1. Which of the following is ordinarily considered an "extended procedure" in external auditors' independent audits of financial statements?;A. Send positive confirmations on recorded customer accounts receivable balances.;B. Perform physical observation and testcount during the client's inventorytaking.;C. Measure the time lag between the date of recording cash receipts in the books to the date of deposit credit in the bank.;D. Conduct interviews with the client's sales billing personnel to learn about sales recording control procedures.;2. Auditors ordinarily send a standard confirmation request to all banks with which the client has done business during the year under audit, regardless of the year-end balances. A purpose of this procedure is to;A. provide the data necessary to prepare a proof of cash.;B. request that a cutoff bank statement and related checks be sent to the audit.;C. detect kiting activities that may otherwise not be discovered.;D. seek information about contingent liabilities and security agreements.;3. An auditor wishes to perform tests of controls on a client's cash disbursements procedures. If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by;A. confirmation and observation.;B. observation and inquiry.;C. analytical procedures and confirmation.;D. inquiry and analytical procedures.;4. Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances?;A. The cashier prepares the daily deposit.;B. The cashier makes the daily deposit at a local bank.;C. The cashier posts the receipts to the accounts receivable subsidiary ledger cards.;D. The cashier endorses the checks.;5. When auditing with "fraud awareness," auditors should especially notice and follow up employee activities under which of these conditions?;A. The company always estimates the inventory but never takes a complete physical count.;B. The petty cash box is always locked in the desk of the custodian.;C. Management has published a company code of ethics and sends frequent communication newsletters about it.;D. The board of directors reviews and approves all investment transactions.;6. Narbona, CPA is reviewing controls over cash received through a bank night depository. Which controls would she find most important?;A. Responsibilities are rotated for processing night depository receipts among employees of the various departments.;B. Dual control (joint custody) is established over the contents of the night depository box from the time of removal until initial recording is completed.;C. Vacations are required for all employees engaged in night depository activities.;D. All deposit tickets related to night deposits are numbered.;7. A small business owner can best offset the lack of segregation of duties by;A. Creating an internal audit department;B. Installing the latest computer equipment and software;C. Being actively involved in the accounting process;D. Relying on the external auditor to detect errors.;8. Confirmations of accounts receivable provide the most evidence for which of the following assertions?;A. Existence.;B. Valuation or Allocation.;C. Rights and obligations.;D. Completeness.;9. In determining the adequacy of the allowance for uncollectible accounts, the least valuable evidence would be obtained from;A. an aging schedule of past due accounts which the auditor has tested.;B. correspondence with the client's collection agency.;C. financial statements of individual customers.;D. no reply to negative confirmations.;10. In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified?;A. A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers.;B. A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances.;C. A small number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers.;D. A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances.
Paper#27294 | Written in 18-Jul-2015Price : $27