Question 1

When goods are received, the receiving clerk should match the goods with:

Accepted Answer

A)  the receiving report and the supplier shipping document.
B)  the supplier shipping document and the purchase order.
C)  the supplier invoice and the receiving report.
D)  the purchase order and the requisition form.

Question 2

Jones Ltd has numerous customers. Each customer file contains name, address, credit limit and account balance. The auditor wishes to undertake a test of the automated control that does not allow account balance to exceed credit limit. The best procedure for the auditor to follow would be to: A. develop a program to compare credit limits with account balances and print out the details of any account with a balance exceeding its credit limit.

Accepted Answer

A)   	ANSB. develop test data that would cause some account balances to exceed the credit limit and determine if the system properly detects such situations.
B)   	request a printout of a sample of account balances so they can be individually checked against the credit limits.
C)   	request a printout of all account balances so they can be manually checked against the credit limits.

Question 3

To check the accuracy of the accounting records with regards to the recorded hours worked, an auditor would ordinarily compare time sheets with:

Accepted Answer

A)  shop job time tickets.
B)  personnel records.
C)  time recorded in the payroll register.
D)  labour variance reports.

Question 4

All of the following are important controls over credit memos except:

Accepted Answer

A)  proper segregation of duties to ensure that sales discounts taken were earned.
B)  credit memos should be approved by someone other than whoever initiated it.
C)  credit memos should be supported by a receiving document for returned goods.
D)  proper segregation of duties between access to customer records and authorising credit memos.

Question 5

Which of the following is a significant difference between the test data (test deck)  approach and an integrated test facility (ITF) ?

Accepted Answer

A)  ITFs are processed on a live run basis while test data (test deck)  can only be processed on a 'test run' basis.
B)  Test data (test deck)  techniques test general controls while ITF techniques test application controls.
C)  ITF techniques test programmed application controls while test data (test deck)  techniques test both programmed and non-programmed application controls.
D)  The auditor establishes a dummy entity on the client's system for the ITF approach while a dummy entity is not required for the test data (test deck)  approach.

Question 6

When testing a computerised accounting system, which of the following is not true of the test data approach?

Accepted Answer

A)  The test data must consist of all possible valid and invalid conditions.
B)  Test data are processed by the client's computer programs under the auditor's control.
C)  Only one transaction of each type need be tested.
D)  The test data need consist of only those valid and invalid conditions in which the auditor is interested.

Question 7

Purchase cut-off procedures should be designed to test whether all inventory:

Accepted Answer

A)  on the statement of financial position was carried at lower of cost or market.
B)  purchased and received before the year-end was recorded at year-end.
C)  owned by the company is in the possession of the company.
D)  on the year-end statement of financial position was paid for by the company.

Question 8

After obtaining an understanding of an entity's internal control system, an auditor may assess control risk at a high level for some account balances because he or she:

Accepted Answer

A)  identifies internal controls that are likely to prevent material misstatements.
B)  performs tests of controls to reduce detection risk to an acceptable level.
C)  determines that the pertinent internal control components are not well documented.
D)  believes the internal controls are unlikely to be operating effectively.

Question 9

Beta Pty Ltd posts to its perpetual inventory records directly from its sales invoices.Inadequate control procedures over the invoicing function allow goods to be invoiced that are not shipped.The inadequate control procedures could cause an:

Accepted Answer

A)  understatement of revenues, receivables and inventory.
B)  overstatement of revenues and receivables, and an understatement of inventory.
C)  understatement of revenues and receivables, and an overstatement of inventory.
D)  overstatement of revenues, receivables and inventory.

Question 10

Which of the following is a test of controls for the control assertion of completeness for revenue?

Accepted Answer

A)  Test a sample of sales invoices for authorised customer orders.
B)  Review sales orders for proper credit approval.
C)  Trace shipping documents to sales invoices and the sales journal.
D)  Examine reconciliation of accounts receivable subsidiary ledger to general ledger control account.

Question 11

An auditor wishes to perform tests of controls on a ABC Ltd's cash disbursements procedures.If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

Accepted Answer

A)  enquiry and analytical procedures.
B)  confirmation and observation.
C)  observation and enquiry.
D)  analytical procedures and confirmation.

Question 12

To determine whether internal control structure policies and procedures operated effectively to minimise errors of failure to invoice a shipment, the auditor would select a sample of transactions from the population represented by the:

Accepted Answer

A)  bill of lading file.
B)  customer order file.
C)  accounts receivable master file.
D)  goods received notes file.

Question 13

Evidence about which aspect(s)  of internal control is usually gained when the auditor is assessing control risk?

Accepted Answer

A)  Existence.
B)  Effectiveness.
C)  Continuity.
D)  All of the given answers.

Question 14

After obtaining an understanding of internal control and assessing control risk of an entity, an auditor decided not to perform tests of controls.The auditor most likely decided that:

Accepted Answer

A)  a combination of limited tests of controls with analytical procedures would be more efficient and effective than detailed substantive testing.
B)  the assessed level of detection risk exceeded the assessed level of control risk.
C)  control risk should be assessed as low for key financial report assertions.
D)  the evidence that could be obtained through tests of controls would not support an assessment of control risk as less than high.

Question 15

Which of the following internal control activities is not usually performed in the accounts payable department?

Accepted Answer

A)  Indicating the asset and expense accounts to be debited.
B)  Accounting for unused pre-numbered purchase orders and receiving reports.
C)  Matching the supplier's invoice with the related receiving report.
D)  Approving vouchers for payment by having an authorised employee sign the vouchers.

Question 16

Which of the following is a primary function of the purchasing department?

Accepted Answer

A)  Reducing expenditures for goods acquired.
B)  Verifying the propriety of goods acquired.
C)  Ensuring the acquisition of goods of a specified quality.
D)  Authorising the acquisition of goods.

Question 17

While auditing at Bandana Ltd and undertaking tests of controls which are related to controls built around their integrated sales and purchases system, which assertion would be of least interest to you as auditor?

Accepted Answer

A)  Accuracy.
B)  Occurrence.
C)  Completeness.
D)  Rights and obligations.

Question 18

Tests of controls for the occurrence assertion for purchases include all of the following except:

Accepted Answer

A)  evaluating proper segregation of duties.
B)  testing a sample of vouchers to an authorised purchase order.
C)  testing a sample of vouchers to receiving reports.
D)  tracing a sample of vouchers to the purchases journal.

Question 19

Which of the following audit tests would be regarded as a test of controls?

Accepted Answer

A)  Tests of the additions to property, plant and equipment by physical inspections.
B)  Selecting debtors for a positive confirmation process.
C)  Tests comparing inventory pricing to suppliers' invoices.
D)  Tests of the signatures on sales orders to a list of approved signatories.

Question 20

Tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of:

Accepted Answer

A)  Classification.
B)  Cut-off.
C)  Occurrence.
D)  Accuracy.

Exam 8: Tests of Controls

Which of the following internal control activities is not usually performed in the accounts payable department?

Correct Answer
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All of the following are important controls over credit memos except:

Correct Answer
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To determine whether internal control structure policies and procedures operated effectively to minimise errors of failure to invoice a shipment, the auditor would select a sample of transactions from the population represented by the:

Correct Answer
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While auditing at Bandana Ltd and undertaking tests of controls which are related to controls built around their integrated sales and purchases system, which assertion would be of least interest to you as auditor?

Correct Answer
verified

Beta Pty Ltd posts to its perpetual inventory records directly from its sales invoices.Inadequate control procedures over the invoicing function allow goods to be invoiced that are not shipped.The inadequate control procedures could cause an:

Correct Answer
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Tests of controls for the occurrence assertion for purchases include all of the following except:

Correct Answer
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Tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of:

Correct Answer
verified

Which of the following is a significant difference between the test data (test deck) approach and an integrated test facility (ITF) ?

Correct Answer
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Purchase cut-off procedures should be designed to test whether all inventory:

Correct Answer
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When goods are received, the receiving clerk should match the goods with:

Correct Answer
verified

An auditor wishes to perform tests of controls on a ABC Ltd's cash disbursements procedures.If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

Correct Answer
verified

Which of the following is a primary function of the purchasing department?

Correct Answer
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Correct Answer
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Evidence about which aspect(s) of internal control is usually gained when the auditor is assessing control risk?

Correct Answer
verified

After obtaining an understanding of internal control and assessing control risk of an entity, an auditor decided not to perform tests of controls.The auditor most likely decided that:

Correct Answer
verified

Which of the following is a test of controls for the control assertion of completeness for revenue?

Correct Answer
verified

When testing a computerised accounting system, which of the following is not true of the test data approach?

Correct Answer
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Which of the following audit tests would be regarded as a test of controls?

Correct Answer
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To check the accuracy of the accounting records with regards to the recorded hours worked, an auditor would ordinarily compare time sheets with:

Correct Answer
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After obtaining an understanding of an entity's internal control system, an auditor may assess control risk at a high level for some account balances because he or she:

Correct Answer
verified

Exam 8: Tests of Controls

Which of the following internal control activities is not usually performed in the accounts payable department?

Correct AnswerverifiedShow Answer

All of the following are important controls over credit memos except:

Correct AnswerverifiedShow Answer

To determine whether internal control structure policies and procedures operated effectively to minimise errors of failure to invoice a shipment, the auditor would select a sample of transactions from the population represented by the:

Correct AnswerverifiedShow Answer

While auditing at Bandana Ltd and undertaking tests of controls which are related to controls built around their integrated sales and purchases system, which assertion would be of least interest to you as auditor?

Correct AnswerverifiedShow Answer

Beta Pty Ltd posts to its perpetual inventory records directly from its sales invoices.Inadequate control procedures over the invoicing function allow goods to be invoiced that are not shipped.The inadequate control procedures could cause an:

Correct AnswerverifiedShow Answer

Tests of controls for the occurrence assertion for purchases include all of the following except:

Correct AnswerverifiedShow Answer

Tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of:

Correct AnswerverifiedShow Answer

Which of the following is a significant difference between the test data (test deck) approach and an integrated test facility (ITF) ?

Correct AnswerverifiedShow Answer

Purchase cut-off procedures should be designed to test whether all inventory:

Correct AnswerverifiedShow Answer

When goods are received, the receiving clerk should match the goods with:

Correct AnswerverifiedShow Answer

An auditor wishes to perform tests of controls on a ABC Ltd's cash disbursements procedures.If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

Correct AnswerverifiedShow Answer

Which of the following is a primary function of the purchasing department?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Evidence about which aspect(s) of internal control is usually gained when the auditor is assessing control risk?

Correct AnswerverifiedShow Answer

After obtaining an understanding of internal control and assessing control risk of an entity, an auditor decided not to perform tests of controls.The auditor most likely decided that:

Correct AnswerverifiedShow Answer

Which of the following is a test of controls for the control assertion of completeness for revenue?

Correct AnswerverifiedShow Answer

When testing a computerised accounting system, which of the following is not true of the test data approach?

Correct AnswerverifiedShow Answer

Which of the following audit tests would be regarded as a test of controls?

Correct AnswerverifiedShow Answer

To check the accuracy of the accounting records with regards to the recorded hours worked, an auditor would ordinarily compare time sheets with:

Correct AnswerverifiedShow Answer

After obtaining an understanding of an entity's internal control system, an auditor may assess control risk at a high level for some account balances because he or she:

Correct AnswerverifiedShow Answer

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