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Flashcards in Review Mod 1-Appendix Deck (20):
0

If sales are 100,000 and receivables are 20,000 in 20X2. What happens to accounts receivable turnover for 20X2, if $5,000 are instead included in 20X3.

100/20 = 5
95/15 = 6.33, accounts receivable turnover increased

1

The tolerable rate of deviations for a test of a control is generally...

Higher than the expected rate of errors in the related accounting
Records

2

Deviations from specific internal control procedures at a given rate ordinarily...

Result in misstatements at a lower rate

3

What is the relationship between the expected population deviation rate and the sample size?

Direct relationship

4

In estimation sampling for variables, which of the following must be known in order to estimate the appropriate sample size required to meet the auditor's needs in a given situation?

Acceptable level of risk

5

Estimated rate of misstatements in the population. Why is this not needed to estimate the appropriate sample size in variables sampling?

"Rate" only applies to attributes sampling

6

In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if...

The population has highly variable recorded amounts

7

Calculate the allowance for sampling risk

Allowance for sampling risk = basic precision + incremental allowance

8

What 2 general kinds of sampling can you use to test controls?

1 statistical sampling

2 nonstatistical sampling

9

How would you use the statistical sampling table to determine that the upper precision limit was 14%? 2 things you would use

1 number of deviations

2 sample size

10

If a CPA has been engaged to review and management refuses to sign a representation letter, that is...

2) what should be the CPA's response?

A scope limitation

2) not issue a review report

11

Customers checks are received for less than the customers' full account balances but customers' full account balances are credited.

What internal control should be put in place?

Total amounts posted to accounts receivable ledger from remittance
Advices are compared with validated bank deposit slip

12

Different customer accounts are each credited for the same cash receipt.

Total amounts posted to accounts receivable ledger from remittance
Advices are compared with validated bank deposit slip

13

Comparing amounts posted to accounts receivable ledger with the validated bank deposit will detect...

Improper postings to accounts receivable since any differences
In amounts will be investigated

14

Crediting more than one account for a cash receipt will be detected when...

The total amounts posted to the accounts receivable ledger is
Compared with the validated bank deposit slip

15

An accounts payable clerk misplaces year end invoices for raw materials that were received on December 21, year 2 and therefore liabilities were not recorded.

What audit procedure should be performed?

Investigate unmatched receiving reports dated prior to January 1,
year 3

16

An examination of disbursements after year end will reveal situations in which...

Payables that should have been recorded prior to year end
We're not recorded until subsequent year end

17

The company tends to be careless in recording payables in the correct period.

What audit procedure should be performed?

From the January, year 3, cash disbursements journal, select
payments and match to corresponding invoices

18

Identifying open purchase orders and vendors' invoices will reveal a situation in which one would expect...

A receiving report to have been prepared

19

The company's receiving department misplaces receiving reports for purchases of raw materials at year end and therefor liabilities were not recorded.

What audit procedure should be performed?

Identify open purchase orders and vendors' invoices at
December 31, year 2 and investigate their disposition