Chapter 15 & 16 MCQ

Question 1

A wage rate form that also documents a change in job responsibility for one of the warehouse employees should be approved by​ _______.

Answer 1

the warehouse supervisor and human resources

Question 2

Which of the following controls helps to prevent error with set up of access​ rights, and also helps to prevent unauthorized changes to the access​ rights?

Answer 2

independent comparison to check that they have been set up properly

Question 3

The auditor has examined the financial​ statements, particularly the cash flow​ statement, and the notes to the financial statements to determine that all relevant information is presented clearly. Which audit assertion is associated with this audit​ test?

Answer 3

understandability

Question 4

Which of the following misstatements could be detected as part of the tests of a bank​ reconciliation?

Answer 4

deposits recorded as cash receipts at the end of​ year, but included as outstanding deposits​ (deposits in​ transit)

Question 5

After testing the bank reconciliation and inspecting the cutoff bank statement received from the​ bank, the auditor has determined that there are two outstanding cheques from the list on the bank reconciliation that have still not cleared the bank. The​ auditor’s next step should be to​ _______.

Answer 5

trace the details of the two cheques to the cash disbursements journal

Question 6

Testing to ensure that bank transfers are recorded in both the receiving and disbursing banks helps to detect evidence​ _______.

Answer 6

associated with an attempt to conceal a theft of cash

Question 7

During his examination of a January​ 19, 2019 cutoff bank​ statement, an auditor noticed that the majority of cheques listed as outstanding at December​ 31, 2018 had not cleared the bank. This would indicate​ _______.

Answer 7

that the cash disbursements journal had been held open past December​ 31, 2018

Question 8

Because of the lack of available​ evidence, it is usually difficult for an auditor to discover if an employee records more time on his or her time card than they actually worked. One procedure is to reconcile the total hours​ _______.

Answer 8

paid according to the payroll records with an independent record of the total hours​ worked, such as those maintained by production control

Question 9

In an effort to satisfy the completeness​ objective, the auditor could perform which of the following test of details of balance​ procedures?

Answer 9

Obtain and test a cutoff bank statement.

Question 10

Otto decided to outsource the payroll function to Magna Plus. For the purpose of an assurance​ engagement, Magna is considered a​ _______.

Answer 10

service organization

Question 11

General controls must be evaluated and their impact considered upon the human resources and payroll transaction cycle because​ _______.

Answer 11

automated techniques are normally used to prepare and post payroll transactions

Question 12

Chyna is the auditor for Sage Events. While testing the controls related to the human resources and payroll​ cycle, she examines the sequence of payroll cheques and direct​ deposits, and reconciles all the disbursements in the payroll journal with all the disbursements on the payroll bank statement. What audit objective is she concerned​ about?

Answer 12

completeness

Question 13

Which of the following describes the class of transactions associated with​ payroll?

Answer 13

payment of employee services

Question 14

Which of the following misstatements in the payroll cycle could be detected during the audit of payroll transactions​ (but would not be discovered as part of the audit of the bank​ reconciliation)?

Answer 14

payment to fictitious employees that had been set up by the payroll supervisor

Question 15

An auditor is concerned about the risk of inadequate disclosure or incorrect presentation of financial​ information, including fraudulent financial reporting. Which of the following is an example of this type of​ risk?

Answer 15

A company overstates its cash balance to cover up theft or losses.

Question 16

On the last day of the fiscal​ year, the cash disbursements clerk drew a company cheque on bank A and deposited the cheque in the company account in bank B to cover a previous theft of cash. The disbursement had not been recorded. The auditor will best detect this form of kiting by​ _______.

Answer 16

examining paid cheques returned with the bank statement of the next account period after​ year-end

Question 17

Stella is auditing the electronic receipts and payments. The extent of her audit work conducted on the bank reconciliation will​ _______.

Answer 17

depend on the assessed quality of internal controls

Question 18

An important consideration in evaluating the fairness of the amounts accrued for vacation​ pay, sick​ pay, and other benefits is the​ _______.

Answer 18

consistent accrual of these liabilities relative to those of the preceding year

Question 19

The starting point for the verification of the balance in the general bank account is to obtain _______.

Answer 19

a bank reconciliation from the client

Question 20

Otto decided to outsource the payroll function to Magna Plus. The controller of Otto should still

Answer 20

review the payroll journal and compare the total hours worked with the payroll time records

Question 21

The general cash account is considered significant in almost all audits __________.

Answer 21

Even when the ending balance is immaterial

Question 22

The auditor should review the preparation of at least one of each type of payroll tax form the client is responsible for​ filing, as a part of the​ auditor’s responsibility for​ _______.

Answer 22

understanding internal controls

Question 23

What is an important benefit of independent preparation of bank reconciliations?

Answer 23

the ability to internally verify cash receipts and disbursement transactions

Question 24

Which of the following internal controls would help ensure that existing payroll transactions are recorded?

Answer 24

Independent preparation of payroll bank reconciliation

Question 25

Which of the following internal control tests would help to assess whether payroll transactions were recorded on the correct​ dates?

Answer 25

Compare date on cheque with date the cheque cleared the bank

Question 26

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to​ _______.

Answer 26

Verify reconciling items on the clients bank reconciliation

Question 27

Verification of the legitimacy of​ year-end unpaid bonuses to officers and employees can be accomplished by comparing the recorded accrual to the amount​ _______.

Answer 27

Authorized and recorded in the minutes of the board of directors

Question 28

Which of the following internal controls would assist in ensuring that recorded payroll transactions are for the amount of time actually worked and at the proper pay​ rate, and that withholdings are properly​ calculated?

Answer 28

Comparison of batch totals with computer summary reports

Question 29

In addition to the possibility of​ kiting, inaccurate handling of bank transfers could result in​ _______.

Answer 29

A misclassification between cash and accounts PAYABLE

Question 30

A​ four-column proof of cash can be performed for​ _______.

Answer 30

Any specified time period for which bank statements are available and which the auditor chooses to designate