Question;1. Question: (TCO 6) For efficiency, tests of controls are frequently done at the same time as Student Answer: analytical procedures. compliance tests. tests of transactions. tests of details of balances. Question 2. Question: (TCO 6) Which of the following is not a direct result of performing analytical procedures? Student Answer: Identify areas of potential misstatements. Reduce detailed audit risk. Understand the client's business. Identify specific errors in the accounts. Question 3. Question: (TCO 6) Which of the following audit tests is usually the most costly to perform? Student Answer: Analytical procedures Tests of controls Tests of balances Substantive tests of transactions Question 4. Question: (TCO 6) Which of the following represents an incorrect pairing of a type of audit test and evidence? Student Answer: Procedures to obtain an understanding of internal controls?documentation Analytical procedures?ratio analysis Substantive tests of transactions?confirmation Tests of details of balances?physical examination Question 5. Question: (TCO 6) The sequence of steps in gathering evidence as the basis of the auditor's opinion are Student Answer: substantive tests, initial assessment of control risk, and tests of controls. initial assessment of control risk, substantive tests, and tests of controls. initial assessment of control risk, tests of controls, and substantive tests. tests of controls, initial assessment of control risk, and substantive tests. Question 6. Question: (TCO 9) It is important that sales be billed and recorded in the journal as soon as possible after Student Answer: the order is received. the order is received and credit is approved. credit is approved and it is verified that there is enough inventory to fill the order. the shipment takes place. Question 7. Question: (TCO 9) At which point in an ordinary sales transaction would a lack of specific authorization be of least concern to the auditor? Student Answer: Granting of credit Shipment of goods Determination of discounts Selling of goods for cash Question 8. Question: (TCO 9) Proper separation of duties is useful to prevent various types of misstatements. Which of the following is not an essential separation of duties? Student Answer: Persons having access to cash should not have access to marketable securities Separate the credit-granting function from the sales function Personnel doing internal comparisons should be independent of those entering the original data Anyone responsible for inputting sales and cash receipts transactions information into the computer should be denied access to cash Question 9. Question: (TCO 9) Which one of the following would the auditor be concerned with when examining the client's billing function? Student Answer: All shipments made have been billed No shipment has been billed more than once Each shipment has been billed for the proper amount All three are of concern Question 10. Question: (TCO 9) Smith Manufacturing Company's accounts receivable clerk has a friend who is also a Smith's customer. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to Student Answer: prenumber and account for all credit memorandums. require receiving reports to support all credit memorandums before they are approved. have independent sales and accounts receivable departments. mail monthly statements to customers.
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