Audit 4 Flashcards
MCQs m1: If an auditor does not receive a/r confirmation what is he least like to do
Increase the assessed leve of detection risk for the valuation assertion. this deals with existence and nt valuation assertion besed on auditi risk = i/r *c/ *dr
Which control would be most effective in offseting sale personnel from maximum sales volume at the expense of high bad debt write off
dont’ have these employee involved in credit granting functions.
which procedure wold not be an i/c designed to reduce the risk of errors in billing
reconciling sales invoces to a/r subledager not an effectie i/c on billing
In order to decide if i/c is working properly in minimizing the failure to prepare sales invoices, an audit would select sample transactions from the population of
shipping document files becasue they provide evidence that a sale has been secured and if invoices exist.
confirmation of customers a/r rarely provides reliability evidence of completeness assertions because
Because customers may not be inclined to report understatements error in their account.
What is the best wasy to find out if client is frauduently reporting sales
trace sales invoces back to shipping documents to see if related shipping document exist.
Is remittance, sales invoice and credit memos part of flow chart are input document and part of applications
yes
Is GAAS followed if auditor recieve faxed or emailed confirmation without following and confirming with client’s customer
No
If audit have not received confirmation replies, will one option be to have client contact customer abut confirming
yes. when they have sent out multiple reuest.
what would be used in a sudit data analytic procedure n performing substance procedures testing on the occurance of sales transactions and the accuracy of a/r
sales order quantity customer acct id. invoice amount would not PO numbers more likely done in expenditure cycle
if all confirmation were confirmed at interim date and looked reasonable. what additional procedure is needed to be performed at year-end
review supporting documetation for large balances after interim date and evaluation signifcant changes in balances at year-end
negative confimation are used when
when the combined assess level of i/r and c/r are lown., a large number of small bal in involved and audtor beleves the recipient recieving confirmation will reply.
which of the procedures would be used to test the existance assertion of a/r
would be sendin confirmation to customers to confirm the have open invoces. where as completion wold be. tracing invoces and transactions determining if shippment went out at y-e would be cutoff
when is it best to use blank confirmation
when recipient can fill in the blance with there information without doing further investigation.
tracing copies of prepared sales invoices to copies of corresspondence shipping document provide evidence that
sales billed to customers were actual not. shipment to customers were properly biiled
negative conf and less effective than positive conf becass
due to the small balances of negative confirmation, it is no gaurantee customers willl resond due to lack of willingness
two assertion which confirmation for a/r evidence would be
Rights anf obligation of a/r and existence of a/r. not completeness would be looking if recorded and valuation would be how is it worth.
what procedure would auditor perfom if did not recieve second request confirmation
inspect shipping records documentation.sold to debtor No increae assess level of detection.
If auditor found fictitious sales to customers what is his test
send out confirmatio to all customers
what is a best control to ensure sales are properly authorized when assessing risk for sales
Sales orders are sent out to credit department for approval.
would a audit look at prior year info that was resolved in last year to set procedures
no.
If the objective of the auditor is to test of details of possible understatement of sales he would
test shipping douments to sales document to make sure order was shipped.
Should the same person who received Cash receipts endorse checks
no.
If an auditor is performing a test of details of sales transactions and examine a sample of sales invoices to determine if they are recorded in the proper revenue accounts he is performng a
test of classificaton into proper accounts
Tracing shipping documents to sales invoices and then to sales journal and account receivable ledger would be a completeness assertion.
Is receiving reports a least likely safegaurd of cash
yes.
are negative confirmation used when RMM is low
yes
MCQs a4; m2: when an auditor is doing test of control to find evidence of a/p misstated he would
examine vendor statements for amounts not reported as purchases shows if a/p is understated it is a completion assertion via tracing statements to a/p aged schedule
is accounting for unused prenumber po and receiving reports an effective i/c in voucher department
no. voucher match po, recieving and invoices for payment process. unused po are in the purchasing
What information is the voucher dept need to pay invoice
po. and recieving report
auditor determining ap is completed would verify if merchandise has been received what would they test
the receiving report. then they would know merch is recevied and ready to be paid in ap. Remember po is done via purchasing dept. purch not necessarily merch is at co.
the same person can match to invoices and recieving report can also
Recompute the calculation of vendor invoices to provided authorization for payment.
mailing the checks and remittance would be controlled by the check signer
yes. this is the treasury dept.
If good are sent back via shipping department then purchasing dept send accounting ap dept
a Debit memo to reduce ap.
authority to accept goods should be done through receiving dept with authorized po.
yes.
what is the procedures for an auditor to perform to search for recorded ap
compare cash payments after the b/s date with the ap tb. this is test to match a dr ap with a cr cash. remember 3 step match has already happen.
would the purchasing dept also handle the negotiation of vendor payment terms
yes. The requisition of goods would come from the raw material or stores dept. who is requesting the good ans contact purchasing.
A cfo who waived approvals on checks would be a inadeaquate i/c
yes.
when confirming the proper evidence about completeness audit would use
vendors that have done business with client.
confirmation are an unecessary step by auditor if
there are other reliable external evidence available to support the business.
how would a invoice not be paid twice
when check signer reviews and cancel voucher packet.
if ap clerk post vendor invoices and mails check is this i/c weakness
yes. Think ARC is separated. ap clerk is posting and have custody of checks.
to provide assurance that each voucher is submitted and is paid only once. auditor would test to determine
a stamped paid by check signer is on each voucher.
When auditing a/p. audit, auditor is focus on management assertion of
Completness. a/p auditor is looking for understatement
Where as existence. auditor looking for overstatement of assets.
Effective i/c for ap is to
establish agreement with vendor invoice, recieving report and po. the 3 match
Tracing po to recieving , purchase journal and cash disbursement journal is a substantive procedure used in
Completion to determine that purchases were properly ordered.
remember this procedure is a purch po procedure and not a cash disbursement procedures where auditor would test cash disbursements.
what would be a good audit procedure in ap for existence and occurance
vouch selecting amounts from ap listing to vouch packaging. the auditor at the selcted vouchers- from the ap listing = existance and tieing to vouch package = occurance
when would an auditor use ap confirmations
when vendors statements are not available. auditors send our positive or blank ap confirmation confirmation would not be the primary test if statements are available. auditor would not select large balances for confirmation this would not be consider a test of understatement but they would use small to zero balances for confirmations
would the treasury dept returning the vouch package back to ap for cancelling a weak i/c
yes.
an auditor test confirm and owed by client is a test procedure on
confirm is a test of completion and existence but normally completion owed base on 3 match would be rights ( to goods) and obligation (to pay)
is sending out ap confirmation a least likely ap audit test of procedures
yes. because if there are better options auditor will select them.
if auditor is testing for dates and periods it is testing for cut offs
yes.
M3 mcq; what i/c would deter lapping
segregation of duties between cash receipt and a/r posting general staff. lapping occurs when cash receipts are stolen and posted to another account such as ar with applying customers remittance. and post another customer cash to that a/r
if a bookkeeper has access to check stock and signatrue plate would this be a high risk and high i.c for embazzelement
yes.
evidence of y-e cash balance is documented via
bank recs.
what is the best way to prevent lapping
compare date checks are deposited per bank statement to dates check are credited to a/r or sales.
what is a limitation of bank confirmation
that the bank employee signing the does not know all accounts client has with the bank.
if co. has a IA would he be the first person to review the bank statement for i/c purposes
yes.
to detect if kitting is happen an auditor would
trace bank transfer from the last part of audit period to the subsequent period .
kiting is a form of check fraud, involving taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit.
auditing a clients y-e cash balances. auditor uses standard bank confirmation and bank recs. these substantive procedures test the following assertions
Completes and valuation and allowances.
cutoff is not uses in testing ending cash balances.
A4-M4 MCQs; What procedure would an auditor perform to obtain assurance that slow moving and obsolete items in inventory are id.
Examine an analysis of inventory turnover it would give a assurance that inventory is properly value because it test how fast inventory is being sold via COGS and what items should be written down because of obsolete or damage.
In addition, inventory turnover analysis gives evidence of management assertion of inventory valuation and accuracy.
An auditor test count that are traced to clients inventory listing is a test of what f/s assertion
The test of completion test the test count and verify with the inventory listing.
a client with perpetual inventory records both quantity and dollar assessed at a control risk of high, an auditor would would probably
Do test and schedule count at the end of the year or b/s date due to high control risk and not at interim date low control risk. So if client is doing inventory counts multiple times a year and still high risk, this is good conttrol but in effective.
would periodical inventory counts that are used to adjust the perpetual inventory record would be a internal control method used to maintain accurate inventory records
Yes.
Would testing the computation of standard overhead rates be the least likely test performed to determine slow moving and obsolete inventory
yes. because overhead would be used more effectively in test of valuation and accuracy of inventory and indirectly why slow moving.
what management assertion is an auditor most likely testing if the audit objective state all inventory on hand is reflected in the ending inventory balance
The is a test of completion. test of count to inventory listing in inventory report
what procedures would be most appropriate for testing the completeness of assertion as it applies to inventory
So if completion is the test of test count back to listing records.
Test count and report listing must of closed period. this done through cut off procdures in shipping and recieving.. while accounting for goods in transit.
what is the fundamental for completion and existment assertion to f/s
Completion= test count to inventory listing . or prenumber tags to the inventory report sheet.
Existence = inventory listing to test count. Existence assertion are for assets and risk of overstatement and not testing for liab. i.e ap
what statement matches the f/s assertion with the potential misstatement and relevant audit procedures
auditor may physically examine a sample of inventory count in order to test existence of inventory = asset to ensure the the inventory is not overstated.
existence = assets = overstated
complete = understatement
rights and obligations is tested on ownership but would not be tested on inventory due to consignment
if an audit is unable to get acesss to phyical inventory but alternative methods to conduct audit procedures can he use them instead of withdraw from engagement
yes. if alternatie method are there to be used.
only with if no alternative.
of the two inquiries, which one would be not be considered an f/s assertion.
inquiry of consigned inventory
inquire of damaged and obsolete good
inquire of consigned goods is not a valuation assertion. inqiure of damage and obsolete good is because inventory will be written down.
A4 M5 MCQs; if an auditor is assessing management rationale for selecting a model to measure the fv of debt securities. During the current year, the active trading mkt for debt security was introduced would the auditor validate the model based on prior years
No. becaue model was introduced in the current year. no model in the past or prior year/
if auditor are given securites for audit to record and count the securities. what information should auditor included in this worksheet
in addtion to security count, the auditor should have an aknowledgement by client that securites were returned back to client. to eliminate employee missappropriation and blaming auditors for not returning.
What information should an auditor use to recompute dividend income and confirm it is reasonable to management assertions.
he should get an electronic copy of clients dividends given record confirmation that shows and verify dividend rates
