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Audit > Test 2 > Flashcards

Test 2 Flashcards

1
Q

Fraud Schemes uncovered by the SEC and PCAOB

A
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2
Q

(True / False) Current U.S. auditing standards do not require the confirmation of accounts receivable if the accounts receivable balance is not material.

A

True

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3
Q

(True / False) Auditors usually perform relatively limited substantive analytical procedures for cash accounts but instead focus on substantive test of details.

A

True

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4
Q

(True / False) The auditor may discover evidence of lapping by preparing an interbank transfer schedule.

A

False

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5
Q

(Management Assertion) Review for significant transactions with related parties.

A

Presentation & Disclosure

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6
Q

(Management Assertion) Trace a sample of shipping documents to the sales journal.

A

Completeness

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7
Q

(Management Assertion) Review the client’s process for estimating uncollectible accounts receivable.

A

Valuation / Allocation

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8
Q

(Management Assertion) Verify if any tangible assets have been pledged as collateral.

A

Rights & Obligations

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9
Q

(Management Assertion) Observe / test the client’s annual physical inventory of finished goods.

A

Existence / Occurrence

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10
Q

(Management Assertion) Send confirmations to customers for a sample of accounts receivable.

A

Existence / Occurrence

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11
Q

(Management Assertion) Determine the client’s intent to hold or sell marketable securities.

A

Presentation & Disclosure

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12
Q

(Management Assertion) Examine a sample of payments to vendors made after year-end.

A

Completeness

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13
Q

(Management Assertion) ​Complete analytical review to identify any slow-moving inventory items.

A

Valuation / Allocation

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14
Q

(Management Assertion) Reperform the client’s reconciliations of significant bank accounts.

A

Valuation / Allocation

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15
Q

What is the technique used to cover up embezzlement of cash? Employee steals a payment from one customer, and covers it up by using payments from another customer to disguise the theft.

A

Lapping

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16
Q

Type of fraud that occurs when an employee makes a sale but does not record it, and steals the cash.

A

Skimming

17
Q

Fraudulent cash scheme to overstate cash assets at year-end by showing the same cash in two different bank accounts.

A

Kiting

18
Q

Associated with the extraction of natural resources

A

Depletion expense

19
Q

The process of expensing acquisition cost minus the residual value of intangible assets over their estimated useful economic life

A

Amortization expense

20
Q

Management’s recognition that a significant portion of fixed assets is no longer as productive as had originally been expected

A

Asset impairment

21
Q

A statement for a period of time after year-end determined by client and auditor (usually two weeks)

A

Bank Cutoff Statements

22
Q

A standard confirmation sent to all banks with which the client had business during the year. Used to obtain information about year-end cash balance and additional information about loans outstanding.

A

Bank Confirmation

23
Q

Audit document listing all transfers between client bank accounts. Starts shortly before year-end and continues for a short period after year-end. The purpose is to assure that cash in transit is not recorded twice.

A

Bank transfer schedule

24
Q

Inventory control that physical counts the inventory

A

Periodic inventory system

25
Q

Inventory control that counts the inventory cycle

A

Perpetual inventory system

26
Q

3 Items of the three-way match

A
  1. Vendor Invoice
  2. Purchase Order
  3. Receiving Report
27
Q

Physical Inventory Procedures

A
28
Q

Physical Inventory Procedures

A
29
Q

Physical Inventory Procedures

A
30
Q

Physical Inventory Procedures

A
31
Q

Physical Inventory Procedures

A
32
Q

Audit Procedures for Inventory Obsolescence

A
33
Q

Audit Procedures for Inventory Obsolescence

A
34
Q

Search for Unrecorded Liabilities

A
35
Q
A

Audit (3 decks)

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