Chapter 13 & 14 MCQ Flashcards
Which one of the following analytical procedures would be most helpful in alerting the auditor to the possibility of obsolete inventory?
Comparing inventory turnover with previous years
Receipt of ordered materials by the receiving department will generate the completion of a form called the _______.
Receiving report
The test of details of balance procedure that requires the auditor to perform tests of lower-of-cost-or-market, selling price, and obsolescence is an attempt to satisfy the objective of _______.
Valuation
The purpose of the audit procedure to “examine underlying documentation for subsequent cash disbursements” is to _______.
Uncover payments made in a subsequent accounting period that represent liabilities at the balance sheet date
An important control in the accounts payable and information systems departments is to require that those personnel who record acquisitions do not have access to _______.
Cash, marketable securities, and other assets
The auditor has determined that the inventory procedures are highly automated with limited use of a paper or physical trail. Rather than having people count inventory (since all inventory has RFID tags attached), inventory is being read using the wireless mesh network. To provide assurance with respect to ending inventory, the auditor should _______.
test the quality of the controls over the programs in use and over tagging inventory items
A normal audit procedure is to analyze the current year’s repairs and maintenance accounts to provide evidence in support of the audit proposition that _______.
Expenditures for capital assets have been capitalized
XYZ Company uses standard costs for allocating costs to work-in-process and finished goods inventory. What internal control is required with respect to these costs to ensure proper valuation of inventory?
Procedures must be designed to keep the standards updated for changes in production processes and costs.
ZyCo has recently converted to a new online accounts payable system. To test that only authorized vendors have been converted to the vendor master file (occurrence), the auditor would _______.
on a test basis, agree vendor file details for each vendor from the NEW (online) system to the old (batch) system
The auditor evaluates the internal transfer of assets and related costs during the _______.
Inventory and distribution cycle
The test of details of balances procedure to “inspect the accounts payable trial balance and master file for related parties, notes, or other interest-bearing liabilities” satisfies the objective of _______.
Classification
The test of details of balance procedure that requires the auditor to review contracts with suppliers and customers and inquire of management for the possibility of the inclusion of consigned or other non-owned inventory is an attempt to satisfy the objective of _______.
Rights & obligations
The point at which most companies first recognize the acquisition and related liability on their records is when the _______.
receiving report is completed
The bias in recording inventory would be toward ____________.
Overstatement
The tests of details of balances procedure for manufacturing equipment that requires the auditor to examine vendors’ invoices of closely related accounts (such as repairs and maintenance) to uncover items that should be manufacturing equipment would satisfy the audit objective of _______.
Classification
