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Accounting 30 MCQs

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Question;1.The cash disbursements journal also is called the;a);Voucher register.;b);Purchases journal.;c);Check register.;d);Accounts payable subsidiary ledger.;In assessing control risk for purchases, an auditor;vouches a sample of entries in the voucher register to the supporting;documents. Which assertion would;this test of controls most likely support?;a);Completeness.;b);Existence or occurrence.;c);Valuation or allocation.;d);Rights and obligations.;An important purpose of the auditor?s review of the;client?s procurement system should be to determine the effectiveness of;the procedures to protect against;a);Improper materials handling.;b);Unauthorized persons issuing;purchase orders.;c);Mispostings of purchase returns.;d);Excessive shrinkage or spoilage.;A client erroneously recorded a large purchase;twice. Which of the following;internal control measures would be most likely to detect this error in a;timely and efficient manner?;a);Footing the purchases journal.;b);Reconciling vendors? monthly;statements with subsidiary payable ledger accounts.;c);Tracing totals from the purchases journal to the ledger accounts.;d);Sending written quarterly confirmation to all vendors.;Which of the following departments most likely would;approve changes in pay rates and deductions from employee salaries?;a);Personnel.;b);Treasurer.;c);Controller.;d);Payroll.;Possible misstatements related to the validity internal;control objective for payroll transactions include all of the following;except;a);Payments to fictitious employees.;b);Payments to terminated employees.;c);Payments to valid employees who;have not worked.;d);Payment to valid employees at a rate in excess of the authorized amount.;When examining payroll transactions, an auditor is;primarily concerned with the possibility of;a);Posting of gross payroll amounts to incorrect salary expense accounts.;b);Overpayments and unauthorized;payments.;c);Misfootings of employee time records.;d);Excess withholding of amounts required to be withheld.;An auditor vouched data for a sample of employees in a;payroll register to approved clock card data to provide assurance that;a);Payments to employees are computed at authorized rates.;b);Internal controls relating to unclaimed payroll checks are operating;effectively.;c);Segregation of duties exist between the preparation and distribution of;the payroll.;d);Employees work the number of;hours for which they are paid.;Which of the following circumstances most likely would;cause an auditor to suspect an employee payroll fraud scheme?;a);Payrolls checks are disbursed be the same employee each payday.;b);There are significant;unexplained variances between standard and actual labor cost.;c);Employee time cards are approved by individual departmental supervisors.;d);A separate payroll bank account is maintained on an imprest basis.;If preparation of a periodic scrap report is essential;in order to maintain adequate control over the manufacturing process, the;data for this report should be accumulated in the;a);Production Department.;b);Accounting Department.;c);Warehousing Department.;d);Budget Department.;Which of the following departments typically approves;purchase requisitions?;a);Raw materials stores.;b);Cost accounting.;c);IT.;d);Inventory management.;Which of the following best describes the validity audit;objectives for inventory?;a);Purchase requisitions initiated by authorized personnel.;b);Recorded inventory actually exists.;c);Inventory properly accumulated from journals and ledgers.;d);All inventory is recorded.;Auditors are most likely to ensure that no production;activity is scheduled prior to;a);Determining standard costs.;b);Observing physical inventory.;c);Completing the book to physical adjustment.;d);Determining the amount of;consigned inventory.;Which of the following is least likely to be a possible;cause of book-to-physical differences in inventory quantities?;a) Inventory cutoff errors.;b);Misapplication of LIFO.;c);Unreported scrap or spoilage.;d);Theft.;The auditor is most likely t seek information from the;plant manager with respect to the;a);Adequacy of the provision for uncollectible accounts.;b);Appropriateness of physical;inventory observation procedures.;c);Existence of obsolete machinery.;d);Deferral or procurement of certain necessary insurance coverage.;In the examination of property, plant, and equipment;the auditor tries to determine all of the following except the;a);Adequacy of internal controls.;b);Extent of property abandoned;during the year.;c);Adequacy of replacement funds.;d);Reasonableness of the depreciation.;The auditor may conclude that depreciation charges are;insufficient by noting;a);Insured values greatly in excess of book values.;b);Large amounts of fully depreciated assts.;c);Continuous trade-in s of relatively new assets.;d);Excessive recurring losses on;assets retired.;Which of the following accounts should be reviewed by;the auditor to gain reasonable assurance that additions to property;plant, and equipment are not;understated?;a);Depreciation expense.;b);Accounts payable.;c);Cash.;d);Repairs and maintenance.;In auditing intangible assets, an auditor most likely;would review or recomputed amortization and determine whether the;amortization period is reasonable in support of management?s financial;statement assertion of;a) Valuation or allocation.;b);Existence or occurrence.;c);Completeness.;d);Rights and obligations.;Several years ago, Conway, Inc. secured a conventional;real estate mortgage loan. Which of;the following audit procedures would be least likely to be performed by an auditor examining the;mortgage balance?;a);Examine the current year?s;canceled checks.;b);Review the mortgage amortization schedule.;c);Inspect public records of lien balances.;d);Re-compute mortgage interest expense.;An internal control that ensures that long-term;borrowing is properly initiated by appropriate individuals addresses the;internal control objective of;a);Validity.;b);Authorization.;c);Completeness.;d);Ownership.;The primary reason for preparing a reconciliation;between interest-bearing obligations outstanding during the year and;interest expense presented in the financial statements is to;a);Evaluate internal control over securities.;b);Determine the validity of prepaid interest expense.;c);Ascertain the reasonableness of imputed interest.;d);Detect unrecorded liabilities.;Valuation is most likely an issue for long-term debt if;a);Bonds are sold on the open market.;b);Bonds are issued at a discount;or premium.;c);The loans are from banks.;d);The company has many short-term leases.;A substantive strategy is typically used to audit stockholders?;equity because;a);The number of transactions is small.;b);Controls over stockholders?;equity transactions typically are weak.;c);A reliance strategy is most efficient.;d);A substantive strategy likely was used in prior years.;The least;crucial element of internal control over cash is;a);Separation of cash record-keeping from custody of cash.;b);Preparation of the monthly bank reconciliation.;c);Batch processing of checks.;d);Separation of cash receipts from cash disbursements.;Which of the following is one of the better auditing;techniques that might be used by an auditor to detect kiting between;inter-company banks?;a);Review the composition of authenticated deposit slips.;b);Review subsequent bank statements received directly from the banks.;c);Prepare a schedule of bank;transfers.;d);Prepare year-end bank reconciliations.;An unrecorded check issued during the last week of the;year would most likely be discovered by the auditor when the;a);Check register for the last month is reviewed.;b);Cutoff bank statement is reconciled.;c);Bank confirmation is reviewed.;d);Search for unrecorded liabilities is preformed.;Which of the following audit procedures is the most;appropriate when internal control over cash is weak or when a client;requests an investigation of cash transactions?;a);Proof of cash.;b);Bank reconciliation.;c);Cash confirmation.;d);Evaluate ratio of cash to current liabilities.;Which of the following internal controls most likely;would reduce the risk of diversion of customer receipts by an entity?s;employees?;a);A bank lockbox system.;b);Pre-numbered remittance advices.;c);Monthly bank reconciliation.;d);Daily deposit of cash receipts.;When auditing contingent liabilities, which of the following;procedures would be least;effective?;a);Reading the minutes of the board of directors.;b);Reviewing the bank confirmation;letter.;c);Examining customer confirmation replies.;d);Examining invoices for professional services.;The auditor?s primary means of obtaining corroboration;of management?s information concerning litigation is a;a);Letter of audit inquiry to the client?s lawyer.;b);Letter of corroboration from the auditor?s lawyer upon review of the;legal documentation.;c);Confirmation of claims and assessments from the other parties to the;litigation.;d);Confirmation of claims and;assessments from an officer of the court presiding over the litigation.;An auditor will ordinarily examine invoices from lawyers;primarily in order to;a);Substantiate accruals.;b);Assess the legal ramifications;of litigation in progress.;c);Estimate the dollar amount of contingent liabilities.;d);Identify possible unasserted litigation, claims, and assessments.;If a lawyer refuses to furnish corroborating information;regarding litigation, claims, and assessments, the auditor should;a);Honor the confidentiality of the client-lawyer relationship.;b);Consider the refusal to be tantamount to a scope limitation.;c);Seek to obtain the corroborating information from management.;d);Disclose this fact in a footnote;to the financial statements.;Which of the following situations would require;adjustment to or disclosure in the financial statements?;a);a merger discussion.;b);The application for a patent on a new production process.;c);Discussions with a customer that could lead to a 40 percent increase in;the client?s sales.;d);The bankruptcy of a customer who;regularly purchased 30 of the company?s output.;Which of the;following parties is responsible for the fairness of the representations;made in financial statements?;a);Client?s management.;b);Independent auditor.;c);Audit committee.;d);AICPA.;Which of the following situations will not result in;modification of the auditor?s report because of a scope limitation?;a);Restriction imposed by the;client.;b);Reliance placed on the report of another auditor.;c);Inability to obtain sufficient competent evidential matter.;d);Inadequacy in the accounting records.;Management believes, and the auditor is satisfied, that;a material loss probably will occur when pending litigation is;resolved. Management is unable to;make a reasonable estimate of the amount or range of the potential loss;but fully discloses the situation in the notes to the financial;statements. If management does not;make an accrual in the financial statements, the auditor should express;a/an;a);Qualified opinion due to a scope limitation.;b);Qualified opinion due to a departure from GAAP.;c);Unqualified opinion with an;explanatory paragraph.;d);Unqualified opinion in a standard auditor?s report.;When a question arises about an entity?s continued;existence, the auditor should consider factors tending to mitigate the;significance of contrary information concerning the entity?s alternative;means for maintaining adequate cash flow.;An example of such a factor is the;a);Possibility of purchasing;certain assets rather than leasing them.;b);Capability of extending the due dates of existing loans.;c);Feasibility of operating at increased levels of production.;d);Marketability of property and equipment that management plans to keep.;An auditor issued an audit report that was dual dated;for a subsequent event occurring after the completion of fieldwork but;before issuance of the auditor?s report. The auditor?s responsibility for;events occurring subsequent to the completion of fieldwork was;a);Limited to include only events occurring up to the date of the last subsequent;event referenced.;b);Limited to the specific event referenced.;c);Extended to subsequent events occurring through the date of issuance of;the report.;d);Extended to include all events;occurring since the completion f fieldwork.;With respect to ethics, the theory of rights;a);Suggests that auditors should always verify ownership of a client?s;material tangible assets.;b);Is primarily concerned with;equity and impartiality.;c);Suggests that an individual?s actions should not violate the liberties;of any individual.;d);Recognizes that decisions involve trade-offs between costs and benefits.;In which of the following instances would the;independence of the CPA not be considered to be impaired? The CPA has been retained as the auditor;f a brokerage firm;a);Which owes the CPA audit fees for more than one year.;b);In which the CPA has a large active margin account.;c);In which the CPA?s brother is the controller.;d);Which owes the CPA audit fees;for current year services and has just filed a petition for bankruptcy.;A CPA, while performing an audit, strives to achieve;independence in appearance in order to;a);Reduce risk and liability.;b);Comply with the generally accepted standards of fieldwork.;c);Become independent in face.;d);Maintain public confidence in;the profession.;Which of the following is not a principle of;professional conduct as defined by the Code of Professional Conduct?;a);Integrity.;b);Due care.;c);Reporting.;d);Scope and nature of services.;According to the profession?s standards, which of the;following is not required of a CPA performing a consulting engagement?;a);Complying with Statements on Standards for Consulting Services.;b);Obtaining an understanding of the nature, scope, and limitations of the;engagement.;c);Supervising staff who are;assigned to the engagement.;d);Maintaining independence from the client.;According to the ethical standards of the profession;which of the following acts is generally prohibited?;a);Issuing a modified report explaining a failure to follow a governmental;regulatory agency?s standards when conducting an attest service for a client.;b);Revealing confidential client information during a quality review of a;professional practice by a team from the state CPA society.;c);Accepting a contingent fee for representing a client in an examination;of the client?s federal tax return by an IRS agent.;d);Retaining client records after;an engagement is terminated prior to completion and the client has demanded;their return.;An auditor, using the same degree of due care as other;members of the profession, fails to create an adequate allowance for bad;debts. This occurrence is an;example of;a);Negligence.;b);Fraud.;c);An error in judgment.;d);Constructive negligence.;Which of the following is the best statement of the;general standard of performance owed by an accountant in his or her;professional work?;a);To do the job correctly and discover all irregularities.;b);To follow generally accepted accounting principles (GAAP) and generally;accepted auditing standards (GAAS).;c);To act as a professional and not;commit fraud.;d);To exercise the skill and care of the ordinarily prudent accountant in;the same circumstances.;Which of the following is not within the class of;foreseen users of an accountant?s work product?;a);A shareholder of the client.;b) A lender bank when the accountant knows only that the client will use the;financial statements to obtain a loan from an unspecified source.;c);A bank when the accountant knows the client will rely on the financial;statements as the basis for a loan from the bank.;d);An investor if the accountant knows that the client is seeking capital;from a select group of investors.;Which of the following statements is correct with;respect to ownership, possession, or access to a CPA firm?s audit work-papers?;a);Work-papers are subject to the privileged communication rule, which, in;most jurisdictions, prevents any third-party access to the work-papers.;b);Work-papers may never be obtained;by a third-party unless the client consents.;c);Work-papers are the client?s exclusive property.;d);Work-papers are not transferable;to a purchaser of a CPA practice unless the client consents.;At which point in an ordinary sales transaction of a;wholesaling business would a lack of specific authorization be of least;concern to the auditor?;a);Granting of credit.;b);Shipment f goods.;c);Determination of discounts.;d);Selling of goods for cash

 

Paper#45505 | Written in 18-Jul-2015

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