1. The auditor spends significant time auditing cash discounts and sales returns because

A. management needs to authorize these transactions.

B. these transactions reduce income.

C. the materiality is higher.

D. the risk of transactions being recorded to conceal stolen cash is higher.

2. Which of the following are assertions related to the audit of transactions? Select all that apply.

A. rights and obligations

B. existence

C. completeness

D. cut-off

E. occurrence

3. In order to satisfy the classification assertion, the auditor

A. reviews the client chart of accounts.

B. tests all journal entries.

C. tests a sample of journal entries for sales, cash receipts, and sales adjustment transactions.

D. identifies differences between the current and prior year chart of accounts.

4.Which of the following statements is NOT accurate as it relates to tests of operating effectiveness?

A. Involves using test data to determine if actual results are different than expected.

B. Similar tests to those performed for sales transactions.

C. Always performed on all controls.

D. Includes inquiry and inspection of documents.

5. Alternative procedures for no responses on confirmations include

A. examining subsequent sales.

B. vouching sales invoices.

C. examining subsequent cash collections.

D. discussions with management

6. Controls specific to the recording of cash payments include the following?

A. An independent check by the accounting supervisor of the agreement of the amounts authorized and posted to accounts payable with the cheque summary received from the general accounting department.

B. An independent check of the agreement of the total of cheques issued with a batch total of the vouchers processed for payment.

C. Limits on access to blank cheques.

D. All of the above.

7. Which of these is not a procedure for identifying unrecorded liabilities?

A. Analytical procedures for expense and liability balances.

B. Examination of the subsequent period’s purchase and payment transactions.

C. Confirmation of accounts payable.

D. Examination of contractual commitments.

8. Which of the following statements is true regarding the cut-off of purchases?

A. Extensive analytical procedures will be performed.

B. Acceptable detection risk is likely to be high.

C. It impacts the assertion of completeness.

D. Most entities have effective controls to ensure proper cut-off.

9. Which of the following statements is true regarding the cut-off of purchases?

A. Extensive analytical procedures will be performed.

B. Acceptable detection risk is likely to be high.

C. It impacts the assertion of completeness.

D. Most entities have effective controls to ensure proper cut-off.

10. When an auditor examines the numerical continuity of purchase orders and receiving reports and traces them to suppliers’ invoices and accounts payable, they are performing a(n)

A. test of details of transactions to verify completeness.

B. test of details of balances to verify completeness.

C. analytical procedure.

D. test of details of transactions to verify occurrence.

11. To satisfy the completeness and cut-off assertions, the auditor identifies controls that

A. prevent transactions from being recorded on the last day of the financial year.

B. pre-number shipping documents and record the last shipping documents for the year.

C. train employees to pre-number documents.

D. require gatekeepers to record shipping document details.

12. In witnessing a payroll distribution, the auditor would not be expected to observe that

A. there is proper control and disposal of unclaimed cheques.

B. the segregation of duties exists between the preparation and payment of payroll.

C. the correct payroll entries are made in the firm’s ledger and journal.

D. each employee receives only one cheque or pay envelope

13. The auditor designs the audit program based on the original assessment of control risk and

A. follows the program regardless of the results of control testing.

B. adjusts the program depending on the results of control testing.

C. reassesses control risk and redesigns substantive procedures after testing.

D. reassesses control risk after testing.

Answer rating: 100% (QA)

1 Answer D the risk of transaction being recorded to conceal stolen cash is higher Explanation Sales return and cash discount is a contra revenue account It is recorded in contra revenue account in or... View the full answer