Auditing A Practical Approach 1st Extended Canadian Edition Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren - Solutions

What is the most significant risk over cash receipts?
What are three controls an entity should enforce to reduce the risk of fraud over sales adjustment transactions?
List four inherent risks over the sales and receivable cycle.
What is a dual-purpose test?
What are three possible tests of controls over the operating effectiveness of cash receipts?
What income statement accounts impact accounts receivable? Why?
If tests of controls subsequently lead to a revised assessment of control risk, how will this impact the audit?
Explain how the assessment of the assertions for credit sales, cash receipts, and sales adjustments affects the assessment of the assertions over accounts receivable.
What is the purpose of vouching recorded accounts receivable to supporting transactions?
What is the purpose of sales cut-off testing?
What are four reasons why accounts receivable confirmations may not provide reliable evidence?
In a credit sales organization, the best place to assign credit approval is in:(a) accounts receivable.(b) the sales department.(c) the cashier area where receipts will eventually be sent.(d) a completely separate department.
Controls over approving credit relate to:(a) the existence or occurrence assertion.(b) the completeness assertion.(c) the accuracy or valuation and allocation assertion.(d) the rights and obligations assertion.
To enhance controls in the credit sales area, the warehouse should be instructed not to release goods until:(a) a faxed copy of the sales requisition is received.(b) a completed sales invoice is received.(c) an approved sales order is received.(d) the shipping department requests the goods.
An example of a programmed application control is:(i) numerical sequence (continuity) of documents is assured.(ii) unreasonable quantities, amounts, and dates are queried.(iii) only orders for goods in the entity's product range are accepted.(a) (i) and (ii) only.(b) (ii) and (iii) only.(c)
In most audits, the auditor is concerned about sales adjustment transactions because of:(a) the sheer number and value of these transactions.(b) the lack of proper authorization for these transactions.(c) the potential use of these transactions to conceal a theft of cash.(d) poor controls
In relation to materiality, the following statement is most accurate:(a) accounts receivable produced by credit sales transactions are material to the balance sheet for all businesses except those with cash sales.(b) cash balances at the end of a particular reporting period will always be
Control risk assessments for accounts receivable assertions depend on the related control risk assessments for the class of transactions. The classes of transactions that do not relate to the accounts receivable balance are:(a) credit sales. (b) cash sales.(c) sales adjustments.(d) cash
When examining sales transactions, the following is not possible using generalized audit software:(a) inquiring about segregation of duties for invoicing customers.(b) selecting a sample of invoices for inspection.(c) re-performing invoice pricing and reporting differences.(d) ensuring the
The following is a cut-off test:(a) selecting a sample of shipping documents around the year end and agreeing to sales invoice to ensure it is included in the appropriate period.(b) selecting a sample of receivables balances outstanding at the year end and agreeing to cash received after the year
Confirming accounts receivable is required whenever:(a) they are material in amount.(b) it is reasonable to presume accounts receivable customers will respond.(c) they are material and it is reasonable to presume accounts receivable customers will respond.(d) a large number of small balances is
What are three key issues auditors face when auditing the purchases and payables cycle?
What risk is of particular concern when auditing payroll?
Define the audit objective of cut-off with respect to purchases and payables.
List the six steps involved in the purchasing and accounts payable cycle.
What is a packing slip?
What are three controls an entity should have in place over the preparation and signing of cheques and electronic funds transfers?
List the six steps involved in the payroll cycle.
What is a payroll register?
What are four controls over paying the payroll?
List four inherent risks over the purchases and payables cycle.
What are three controls that should be in place over payment transactions?
What are three possible tests of controls over the payroll cycle?
What is the biggest risk with payables? Why?
Explain how accounts payable is affected by purchase and payment transactions
Explain how the control risk for completeness is impacted by the control risk assessments for purchases and cash transactions.
What is the purpose of payables cut-off testing?
What are three tests of details for accounts payable?
The confirmation of accounts payable is performed less frequently than the confirmation of receivables. Why?
The auditor selects a sample of items from the purchase order file to determine that the goods and services were received and recorded. This relates to the:(a) existence or occurrence assertion.(b) completeness assertion.(c) accuracy or valuation and allocation assertion.(d) rights and obligations
The receiving department should be instructed not to accept goods without having on file a properly authorized:(a) purchase requisition.(b) invoice.(c) receiving report.(d) purchase order.
The audit objective of “All amounts included in accounts payable relate to amounts due to suppliers at the balance sheet date” relates to the account balances assertion of:(a) completeness.(b) accuracy.(c) valuation and allocation.(d) existence.
Responsibility for determining that unpaid suppliers’invoices are processed for payment on their due dates generally lies with the:(a) chief financial officer’s department.(b) accounting department.(c) purchasing department.(d) internal audit department.
The following is a test of control that would provide audit evidence for the management assertion of occurrence of credit purchases:(a) selecting a sample of purchase invoices and ensuring there is evidence of a check that the discount given agrees with supplier agreement records.(b) selecting a
Controls over the preparation and signing of cheques include all of the following except:(a) authorized personnel in the finance department should be responsible for signing the cheques.(b) the cheque requisition and supporting documents should be cancelled (stamped) when the cheque is signed.(c)
Controls over the recording of cash payments include:(a) an independent check by the accounting supervisor of the agreement of the amounts journalized and posted to accounts payable with the cheque summary received from the accountant.(b) an independent check of the agreement of the total of
Requiring a special supervisor’s password in order to add a new employee to the personnel data master file relates to the:(a) existence or occurrence assertion.(b) completeness assertion.(c) rights and obligations assertion.(d) accuracy or valuation assertion.
A programmed routine in the edit run for payroll that lists all employees who worked more than 50 hours during the week for review is an example of:(a) a reasonableness test.(b) a validity test.(c) a sequence test.(d) a self-checking test.
When test data may be used to test application controls over accepting and recording data for unpaid suppliers’ invoices, the following conditions would not be relevant:(a) numerical characters in an alphanumeric field.(b) missing or invalid supplier numbers.(c) missing due date or payment
What are two key issues auditors face when auditing inventory?
What is completeness with respect to inventory?
Define the audit objective of cut-off with respect to inventory.
What four functions should be segregated with respect to inventory?
Describe the eight procedures applicable to a full inventory count.
List the procedures required to cost manufactured inventory.
Describe some of the inherent risks for inventory.
In verifying the existence (and completeness) assertions, the auditor has the choice of which three audit strategies?
Is it possible for the auditor to rely on tests of controls for inventory?
What three possible strategies are available to the auditor to determine inventory quantity?
What are four controls that should be in place over inventory?
What is the auditor's responsibility with respect to a client’s inventory count?
What items are considered property?
What are the key issues in auditing property, plant, and equipment?
Explain the completeness assertion for property, plant, and equipment.
Why is a control risk assessment rarely performed for property, plant, and equipment?
What audit approach is generally used for property, plant, and equipment? Why?
Explain the purpose of a capital asset sub-ledger.
What substantive procedures are normally performed over property, plant, and equipment additions?
Why does the auditor review the repairs and maintenance account?
What audit tests are normally performed over accumulated depreciation?
An important procedure for the conduct of a physical inventory count is to maintain control over the count records. The following is not a common count system:(a) use of pre-printed inventory count sheets.(b) use of blank inventory tags.(c) use of blank, pre-numbered inventory count
The following audit strategy would be most appropriate when an auditor has assessed that a substantive approach is necessary to determine inventory quantity:(a) inventory quantities determined by physical count at or within a few days of the end of the reporting period.(b) inventory quantities
If preliminary assessment of control risk supports management’s intended reliance on inventory records, the auditor is most likely to design an audit program that:(a) excludes testing the operating effectiveness of those controls.(b) includes testing the operating effectiveness of those
Observation of an inventory count is a required audit procedure whenever:(a) inventories are material.(b) it is practicable to do so.(c) inventories are material and it is practicable to do so.(d) inventories are material and the auditor considers it to be necessary.
During the observation of the inventory count, the auditor has no responsibility to:(a) observe the count by client personnel.(b) make some test counts of inventory quantities.(c) supervise the taking of the inventory count.(d) watch for damaged and obsolete inventory items.
The auditor’s strategy in performing test counts during the observation of the inventory count is to:(a) test all large-dollar items.(b) randomly select all test items.(c) concentrate tests on high-dollar items with random selection of other items.(d) concentrate tests in areas where
The auditor identifies the specific audit objective:“determine that property, plant, and equipment assets are in productive use at the end of the reporting period.” This objective is derived from:(a) the existence or occurrence assertion.(b) the completeness assertion.(c) the presentation
The following statement about inherent risk assessments for property, plant, and equipment is inaccurate:(a) normally low for the presentation and disclosure assertion for plant assets acquired under capital leases.(b) normally low for the existence or occurrence assertion in a merchandising
When expenditures for property, plant, and equipment are processed as routine purchase transactions, the auditor:(a) must include some of these transactions in the tests of controls over the expenditures cycle.(b) may elect to use a combined approach.(c) should use mainly a substantive approach
The following represents an existence test for property, plant, and equipment:(a) select a sample of items of machinery in the factory and agree that they are correctly recorded in the machinery general ledger account.(b) review entries in the repairs and maintenance expense account for items of a
Discuss the different ways of identifying production overheads and methods of apportionment to determine the cost of inventory. Consider the audit implications of each method.
What items are included in cash balances?
What are the key issues when auditing cash and investments?
What are two control procedures over cash?
Explain an imprest petty cash fund.
What are the key issues when auditing cash and investments?
Why are analytical procedures not often useful when auditing the cash balance?
What is kiting?
Describe the purpose of the subsequent bank statement.
What are three auditing procedures for lapping?
Describe substantive procedures relevant for imprest bank accounts.
Describe the various types of investments.
Define the rights and obligations assertion with respect to investments.
Explain completeness with respect to presentation and disclosure for investments.
What is an investment subsidiary ledger?
List six controls that should be implemented over investments.
What is the most important audit risk when investments are classified as non-strategic?
List four substantive procedures usually performed for investments.
When inspecting securities, what things should the auditor note?
Describe the disclosure requirements over investments.

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Auditing A Practical Approach 1st Extended Canadian Edition Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren - Solutions

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