not normally a distinct phase involved in using generalised audit software?

a.       using the primarily substantive approach in planning the audit.

b.      identification of the relevant audit objective and tests to be performed.

c.       designing the application and form of the output.

d.      processing the application and reviewing the results.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

12.   Generalised audit software can be used for:

a.       performing calculations.

b.      selecting samples.

c.       identifying records meeting specified criteria.

d.  any of the above.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

13.   Tests of details of income statement account are likely when?

  1. inherent risk is less than high.
  2. control risk is moderate to low.
  3. analytical procedures indicate no unusual fluctuations.
  4. the account requires analysis e.g. directors’ remuneration, income tax

The correct option is .

Feedback: Section 12.5 Special considerations when designing substantive procedures

14.   Tests of details of transactions primarily involve:

  1. confirmation with outsiders.
  2. tracing and vouching.
  3. observation and inquiry.
  4. income statement accounts.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

15.   An auditor is examining the detailed debit and credit activity in an account. The auditor is most likely performing:

  1. analytical procedures.
  2. tests of controls.
  3. tests of details of transactions.
  4. tests of details of balances.

The correct option is .Feedback: Section 12.3 Designing substantive procedures

16.   Tests of details of transactions generally use evidence from:

a.       documents found in the entity's files.

b.      documents obtained directly from external sources.

c.   direct observation on the part of the auditor.

d.   inquiry directed to top management personnel.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

17.   Tests of details of balances focus on obtaining evidence:

a.       directly from an outside source.

b.      in the least costly manner.

c.  directly about an account balance.

d.  to refute instead of support an assertion.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

18.   Which of these would not be considered to be a test of details of balances?

  1. accounts receivable confirmations.
  2. tracing an invoice to the sales journal.
  3. observing the entity’s stocktake.
  4. inspecting plant assets.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

19.   Confirmation and direct knowledge by the auditor are most associated with:

  1. analytical procedures.
  2. tests of details of balances.
  3. tests of details of transactions.
  4. tests of controls.

The correct option is .

Feedback: Section 12.3 Designing substantive procedures

20.   Which of the following is not true in regards to cut-off tests?

a.       they are related more to the transaction than to the closing balance.

b.      they ensure completeness.

c.       they ensure occurrence.

d.      they affect the income report and the balance sheet

Chapter 13

Audit Sampling

Multiple Choice

1.      Audit sampling is involved whenever an auditor:

a.       examines 100% of the population.

b.      forms a conclusion about the population from which the sample is drawn.

c.       performs tests of controls.

d.      performs substantive tests.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

2.      The statement that is most accurate about the terminology applied to errors identified when applying tests of controls or substantive testing to an audit sample is:

a.       an error identified in substantive testing is referred to as an irregularity.

b.      an error identified in substantive testing is referred to as a control deviation.

c.       an error identified in a test of controls is referred to as a misstatement.

d.      an error identified in a test of controls is referred to as a control deviation.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

3.      The justification for the wide use of non-statistical sampling in auditing is due to:

a.       cost/benefit considerations.

b.      classical decision theory.

c.       the concept of due care.

d.      professional scepticism.

The correct answer is .

Feedback: Section 13.3 Statistical sampling techniques

4.      Which of the following is not a type of sampling risk?

a.       risk of overreliance.

b.      risk of incorrect decision.

c.       risk of sample size.

d.      risk of underreliance.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

5.      Whenever sampling is used in an audit procedure, uncertainty will be present. The two sources of this uncertainty are:

a.       audit risk and detection risk.

b.      inherent risk and control risk.

c.       sampling risk and non-sampling risk.

d.      detection risk and control risk.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

6.      The risk of concluding control risk is lower than it actually is, is also known as:

a.          risk of overreliance.

b.         risk of underreliance.

c. risk of incorrect acceptance.

d. risk of incorrect rejection.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

7.      The risk of concluding a material error does not exist when in fact it does, is also known as:

a.       risk of overreliance.

b.      risk of underreliance.

c.       risk of incorrect acceptance.

d.      risk of incorrect rejection.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

8.      Which of these would not be considered to be a source of non-sampling risk?

a.       human mistakes.

b.      inappropriate audit procedures.

c.       inappropriate sample size.

d.      reliance on erroneous information.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

9.      The statement that is inaccurate is: The choice between non-statistical sampling and statistical sampling:

a.       does not affect the selection of auditing procedures to be applied to the sample.

b.      does affect the appropriateness of the evidence obtained about individual sample items.

c.       does not affect the appropriate response by the auditor to errors found in the sample.

d.      does not impact on the need to exercise professional judgement.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

10.  If the sample supports the conclusion that the recorded account balance is materially misstated when it is actually not materially misstated, this is the:

a.       risk of assessing control risk too low.

b.      risk of assessing control risk too high.

c.       risk of incorrect acceptance.

d.  risk of incorrect rejection.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

11.  The steps in planning the sample are listed as follows:

A

Define what errors are being sought

B

Identify the population and sampling unit

C

Determine the objectives of the test

D

Decide the size of the sample

E

Specify tolerable error, expected error and required confidence level

Which one of the following shows steps A through E in the correct order?

a.       B, E, D, A and C.

b.      C, A, D, E and B.

c.       A, B, C, D and E.

d.  C, A, B, E and D.

The correct answer is .

Feedback: Section 13.2 Use of samples for audit tests

12.  The greatest impact on audit effectiveness comes from the risk(s) of:

a.       overreliance and incorrect rejection.

b.      underreliance and incorrect acceptance.

c.       overreliance and incorrect acceptance.

d.      underreliance and incorrect rejection.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

13.  The greatest impact on audit efficiency comes from the risk(s) of:

a.       overreliance and incorrect rejection.

b.      underreliance and incorrect acceptance.

c.       overreliance and incorrect acceptance.

d.      underreliance and incorrect rejection.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

14.  If the sample supports the conclusion that the recorded account balance is materially misstated when in fact it is, this is:

a.       the risk of incorrect acceptance.

b.      the risk of incorrect rejection.

c.       the correct decision.

d.      the risk of overreliance.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

15.  The least effective means of controlling non-sampling risk is:

a.       adequate supervision.

b.      proper planning.

c.       adherence to quality control standards.

d.      increasing the sample size.

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

16.  The critical difference between statistical and non-statistical sampling is the:

a.       required use of judgement in non-statistical sampling

b.      sampling risk can be quantified in statistical sampling

c.       elimination of non-sampling risk with statistical sampling

d.      added precision attained with statistical sampling

The correct answer is .

Feedback: Section 13.1 Basic concepts of sampling

17.  An auditor may use sampling to obtain information about many different characteristics of a population. However, most audit samples lead either to an estimate of:

a.       a dollar rate or a deviation amount.

b.      the number of items in the population or the dollar amount of the population.

c.       size of the population or the distribution of the population.

d.      a deviation rate or a dollar amount.

The correct answer is .

Feedback: Section 13.2 Use of samples for audit tests

18.  Which of these would not be considered a method of audit sampling?

a.       random selection.

b.      systematic selection.

c.       haphazard selection.

d.      block selection.

The correct answer is .

Feedback: Section 13.2 Use of samples for audit tests

19.  The incorrect statement in relation to systematic selection is:

a.       it is not appropriate for populations with a fixed pattern.

b.      the results cannot be evaluated statistically.

c.       it is not possible to measure the probability of an item being selected.

d.      none of the above is incorrect

The correct answer is .

Feedback: Section 13.2 Use of samples for audit tests

20.  The sampling unit is:

a.       the physical location of the population from which the sample will be drawn.

b.      an individual item in the population.

c.       the individual control procedure being tested.

d.      a population expressed as an attribute of interest.

The correct answer is .

Feedback: Section 13.2 Use of samples for audit tests

Chapter 14

Auditing sales and receivables

Multiple Choice

1. The account balance audit objective, “Accounts receivable represent gross claims on customers at balance date and agree with the sum of the accounts receivable subsidiary ledger”, is derived from the assertion category of:

  1. existence or occurrence.
  2. completeness.
  3. rights and obligations.
  4. valuation and allocation.

The correct answer is .

Feedback: Section 14.2 Audit objectives

2. Which of these is not a specific audit objective for sales and receivables?

  1. existence or occurrence.
  2. completeness.
  3. representation.
  4. presentation and disclosure.

The correct answer is .

Feedback: Section 14.2 Audit objectives

3. In a credit sales environment, the document that usually initiates the activity in the sales cycle is:

  1. customer order.
  2. sales order.
  3. dispatch note.
  4. sales invoice.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

4. Which of the following is not normally considered a step in the credit sales functions?

  1. accepting customer orders.
  2. approving credit.
  3. acquiring goods to fill the order.
  4. billing customers.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

5. In a credit sales environment, the documents that serves as the basis for internal processing of an order is:

  1. customer order.
  2. sales order.
  3. dispatch note.
  4. sales invoice.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

6. In a credit sales environment, the best place to vest credit approval is in:

  1. accounts receivable.
  2. the sales department.
  3. the cashier area where receipts will eventually be sent.
  4. an independent credit department.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

7. Controls over approving credit relate to the:

  1. existence or occurrence assertion.
  2. completeness assertion.
  3. accuracy, valuation or allocation assertion.
  4. rights and obligations assertion.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

8. To enhance controls in the credit sales area, the warehouse should be instructed not to release (or dispatch) goods until:

  1. they received a faxed copy of the sales requisition.
  2. they have a completed sales invoice.
  3. they receive an approved sales order.
  4. the shipping department requests the goods.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

9. Accounting for the numerical sequence of dispatch notes used in tracing will primarily meet the:

  1. existence or occurrence assertion.
  2. completeness assertion.
  3. accuracy, valuation or allocation assertion.
  4. presentation or disclosure assertion.

The correct answer is

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

10. From the following which would not be an appropriate control procedure for the invoicing of customers?

  1. checking the existence of a dispatch note matching the approved sales order before an invoice is prepared.
  2. using an authorised price list when preparing the invoice.
  3. comparing totals for dispatch notes with totals for invoices.
  4. segregating filling and dispatching sales orders.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

11. Use of an authorised price list in preparing the sales invoices meets primarily the:

  1. existence or occurrence assertion.
  2. completeness assertion.
  3. accuracy, valuation or allocation assertion.
  4. rights and obligations assertion.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

12. The main control objective of the recording of sales function is:

  1. that only actual deliveries are invoiced.
  2. that sales are recorded accurately and in the proper period.
  3. that cash will be received for the sale.
  4. to produce a monthly customer statement.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

13. Access controls should permit read-only access to transaction and master files except for authorised individuals. Which of the following illustrates such an exception?

  1. credit controller can override marginal breaches of a customer’s credit limit.
  2. sales manager can amend a price for a sales transaction.
  3. sales manager can amend a discount for a customer.
  4. any of the above.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

14. Which of the following is not an example of a programmed application control?

  1. numerical continuity of documents is assured.
  2. unreasonable quantities, amounts and dates are queried.
  3. only orders for goods in the entity’s product range are accepted.
  4. duplicate document numbers are accepted.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

15. Use of point-of-sale terminals to record over-the-counter cash sales provides all of the following except:

  1. assurance that all cash sales are processed through the system.
  2. an immediate visual display for the customer to verify the accuracy of price and cash tendered.
  3. a printed receipt for the customer.
  4. printed control totals of the day’s receipts processed on the device.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

16. Standard control procedures over customer remittances received through the mail include having the mailroom personnel:

a.       forward the remittances, unopened, directly to the accounts receivable clerk.

b.      open the mail, restrictively endorse the cheques and then forward the remittances directly to the cashier.

c.       open the mail, restrictively endorse the cheques and then forward the remittances directly to the accounts receivable clerk.

d.      open the mail, restrictively endorse the cheques and then list each remittance on a prelist.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

17. After making the deposit, the daily cash summary should be forwarded by the cashier directly to:

  1. the chief financial officer.
  2. the accounts receivable clerk.
  3. general accounting.
  4. the cash receipts clerk.

The correct answer is .

Feedback: Section 14.3 Sales, cash receipts and sales adjustment transactions

18. In most credit sales audits, the auditor's concern over sales adjustment transactions is based upon the:

  1. sheer number and value of these transactions.
  2. lack of proper authorisation for these transactions.
  3. potential use of these transactions to conceal a theft of cash.
  4. poor controls normally found over these transactions and the inherent lack of documentation.

The correct answer is .

Feedback: Section 14.4 Developing the audit plan

19. The write-off of accounts receivable should be authorised by the:

  1. cashier
  2. controller.
  3. accounts receivable clerk.
  4. chief financial officer.

The correct answer is .

Feedback: Section 14.4 Developing the audit plan

20. The best procedure for dealing with a non-response to a third positive request for confirmation of an accounts receivable is:

  1. assume that the debtor’s value is correct
  2. write-off the balance as a bad debt
  3. examine subsequent cash collections
  4. involve the client in chasing up the debtor

The correct answer is .

Feedback: Section 14.5 Substantive procedures

Chapter 15

Auditing purchases, payables and payroll

Multiple Choice

1.      Which of these is not directly affected by purchases and payments transactions?

a.       plant assets.

b.      work-in-process inventory.

c.       accounts payable.

d.      prepaid expenses.

The correct answer is .

Feedback: Section 15.1 Brief summary of audit procedures

2.         The specific audit objective “accounts payable are liabilities of the entity at the balance date” is derived from the:

a.          completeness assertion.

b.         valuation or measurement assertion.

c.          presentation or disclosure assertion.

d.         rights and obligations assertion.

The correct answer is .

Feedback: Section 15.2 Audit objectives

3.      Purchase requisitions may originate from:

a.       personnel manager, for plant and equipment.

b.      the warehouse, for inventory.

c.       purchases for a delivery vehicle

d.      b. and c.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

4.              Purchase orders become part of the transaction trail of documentary evidence that directly supports which assertion for purchase transactions?

a.         existence or occurrence.

b.        rights and obligations.

c.         accuracy or valuation.

d.   presentation and disclosure.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

5.         The quantity ordered may not be displayed on the copy of the purchase order sent directly to the:

a.       requesting department.

b.      vouchers payable department.

c.       receiving department.

d.      accounts receivable department.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

6.         The receiving department should be instructed to accept no goods without having on file a properly authorised:

a.       purchase requisition.

b.      invoice.

c.       receiving report.

d.      purchase order.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

7.              A copy of the receiving report should be sent directly by the receiving department to the:

a.       accounts (receivable) department.

b.      chief financial controller

c.       purchasing department.

d.      accounts (payable) department.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

8.              A check by the auditor on the numeric sequence of prenumbered receiving reports to determine that a supplier’s invoice was recorded for each relates to the:

a.       existence or occurrence assertion.

b.      completeness assertion.

c.       presentation or disclosure assertion.

d.      rights and obligations assertion.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

9.              A responsibility not normally assigned to receiving department personnel is to:

a.       compare goods received with description of goods ordered.

b.      prepare a prenumbered receiving report for every order received.

c.       enter cheque requisition data and verify the batch total.

d.      file the purchase order copy pending arrival of goods.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

10.          Prior to recording purchases transactions, supplier's invoices are checked and approved in the accounts department. Controls over this function include all of the following except:

a.       marking all supporting documentation as “paid”.

b.      approving the supplier's invoice for payment by having an authorised person sign the invoice.

c. agreeing the details of the supplier’s invoice with the related receiving report and purchase order.

d. determining the mathematical accuracy of the supplier's invoice.

The correct option is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

11.     For the purchasing firm the processing of purchases and payment transactions requires all of the following functions except:

a.       requisitioning goods and services.

b.      preparing purchase invoices.

c.       preparing the cheque requisition.

d.      all of the functions are required.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

12.     Responsibility for determining that unpaid supplier's invoices are processed for payment on their due dates generally lies with the:

a.       warehouse department.

b.      accounts department.

c.       purchasing department.

d.      internal audit department.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

13.          Segregation of the functions of payroll and personnel do all of the following, except:

a.       reduce the risk of payments to fictitious employees.

b.      reduce the risk of payments to terminated employees.

c.       restrict the recording of new employee data to the payroll department.

d.      restrict the payment of wages to the payroll department.

The correct answer is .

Feedback: Section 15.4 Payroll transactions

14.          Controls over the preparation and signing of cheques include all of the following except:

a.       authorised personnel in the accounting department should be responsible for signing the cheques.

b.      the cheque requisition and supporting documents should be cancelled (stamped) when the cheque is signed.

c.       the signed cheque and the supporting documents should be returned to the accounts payable clerk for review and mailing.

d.      prenumbered cheques should be used.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

15.          Controls specific to the recording of cash payments include which of the following?

a.       an independent check by the accounting supervisor of the agreement of the amounts journalised and posted to accounts payable with the cheque summary received from the general accounts department

b.      an independent check of the agreement of the total of cheques issued with a batch total of the vouchers processed for payment.

c.       limits on access to blank cheques

d.      all of the above.

The correct answer is .

Feedback: Section 15.3 Purchase, payment and purchase adjustment transactions

16.          Payroll functions include all of the following except:

a.       hiring employees.

b.      deciding on the number of workers required to work on a particular day.

c.       preparing the payroll.

d.      protecting unclaimed wages.

The correct answer is .

Feedback: Section 15.4 Payroll transactions

17.          Payroll functions include all of the following except:

a.       preparing attendance and timekeeping data.

b.      authorising payroll changes.

c.       terminating employees.

d.      all of the above are payroll functions

The correct answer is .

Feedback: Section 15.4 Payroll transactions

18.          A special supervisor’s password is required in order to add a new employee to the personnel data master file. This control relates primarily to the:

a.          existence or occurrence assertion.

b.         completeness assertion.

c.          presentation and disclosure.

d.         valuation or measurement assertion.

The correct answer is .

Feedback: Section 15.4 Payroll transactions

19.          Responsibility for updating of the personnel data master file should rest with authorised employees in the:

a.       personnel department.

b.      payroll department.

c.       controller’s department.

d.      employee’s operating department.

The correct answer is .

Feedback: Section 15.4 Payroll transactions

20.          In most modern organisation employee timekeeping data is recorded via:

a.       employee badges.

b.      time-clock cards.

c.       security identification cards.

d.      sign-in/sign-off book.

The correct answer is .

Feedback: Section 15.4 Payroll transactions

Chapter 16

Auditing inventories and property, plant and equipment

Multiple Choice

1.              Which of the following is not a function of maintaining inventory records?

  1. physically comparing inventory with inventory records.
  2. recording the movement of goods into inventory.
  3. ordering goods.
  4. recording the movement of goods from inventory.

The correct answer is .

Feedback: Section 16.2 Inventory

2.              If the auditor was testing inventory pricing the audit objective being fulfilled would be:

  1. completeness.
  2. rights and obligations.
  3. existence.
  4. valuation and allocation.

The correct answer is .

Feedback: Section 16.2 Inventory

3.              Reviewing data pertaining to inventory quality relates primarily to the:

  1. occurrence assertion.
  2. completeness assertion.
  3. rights and obligations assertion.
  4. valuation and allocation

The correct answer is .

Feedback: Section 16.2 Inventory

4.              An important procedure for the conduct of a physical inventory count is to maintain control over the count systems. Which of the following is not a common count system?

  1. use of pre-printed inventory count sheets.
  2. use of blank inventory tags.
  3. use of blank, pre-numbered inventory count sheets.
  4. use of pre-numbered three-part inventory tags.

The correct answer is .

Feedback: Section 16.2 Inventory

5.              When costing manufactured inventory all of the following procedures are necessary except:

  1. determining the cost of materials entered into raw materials.
  2. determining the cost of raw materials transferred to work in process.
  3. recording costs of direct labour applied to work in process.
  4. determine the cost of purchases.

The correct answer is .

Feedback: Section 16.2 Inventory

6.              Which of these factors contributes least to the risk of misstatement of inventories?

  1. the volume of transactions.
  2. location at a large single site.
  3. vulnerability to spoilage or damage.
  4. all of the factors listed contribute equally to the risk of misstatement of inventories

The correct answer is .

Feedback: Section 16.2 Inventory

7.              The audit strategy that would be most appropriate when an auditor has assessed a predominantly substantive approach is necessary to determine inventory quantity is:

a.    inventory quantities determined by physical count at or within a few days of balance date.

b.   inventory quantities determined by physical count near balance date, adjusted by reference to perpetual records.

c. inventory quantities determined by reference to perpetual records, without a physical count at or near balance date.

d. none of the above.

The correct answer is .

Feedback: Section 16.2 Inventory

8.              Observation of inventory counts is a required audit procedure whenever:

  1. inventories are material.
  2. it is practicable to do so.
  3. inventories are material and it is practicable to do so.
  4. inventories are material and the auditor considers it to be necessary.

The correct answer is .

Feedback: Section 16.2 Inventory

9.              During the observation of the inventory count, the auditor has no responsibility to:

  1. watch for damaged and obsolete inventory items.
  2. make some test counts of inventory quantities.
  3. supervise the taking of the inventory.
  4. the auditor has responsibility for all of the above

The correct answer is .

Feedback: Section 16.2 Inventory

10.          When the client engages an inventory specialist to take the inventory, the impact on the audit in this area is:

  1. to eliminate the need to perform test counts.
  2. to eliminate the need to observe the inventory.
  3. minimal because the specialists are considered independent auditors.
  4. minimal because the specialists are considered audit employees.

The correct answer is .

Feedback: Section 16.2 Inventory

11.          In companies where inventories are at multiple locations, the auditor’s observations ordinarily should include:

  1. all inventory locations.
  2. a variation of locations attended each year.
  3. a five minute visit to each location
  4. all significant inventory locations.

The correct answer is .

Feedback: Section 16.2 Inventory

12.          The auditor’s strategy in performing test counts during the inventory observation is to:

  1. test all large-dollar items.
  2. randomly select all test items.
  3. concentrate tests on high dollar items with random selection of other items.
  4. concentrate tests in areas where employees seem to be disregarding the inventory instructions.

The correct answer is .

Feedback: Section 16.2 Inventory

13.          Confirmation of inventories in public warehouses cannot provide evidence concerning the:

  1. existence assertion.
  2. completeness assertion.
  3. valuation and allocation assertion.
  4. it cannot provide evidence concerning any of the listed assertions

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

14.          Ensuring inventories include all materials, products and supplies on hand at the end of the reporting period derives from the audit assertion of:

  1. completeness
  2. valuation and allocation.
  3. existence
  4. rights and obligations.

The correct answer is .

Feedback: Section 16.2 Inventory

15.          Which of the following is not an income statement account related to property, plant and equipment?

  1. depreciation.
  2. accumulated depreciation
  3. loss on disposal of plant.
  4. rent on operating leases.

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

16.          The auditor identifies the specific audit objective: “determine that property, plant and equipment (PPE) assets represent productive assets that are in use at balance date”. This objective is derived from the:

a.       existence assertion.

b.      completeness assertion.

c. presentation and disclosure assertion.

d. rights and obligations assertion.

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

17.          The statement about inherent risk assessments for property, plant and equipment that is inaccurate is:

a.       Inherent risk is normally low for the presentation and disclosure assertion for PPE assets acquired under finance leases.

b.      Inherent risk is normally low for the existence assertion in a merchandising entity because PPE assets are not generally vulnerable to theft.

c.       Inherent risk is normally moderate to high for the existence assertion in a manufacturing entity because scrapped or retired PPE assets may not be written off the books.

d.      Inherent risk is normally low for the valuation and allocation assertion when PPE assets are purchased for cash.

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

18.          The statement about audit strategy for property, plant and equipment that is inaccurate is:

  1. for depreciation and accumulated depreciation inherent risk is affected by the difficulty in estimating both useful lives and residual value
  2. although material, verification of PPE typically involves significantly less time and cost than verification of current assets.
  3. unlike current asset accounts, control risk assessments for PPE asset balances are less dependent on controls over major transaction classes.
  4. none of the above statements is inaccurate

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

19.          Entities frequently maintain a plant register as a subsidiary ledger detailing individual items of PPE. Which of the following would an auditor not expect to find in a plant register?

  1. cost and accumulated depreciation.
  2. the date of previous audit inspections.
  3. serial number and supplier.
  4. insurance cover.

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

20.          Which of these is not true regarding substantive procedures for property, plant and equipment in an initial audit:

a.       the auditor concentrates on the current year’s transactions only

b.      evidence must be obtained as to the fairness of the opening balances.

c.       evidence must be obtained as to the ownership of the assets.

d.      all of the above are untrue.

The correct answer is .

Feedback: Section 16.3 Property, plant and equipment

Chapter 7

The auditor's report

Multiple Choice

1.      ASA 700 provides explanatory guidance on all of these points except:

a.       The form and content of the auditor’s report.

b.      The matters the auditor usually considers in forming an opinion.

c.       The training of junior audit staff.

d.      The auditor’s performance and reporting responsibilities.

The correct answer is .

Feedback: Section 7.1 Standards of reporting

2.      Which of these items does not form part of the financial report, as defined in the Corporations Act (s.295)

a.       A statement of cash flows for the year.

b.      Notes required by Accounting Standards.

c.       Any additional disclosures necessary to give a true and fair view.

d.      The directors' report.

The correct answer is .

Feedback: Section 7.1 Standards of reporting

3.      In addition to the requirements of ASA and the ISA standards, the Corporations Act also prescribes the auditor's reporting duties. Which of the following does not constitute one of those duties?

a.       forming an opinion on whether the financial statements are presented fairly.

b.      forming an opinion as to whether financial records  have been kept to enable the preparation and audit of the financial statements

c.       forming an opinion that all information, explanation and assistance necessary for the conduct of the audit have been provided.

d.      forming an opinion that the records and registers have been kept as required by law

The correct answer is .

Feedback: Section 7.1 Standards of reporting

4.      Which statement would not be found in a directors’ declaration?

a.       That the financial statements and notes give a true and fair view.

b.      That the financial statements are free from material misstatement whether due to fraud or error

c.       That in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.

d.      That in the directors’ opinion the financial statements and notes are in accordance with the law.

The correct option is .

Feedback: Section 7.1 Standards of reporting

5.      The auditor’s opinion is expressed in reference to the financial statements as a whole. This means that the auditor must:

a.       not be overly concerned about individual amounts on the financial statements,

b.      consider whether the firm has made a profit or a loss

c.       consider whether the statements create an impression that is consistent with the auditor’s intimate knowledge of the entity and its financial condition.

d.      decide whether the statements are a complete set of financial statements as required by Accounting Standards.

The correct option is .

Feedback: Section 7.1 Standards of reporting

6.      The addition of an emphasis of matter paragraph in an audit report

a.    does not affect the auditor’s opinion.

b.   does affect the auditor’s opinion.

c.    is required by the standards to be included in all audit reports.

d.   is only included for going concern uncertainties.

The correct option is .

Feedback: Section 7.1 Standards of reporting

7.      A standard unqualified audit report is not required to have which of the elements set out below?

a.       a heading ‘Auditors Opinion’.

b.      an opinion paragraph.

c.       matters the auditor wishes to emphasise.

d.      the opinion of the auditor on the financial statements.

The correct option is .

Feedback: Section 7.2 The auditor’s report and communication with management

8.      The emphasis of matter paragraph in an audit report would normally refer to the fact that the auditor’s opinion is:

a.       qualified in this respect.

b.      not qualified in this respect.

c.       a disclaimer of opinion.

d.      an adverse opinion.

The correct option is .

Feedback: Section 7.2 The auditor’s report and communication with management.

9.      Which of these factors could not be the cause of a material misstatement?

a.       selection of inappropriate accounting policies

b.      inadequate disclosure.

c.       disagreement with those charged with governance in relation to the financial statements

d.      none of the above, i.e. all could be the cause of material misstatement

The correct option is .

Feedback: Section 7.2.  The auditor’s report and communication with management

10.  When the auditor issues a disclaimer of opinionon a set of financial statements, the audit report should:

a.       be unqualified.

b.      begin with the term “except for”.

c.       express an adverse opinion.

d.   have a paragraph headed ‘disclaimer of opinion’.

The correct option is .

Feedback: Section 7.2 The auditor’s report and communication with management

11.  Circumstances where the auditor is justified in qualifying the audit report because of an inability to obtain sufficient appropriate audit evidence would not include which of the following?

a.        the auditor is appointed after the count of physical inventories has occurred

b.      the auditor runs out of time to follow normal auditing procedures because it has scheduled too many clients for audit in the final month of the audit period.

c.       where a fire has destroyed the entity’s accounting records

d.      the auditor is not able to obtain sufficient appropriate audit evidence about an associated entity

The correct option is .

Feedback: Section 7.2 The auditor’s report and communication with management

12.  Which of these would not be considered a scope limitation?

a.       The client would not permit confirmation of receivables with their best customers for fear of annoying the customers.

b.      Access to the board of directors meetings was limited to those meetings taking place before the balance sheet date.

c.       The auditor is appointed to the engagement too late to observe the client’s counting of the inventory.

d.      The auditor is forced to call upon an outside expert to properly value antiques that are held in the client’s vault as investments.

The correct option is .

Feedback: Section 7.2 The auditor’s report and communication with management

13.  The auditor of a reporting entity for which consolidated accounts are required has:

a.       the right of reliance on the work of the controlled entity’s auditor.

b.      the right of access to the accounting records of controlled entities.

c.       the right to appoint the auditor of the controlled entity.

d.      all of the above.

The correct option is .

Feedback: Section 7.3 Other reporting considerations for corporate entities

14.  If the previous period’s financial statements are unaudited, and sufficient appropriate evidence is unavailable, then the current auditor’s report will be:

a.       qualified on the basis of scope limitation.

b.      unqualified on the basis that the comparatives are unaudited and no opinion is expressed on them.

c.       qualified on the basis that the comparatives are unaudited and an opinion is expressed on them.

d.      qualified on the basis that the comparatives are unaudited and no opinion is expressed on them.

The correct option is .

Feedback: Section 7.3 Other reporting considerations for corporate entities

15.  Section 302 of the Corporations Act prescribes that disclosing entities must:

a.       prepare half-year financial statements and a directors’ report.

b.      have the half-year financial statements audited.

c.       have the half-year financial statements reviewed

d. not lodge the half-year financial statements with ASIC

The correct option is .

Feedback: Section 5.3 Other reporting considerations for corporate entities

16.  When the auditor performs an audit or review of half-year financial statements, they are not required to:

a.       circulate the audit report to entity members.

b.      consider aspects of the audit process relevant to the current audit for the forthcoming full-year financial statements.

c.       treat each half-year as a discrete reporting period.

d.      conduct the review in accordance with auditing standards.

The correct option is .

Feedback: Section 7.3 Other reporting considerations for corporate entities

17.  An emphasis of matter section in an audit report is:

a.       not a qualification.

b.      a qualification.

c.       an adverse opinion.

d.      used very commonly

The correct option is .

Feedback: Section 7.3 Other reporting considerations for corporate entities

18.  The opinion expressed on the consolidated statements of a company is the sole responsibility of:

a.          those charged with governance.

b.         the audit senior.

c.          the principal auditor.

d.         the managing director.

The correct option is .

Feedback: Section 7.3 Other reporting considerations for corporate entities

19.  The form and content of the auditor’s report is specified within:

a.          sec 295 of the Corporations Act.

b.         charter of the ICAA.

c.          AUS 708.

d.         ASA 700.

The correct option is .

Feedback: Section 7.1 Standards of reporting

20.  Which of these statements concerning audit reporting on consolidated accounts is the least accurate?

a.       The opinion expressed on the consolidated accounts is the sole responsibility of the principal auditor.

b.      It may be necessary for more than one audit firm to participate in the examination.

c.       The auditor of the parent entity has very limited rights to access the accounting records and registers of the controlled entity

d.      If the auditor concludes that reliance cannot be placed on the work of another auditor, alternative procedures should be attempted before qualifying the opinion.

The correct option is .

Feedback: Section 7.3 Other reporting considerations for corporate entities

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***** **** ******** *** sales adjustment ***************** ** ******* ******** ** *** ****** sales **** *** ********* ****** be ********** *** ** release *** ********* ***** until:they ******** * ***** **** of *** ***** *************** **** * completed ***** *********** ******* ** ******** ***** ******** shipping ********** ******** *** ********** ******* answer ** ********** ******* *** ***** **** ******** and ***** ********** ***************** ********** *** *** ********* sequence of ******** ***** **** in ******* **** primarily **** the:existence or ********** ********************* assertionaccuracy valuation ** ********** ********************* ** ********** assertion The correct ****** ** ********** Section *** ***** cash receipts and sales ********** ****************** **** *** following ***** would *** ** ** *********** ******* procedure *** *** ********* ** customers?checking *** ********* ** a dispatch **** matching *** ******** ***** order before ** invoice ** preparedusing ** authorised ***** **** **** ********* *** invoicecomparing totals *** ******** ***** with ****** *** ******************* filling *** *********** ***** *********** ******* ****** ** ********** Section *** ***** cash ******** and ***** ********** ****************** *** of ** authorised price **** ** preparing the ***** ******** ***** ********* the:existence or ********** ********************* ***************** ********* ** ********** *************** *** *********** ************** ******* ****** is ********** Section *** Sales **** receipts *** ***** ********** ****************** The **** ******* objective ** *** ********* ** ***** function is:that **** actual ********** *** invoicedthat ***** *** ******** accurately and ** *** ****** ********** **** will be received for the ****** ******* * ******* customer ************** ******* answer ** ********** Section 143 ***** **** ******** and ***** adjustment **************** ****** controls ****** ****** ********* ****** ** transaction *** ****** files ****** for authorised *********** Which of *** ********* *********** **** ** exception?credit ********** *** override marginal breaches ** a ************ credit ********** ******* *** ***** * ***** *** * ***** **************** manager can amend * ******** for * *********** ** *** above The ******* ****** ** dFeedback: ******* 143 ***** **** ******** *** sales adjustment ****************** ***** ** *** ********* ** *** ** ******* of * programmed *********** control?numerical ********** ** documents ** assuredunreasonable quantities amounts *** ***** *** queriedonly ****** *** ***** in the ********** ******* ***** *** ***************** ******** ******* are accepted The correct ****** is dFeedback: ******* 143 ***** **** receipts *** ***** ********** ****************** *** ** ************* terminals ** ****** **************** **** sales ******** all of *** ********* **************** that *** **** ***** are ********* ******* *** ******** ********* ****** ******* *** the customer ** ****** the ******** ** ***** *** cash ********* ******* ******* *** the *************** ******* ****** ** *** ******* ******** processed ** *** *********** ******* answer ** aFeedback: Section *** ***** **** receipts *** ***** ********** transactions 16 Standard ******* ********** **** customer *********** ******** through *** mail ******* ****** *** ******** *********** forward *** remittances ******** ******** ** *** accounts ********** clerkb **** *** **** ************* endorse *** ******* *** **** ******* *** *********** ******** to *** ******** **** *** **** ************* ******* *** ******* and **** forward the *********** ******** to the ******** ********** ****** **** the mail ************* ******* *** ******* *** **** **** each remittance on * ************ correct ****** is dFeedback: Section *** ***** **** ******** and sales ********** transactions  17 ***** ****** the deposit the ***** cash summary should ** ********* ** the ******* ******** to:the ***** ********* officerthe accounts ********** ************ accountingthe cash ******** ********** ******* answer ** ********** Section 143 ***** cash receipts *** ***** adjustment transactions  18 In **** ****** sales ****** *** ********* ******* over ***** ********** ************ ** based **** ********* number *** value ** ***** **************** ** proper ************* *** ***** ********************* use of ***** ************ ** ******* a ***** of ******** ******** ******** ***** **** ***** transactions and *** ******** lack ** documentation The ******* answer ** cFeedback: ******* *** ********** *** ***** plan   19 *** ********* of accounts ********** ****** be authorised ** ***************************** ********** ********** financial ************ ******* answer is dFeedback: ******* *** Developing the ***** ********** *** best ********* for ******* **** * ************ ** a ***** ******** ******* *** confirmation ** ** accounts ********** ********* that the ********** ***** ** **************** the ******* ** * bad *********** ********** cash ****************** the ****** ** chasing ** *** *********** ******* ****** is ********** ******* *** *********** ********************* ********** ********* ******** and payrollMultiple ********* ***** ** ***** ** *** ******** ******** by purchases *** ******** ************** ***** assetsb work-in-process inventoryc ******** ******** prepaid ************* ******* ****** ** ********** ******* *** ***** ******* of audit *************** *** ******** ***** objective *********** payable *** *********** of the ****** ** *** balance ******* is ******* **** ***** ************ assertionb valuation ** *********** ********** ************ ** ********** ********** ****** and obligations ************** correct ****** ** ********** ******* 152 ***** *************** ******** ************ may ********* ****** ********* ******* *** plant and equipmentb the ********* *** ********** ********* *** * delivery ******** * and c The correct ****** is bFeedback: ******* *** ******** payment *** ******** ********** ***************** ******** orders ****** **** ** the transaction ***** ** documentary ******** **** directly ******** ***** assertion *** ******** transactions?a ********* or *********** ****** *** ************ ******** ** valuationd ************ *** disclosure The correct ****** is aFeedback: Section *** Purchase ******* *** ******** ********** transactions   5 *** quantity ******* *** *** be ********* on *** copy ** *** ******** ***** **** ******** ** ***** requesting departmentb ******** ******* *********** ********* *********** ******** ********** *************** ******* ****** ** cFeedback: ******* *** ******** ******* and ******** ********** ***************** The ********* department ****** ** ********** to ****** ** ***** ******* having on file * ******** ************ purchase requisitionb ******** ********* reportd purchase ********** ******* ****** is ********** ******* 153 ******** ******* and ******** adjustment transactions  7 * copy ** the ********* ****** should be **** ******** ** the receiving department to the:a ******** (receivable) departmentb ***** financial *********** purchasing *********** ******** ********* *************** ******* ****** ** dFeedback: ******* 153 Purchase ******* and ******** adjustment ***************** * ***** ** *** ******* on *** ******* sequence ** prenumbered ********* ******* to ********* **** * supplier’s invoice *** ******** *** each ******* to ***** ********* ** occurrence ********** completeness ********** presentation ** ********** ********** rights *** obligations assertion The ******* ****** ** bFeedback: Section 153 ******** ******* *** ******** ********** transactions  9 A responsibility *** ******** ******** ** receiving ********** ********* ** **** ******* ***** ******** **** description ** ***** ******** ******* * *********** receiving report for ***** ***** ********* ***** ****** *********** **** *** verify *** ***** ****** file *** ******** ***** **** ******* ******* ** ********** correct ****** is ********** ******* *** ******** ******* *** ******** ********** transactions 10 ***** ** recording purchases ************ ********** ******** are ******* *** approved ** *** ******** ********** ******** **** **** ******** include *** ** *** following except:a ******* *** supporting ************* ** *********** ********* *** ********** ******* *** payment ** having ** ********** ****** **** *** ******** agreeing the details ** the ************ invoice **** *** ******* ********* ****** *** ******** ****** determining *** ************ ******** ** the ********** ************ ******* option ** ********** Section *** ******** ******* *** purchase ********** ****************** For *** ********** **** *** processing of ********* *** payment ************ ******** *** ** the ********* ********* ******** ************** goods *** servicesb ********* ******** invoicesc ********* *** ****** ************ *** ** *** ********* are ************* ******* answer ** bFeedback: ******* 153 ******** ******* and ******** adjustment ****************** ************** *** *********** **** ****** ********** ******** *** processed for ******* ** their due ***** ********* lies with ***** ********* departmentb ******** *********** ********** *********** ******** audit *************** ******* ****** ** ********** ******* *** ******** ******* *** ******** adjustment ****************** *********** ** *** ********* ** payroll *** ********* do *** ** *** following ******** reduce *** risk ** payments to ********** ********** reduce the **** ** ******** to ********** ********** restrict *** recording ** *** ******** **** ** *** payroll *********** ******** the payment ** ***** to the ******* *************** ******* ****** is ********** ******* 154 ******* ****************** ******** **** *** *********** *** ******* ** ******* include *** ** *** ********* ******** ********** ********* ** *** ********** department ****** be responsible for ******* the chequesb *** cheque *********** *** ********** ********* ****** ** ********* ********* **** *** ****** ** signedc the ****** ****** and *** ********** ********* ****** ** ******** ** *** ******** ******* ***** *** review and ******** prenumbered cheques ****** be used The correct ****** ** ********** ******* 153 Purchase ******* *** purchase adjustment transactions  15 Controls ******** ** the ********* ** cash payments ******* ***** of *** *********** ** *********** ***** by the accounting supervisor ** *** ********* of *** ******* *********** *** ****** to ******** ******* **** *** ****** ******* ******** **** the ******* ******** *********** ** *********** ***** of *** ********* ** *** ***** of ******* issued **** * ***** total of *** ******** ********* for paymentc ****** ** ****** ** ***** ******** *** ** *** ********** ******* ****** ** ********** ******* *** ******** ******* and ******** adjustment transactions  16 Payroll ********* ******* *** ** *** following ******** ****** ********** ******** on *** ****** ** ******* required to work on a ********** **** ********* *** ******** ********** ********* wages The ******* ****** ** ********** Section *** ******* ****************** Payroll ********* ******* *** of *** ********* except:a ********* ********** *** *********** ***** *********** ******* ******** *********** ********** *** of *** above are payroll ************** ******* ****** ** cFeedback: ******* 154 ******* transactions    18 * ******* ************** ******** ** required ** ***** to *** a new ******** to *** personnel **** ****** **** This ******* ******* ********* ** ***** ********* ** occurrence assertionb ************ ********** ************ *** *********** ********* ** measurement ************** ******* ****** ** ********** Section *** ******* ****************** ************** *** ******** of *** ********* **** ****** **** should **** **** authorised ********* ** the:a ********* *********** ******* *********** ************** *********** ************ operating *************** correct ****** ** ********** ******* *** ******* ****************** In **** ****** ************ ******** *********** **** is recorded ***** ******** ******* ********** ****** security identification ****** **************** book The ******* answer ** cFeedback: ******* *** ******* *********************** ********** *********** *** ******** ***** *** ******************* ********* Which ** the ********* is *** a function ** maintaining ********* ****************** ********* inventory **** ********* recordsrecording *** movement of ***** **** inventoryordering ************** *** ******** ** goods from inventory The ******* answer is ********** Section 162 ************** ** *** ******* *** ******* ********* pricing *** ***** ********* ***** fulfilled ***** ********************* *** ***************************** *** *************** correct ****** ** dFeedback: Section *** ************** ********* **** ********** ** ********* ******* ******* ********* ** ************** ********************* *************** *** *********** ****************** *** allocation The ******* ****** is ********** ******* 162 Inventory  4 ** ********* ********* *** *** conduct ** * ******** inventory count ** to ******** ******* over *** count ******* ***** ** the following ** not a ****** count ********** ** *********** inventory count ********* ** ***** inventory ******* ** ***** ************ ********* ***** sheetsuse ** ************ ********** ********* tags The correct ****** ** ********** ******* *** ************** **** costing ************ ********* *** ** *** following procedures are necessary except:determining *** **** ** ********* ******* **** raw ******************** the **** ** *** ********* *********** ** **** ** **************** costs ** direct ****** applied ** work ** **************** the cost ** purchases The ******* ****** is dFeedback: ******* *** ************** ***** ** ***** factors *********** ***** ** the risk ** ************ of inventories?the ****** ** ******************** ** a ***** ****** ***************** ** ******** ** ********* ** *** factors ****** ********** ******* ** *** risk ** misstatement ** **************** correct answer ** ********** ******* *** Inventory  7 The ***** ******** **** would ** most *********** **** ** ******* has assessed * ************* *********** approach ** necessary to ********* ********* quantity **** ********* quantities ********** ** physical ***** ** ** ****** * few **** ** ******* dateb ********* ********** determined ** ******** ***** **** ******* date ******** ** ********* to ********* ******** ********* ********** ********** by ********* ** ********* ******* without * ******** ***** ** ** near ******* dated **** of *** ********** ******* ****** ** aFeedback: ******* *** Inventory  8 *********** ** ********* ****** ** a required ***** ********* ******************** *** ********** ** *********** ** ** soinventories *** ******** *** ** ** *********** ** ** soinventories are ******** and the auditor ********* ** to ** ************** ******* ****** ** ********** ******* 162 ************** ****** *** observation ** the inventory ***** *** ******* has ** responsibility ******** *** ******* *** ******** ********* ********* **** **** counts of inventory quantitiessupervise the ****** ** *** ************ ******* *** ************** *** *** ** *** ********** correct ****** ** ********** Section 162 *************** **** *** ****** ******* ** ********* ********** ** take *** inventory the ****** ** the ***** in this **** ***** eliminate *** **** ** ******* **** ******** ********* *** need to ******* *** **************** ******* the *********** *** ********** *********** *************** ******* *** specialists *** ********** ***** ************** ******* ****** ** ********** ******* *** *************** ** companies ***** inventories are ** ******** ********* *** auditor’s ************ ordinarily ****** include:all ********* ********** ********* ** locations attended **** ***** **** ****** ***** ** **** locationall *********** ********* ************** ******* ****** ** ********** ******* *** *************** The *********** ******** in ********** test counts ****** *** inventory *********** ** ******* all ************ ************* ****** *** **** **************** ***** ** high ****** items with random ********* of ***** **************** ***** in ***** ***** ********* **** to be ************ *** ********* ***************** ******* answer is ********** ******* *** *************** ************ ** inventories in public warehouses ****** ******* ******** ********** ************* ********************* ****************** *** allocation assertionit ****** provide evidence ********** any ** *** listed *************** ******* answer ** cFeedback: ******* *** ******** plant *** equipment    14 ******** *********** include all ********* products and supplies on **** ** *** end of *** ********* ****** ******* from the ***** ********* ************************ and ************************* and **************** correct ****** is ********** ******* *** *************** ***** ** *** ********* is *** ** ****** statement ******* ******* ** ******** ***** and ********************************* depreciationloss ** ******** ** plantrent ** ********* *********** ******* ****** ** bFeedback: Section *** ******** ***** *** *************** *** auditor ********** *** ******** ***** objective: ************ **** ******** ***** and ********* ***** ****** represent ********** ****** that are in *** ** ******* ******* **** ********* is ******* **** the:a ********* ********** ************ ********** presentation *** ********** ********** rights *** *********** ************** ******* ****** ** aFeedback: ******* *** ******** plant and equipment  17 *** ********* ***** ******** **** *********** *** ******** ***** and equipment **** ** ********** **** ******** risk ** ******** *** *** *** ************ *** ********** ********* *** *** ****** ******** under ******* ******* ******** **** is ******** *** *** *** existence ********* in a ************* entity ******* PPE ****** *** *** ********* ********** to ****** ******** risk ** ******** ******** ** **** *** the existence ********* in * manufacturing entity because scrapped or ******* PPE ****** may *** ** ******* off *** booksd ******** **** is ******** *** *** *** valuation and ********** ********* **** *** ****** *** ********* *** ********* ******* ****** is aFeedback: Section *** ******** plant *** equipment  18 *** ********* ***** audit ******** for ******** ***** *** equipment **** ** inaccurate is:for ************ *** accumulated ************ ******** **** ** ******** ** *** ********** ** estimating both ****** ***** and ******** ************* ******** ************ ** *** typically involves ************* less time *** **** **** ************ ** ******* ************ ******* ***** accounts ******* **** assessments for *** ***** ******** *** **** dependent ** ******** **** ***** *********** *********** ** the above ********** ** *************** ******* ****** is dFeedback: Section *** ******** plant *** *************** ******** frequently ******** * ***** ******** as * ********** ****** ********* ********** ***** ** *** Which ** *** following would an auditor *** ****** to find ** * plant register?cost *** *********** *************** **** of ******** ***** inspectionsserial ****** and ***************** ********** ******* ****** ** ********** ******* *** ******** plant *** *************** ***** ** these is *** **** ********* substantive ********** *** ******** ***** and ********* ** ** initial ******* *** ******* ************ ** *** current year’s transactions ***** ******** **** be obtained ** to the ******** ** *** ******* ********* ******** **** ** obtained ** ** *** ownership ** *** ******* *** of the ***** *** *********** ******* answer is ********** Section *** ******** ***** and equipment  Chapter 7The ********* ************** ********* *** 700 ******** *********** ******** ** *** of these ****** ******** *** **** and ******* ** the *********** ******* The matters *** ******* ******* ********* ** forming ** ******** The ******** ** ****** ***** ****** The *********** *********** and ********* ********************* correct ****** ** ********** ******* 71 ********* ** ************** Which ** these ***** **** not form **** ** *** ********* report as ******* in *** ************ *** ******* * ********* ** **** flows *** *** yearb Notes ******** ** Accounting ********** *** ********** disclosures ********* to give a true *** **** ***** The ********** *********** ******* ****** ** dFeedback: ******* ** ********* of reporting  3 ** ******** to *** ************ ** *** *** *** *** ********* the ************ *** also prescribes the ********* ********* ****** ***** ** *** following **** *** ********** *** ** those ******** ******* ** ******* ** ******* *** ********* ********** are ********* ******* ******* ** ******* as ** ******* ********* ******* **** **** **** to enable *** preparation *** ***** ** *** ********* *********** forming ** ******* **** *** information explanation *** ********** ********* for *** conduct ** *** audit **** **** ********* ******* ** opinion **** *** ******* *** ********* **** been kept as required ** law The correct answer is ********** ******* ** ********* of ************** ***** ********* ***** *** ** ***** ** * ************ declaration?a **** *** ********* ********** and ***** **** * true *** **** ***** That the ********* ********** *** free **** ******** ************ whether *** ** ***** or errorc **** ** *** directors’ ******* ***** are ********** ******* to believe **** *** company will ** **** ** pay its ***** ** *** **** they **** dued **** in *** ************ ******* the ********* ********** and ***** *** in ********** **** *** law  The ******* ****** ** bFeedback: Section ** Standards ** ************** *** *********** ******* is ********* ** reference ** *** ********* statements ** * ***** **** ***** that the ******* ****** *** ** ****** concerned ***** ********** ******* ** *** ********* *********** consider ******* the firm *** **** a profit ** * lossc ******** ******* *** statements ****** an ********** that is ********** **** *** *********** intimate knowledge ** *** ****** *** *** ********* ********** ****** whether *** ********** *** * ******** set ** ********* ********** ** required ** ********** ************** ******* option is ********** ******* ** Standards ** ************** *** ******** of an ******** ** matter ********* ** ** audit ******* **** *** affect *** *********** ******** **** ****** the *********** ******** ** ******** ** the ********* ** ** ******** ** *** ***** ******** ** **** included for ***** ******* uncertainties The ******* ****** ** ********** ******* ** ********* ** reporting  7 * ******** *********** audit ****** is not ******** ** **** ***** ** the ******** *** *** ******* a heading *********** Opinion’b ** ******* ********** ******* *** ******* ****** ** emphasised *** ******* of the ******* ** *** ********* *************** correct ****** ** ********** ******* 72 The *********** report *** ************* **** *************** *** emphasis ** ****** ********* ** ** audit report ***** normally refer ** *** **** **** the auditor’s opinion is:a ********* ** this ******** *** ********* ** **** ******** a ********** ** ******** ** ******* opinion The ******* option is ********** ******* ** *** *********** ****** *** communication **** ******************* ***** of these ******* ***** not ** *** ***** of * material ************** ********* ** ************* ********** ********* ********** disclosurec ************ with ***** ******* **** ********** ** ******** to *** financial *********** none ** *** ***** ** *** ***** ** the ***** ** material misstatement The ******* ****** ** ********** Section ** The *********** ****** and ************* **** management  10 **** *** ******* issues * disclaimer ** ******* on * set ** ********* statements *** ***** ****** ******** be unqualifiedb ***** **** *** **** ********* ******* express ** ******* ******** **** a paragraph ****** ************* ** *************** ******* option ** dFeedback: Section ** *** *********** report *** ************* **** **************** ************* where *** ******* ** justified ** ********** *** ***** ****** because ** an ********* to ****** ********** *********** ***** ******** would *** include which ** *** *********** *** ******* ** ********* after the ***** of ******** *********** *** ********* the auditor **** out of **** to ****** ****** ******** procedures ******* ** has ********* too **** ******* for audit ** *** final ***** ** *** ***** ******* where * fire *** destroyed *** entity’s ********** ******** *** ******* ** *** able ** ****** ********** *********** ***** evidence ***** ** associated *********** ******* option ** bFeedback: ******* ** *** *********** ****** *** ************* **** **************** Which ** ***** ***** *** ** considered a ***** limitation?a *** ****** ***** *** ****** ************ ** *********** **** ***** best customers for **** ** ******** *** ********** ****** ** *** board ** ********* ******** *** ******* to ***** meetings ****** ***** before *** balance ***** datec *** auditor ** ********* to *** engagement *** **** ** observe *** client’s ******** of *** ********** *** ******* ** forced to **** **** an ******* ****** ** properly value antiques **** are **** ** *** ********** vault ** **************** ******* ****** ** ********** ******* 72 *** *********** ****** and ************* **** management    13 *** ******* ** a reporting entity for ***** consolidated accounts are ******** ***** *** right ** reliance ** the **** ** *** ********** ********** ******** *** ***** of access ** the ********** ******* of ********** entitiesc the ***** to ******* *** ******* ** *** ********** entityd all ** the ********** ******* option ** bFeedback: Section 73 Other ********* ************** for corporate ************ If *** ******** period’s ********* statements are ********* *** ********** appropriate ******** ** *********** **** *** ******* *********** ****** **** **** ********* on *** ***** ** scope *********** unqualified ** *** basis **** *** ************ *** ********* *** ** ******* ** expressed ** ***** qualified on *** ***** **** *** ************ *** ********* and ** opinion ** expressed ** ***** ********* on *** ***** **** *** comparatives *** unaudited and no ******* is ********* ** ********* correct ****** ** dFeedback: Section ** ***** ********* ************** *** ********* ************** ******* *** ** *** Corporations *** ********** that ********** entities ****** ******* ********* ********* ********** and * ************ ******* **** the ********* financial ********** ******** have the ********* ********* statements ********* not ***** *** ********* ********* statements **** ********* ******* ****** is ********** Section ** ***** ********* considerations *** corporate ************** **** the ******* ******** ** ***** ** review ** ********* ********* ********** **** *** *** ******** **** ********* the ***** report ** ****** membersb ******** aspects of the ***** ******* ******** ** *** ******* ***** *** *** *********** full-year ********* statementsc ***** each ********* as * ******** ********* ******* conduct the ****** in accordance with ******** ************** ******* ****** ** aFeedback: ******* ** ***** ********* considerations *** ********* entities  17 An ******** ** ****** ******* ** an ***** ****** is:a *** * ************** a ************** ** ******* ******** used **** *********** ******* ****** ** aFeedback: ******* 73 ***** reporting considerations *** ********* entities  18 *** ******* ********* on the consolidated statements ** * company ** *** sole ************** **** ***** ******* with *********** the ***** ******* *** ********* ******** *** ******** ************* correct ****** ** cFeedback: ******* 73 ***** ********* ************** *** corporate ************** The **** and ******* of *** *********** ****** ** ********* ******** *** *** ** *** Corporations **** ******* ** the ***** *** 708d *** ******** ******* option ** ********** Section 71 ********* of *************** ***** of ***** ********** concerning ***** ********* ** consolidated ******** ** *** ***** accurate?a The ******* ********* ** the ************ ******** is *** **** ************** ** *** principal ******** ** *** ** necessary for **** **** one ***** firm to *********** ** *** ************ *** ******* ** *** ****** entity *** very ******* ****** to access *** ********** records *** ********* of the ********** entityd ** the auditor ********* **** ******** cannot be ****** on *** **** ** ******* auditor alternative ********** ****** ** attempted before ********** *** opinion The ******* ****** ** ********** ******* ** Other ********* considerations *** ********* ************

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