Wiley CPA Excel Exam Review Study Guide Auditing And Attestation 2015 14th Edition O. Ray Whittington - Solutions

An auditor vouched data for a sample of employees in a payroll register to approved clock card data to provide assurance thata. Payments to employees are computed at authorized rates.b. Employees work the number of hours for which they are paid.c. Segregation of duties exist between the preparation
The objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded, and thata. Production orders are prenumbered and signed by a supervisor.b. Custody of work in process and of finished goods is properly maintained.c. Independent
Which of the following is a question that the auditor would expect to find on the production cycle section of an internal control questionnaire?a. Are vendors’ invoices for raw materials approved for payment by an employee who is independent of the cash disbursements function?b. Are signed checks
Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate controls over the invoicing function allow goods to be shipped that are not invoiced. The inadequate controls could cause ana. Understatement of revenues, receivables, and inventory.b. Overstatement of
Sound internal control dictates that defective merchandise returned by customers should be presented initially to thea. Salesclerk.b. Purchasing clerk.c. Receiving clerk.d. Inventory control clerk.
Which of the following controls most likely addresses the completeness assertion for inventory?a. Work in process account is periodically reconciled with subsidiary records.b. Employees responsible for custody of finished goods do not perform the receiving function.c. Receiving reports are
A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probablya. Insist that the client perform physical counts of inventory items several times during the year.b. Apply gross profit tests to ascertain the
Which of the following controls most likely would be used to maintain accurate inventory records?a. Perpetual inventory records are periodically compared with the current cost of individual inventory items.b. A just-in-time inventory ordering system keeps inventory levels to a desired minimum.c.
In obtaining an understanding of a manufacturing entity’s internal control over inventory balances, an auditor most likely woulda. Analyze the liquidity and turnover ratios of the inventory.b. Perform analytical procedures designed to identify cost variances.c. Review the entity’s descriptions
With well-designed internal control, employees in the same department most likely would approve purchase orders, and alsoa. Reconcile the open invoice file.b. Inspect goods upon receipt.c. Authorize requisitions of goods.d. Negotiate terms with vendors.C.3. Inventories and Production
A client erroneously recorded a large purchase twice.Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner?a. Footing the purchases journal.b. Reconciling vendors’ monthly statements with subsidiary payable ledger accounts.c.
Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to thea. Department that initiated the requisition.b. Receiving department.c. Purchasing agent.d. Accounts payable department.
For effective internal control, the accounts payable department generally shoulda. Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed.b. Ascertain that each requisition is approved as to price, quantity, and quality by an authorized employee.c. Obliterate the
Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?a. Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a
An entity’s internal control requires for every check request that there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for
With properly designed internal control, the same employee most likely would match vendors’ invoices with receiving reports and alsoa. Post the detailed accounts payable records.b. Recompute the calculations on vendors’ invoices.c. Reconcile the accounts payable ledger.d. Cancel vendors’
Which of the following controls is not usually performed in the vouchers payable department?a. Matching the vendor’s invoice with the related receiving report.b. Approving vouchers for payment by having an authorized employee sign the vouchers.c. Indicating the asset and expense accounts to be
In assessing control risk for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support?a. Completeness.b. Existence or occurrence.c. Valuation or allocation.d. Rights and obligations.
In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks alsoa. Reviews the monthly bank reconciliation.b. Returns the checks to accounts payable.c. Is denied access to the supporting documents.d. Is responsible for mailing the checks.
To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher isa. Supported by a vendor’s invoice.b. Stamped “paid” by the check signer.c. Prenumbered and accounted for.d. Approved for
When a customer fails to include a remittance advice with a payment, it is common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees?a. Credit manager.b. Receptionist.c. Sales manager.d. Accounts receivable
During the consideration of a small business client’s internal control, the auditor discovered that the accounts receivable clerk approves credit memos and has access to cash.Which of the following controls would be most effective in offsetting this weakness?a. The owner reviews errors in
Employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals anda. Protect employees who make unintentional misstatements from possible monetary damages resulting from their misstatements.b. Deter dishonesty by making employees
Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments?a. Accounts receivable.b. Credit.c. Accounts payable.d. Treasurer.
Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?a. Employees responsible for authorizing sales and bad debt write-offs are denied access to cash.b. Shipping documents and
Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded?a. The billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account
An auditor tests an entity’s policy of obtaining credit approval before shipping goods to customers in support of management’s financial statement assertion ofa. Valuation or allocation.b. Completeness.c. Existence or occurrence.d. Rights and obligations.
Which of the following controls most likely would assure that all billed sales are correctly posted to the accounts receivable ledger?a. Daily sales summaries are compared to daily postings to the accounts receivable ledger.b. Each sales invoice is supported by a prenumbered shipping document.c.
Which of the following audit procedures would an auditor most likely perform to test controls relating to management’s assertion concerning the completeness of sales transactions?a. Verify that extensions and footings on the entity’s sales invoices and monthly customer statements have been
Which of the following procedures most likely would not be a control designed to reduce the risk of misstatements in the billing process?a. Comparing control totals for shipping documents with corresponding totals for sales invoices.b. Using computer programmed controls on the pricing and
Upon receipt of customers’ checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to thea. Internal auditor to investigate the listing for unusual transactions.b. Treasurer to compare the listing
An auditor suspects that a client’s cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditor most likely would compare thea. Dates checks are deposited per bank statements with the
Which of the following controls most likely would reduce the risk of diversion of customer receipts by an entity’s employees?a. A bank lockbox system.b. Prenumbered remittance advices.c. Monthly bank reconciliations.d. Daily deposit of cash receipts.
Tracing shipping documents to prenumbered sales invoices provides evidence thata. No duplicate shipments or billings occurred.b. Shipments to customers were properly invoiced.c. All goods ordered by customers were shipped.d. All prenumbered sales invoices were accounted for.
Sound internal control dictates that immediately upon receiving checks from customers by mail, a responsible employee shoulda. Add the checks to the daily cash summary.b. Verify that each check is supported by a prenumbered sales invoice.c. Prepare a duplicate listing of checks received.d. Record
Which of the following procedures would an auditor most likely perform to test controls relating to management’s assertion about the completeness of cash receipts for cash sales at a retail outlet?a. Observe the consistency of the employees’ use of cash registers and tapes.b. Inquire about
Which of the following procedures concerning accounts receivable would an auditor most likely perform to obtain evidence in support of an assessed level of control risk below the maximum?a. Observing an entity’s employee prepare the schedule of past due accounts receivable.b. Sending confirmation
Which of the following is least likely to be evidence the auditor examines to determine whether controls are operating effectively?a. Records documenting usage of computer programs.b. Canceled supporting documents.c. Confirmations of accounts receivable.d. Signatures on authorization forms.C.1.
To obtain audit evidence about control risk, an auditor selects tests from a variety of techniques includinga. Inquiry.b. Analytical procedures.c. Calculation.d. Confirmation.
Which of the following is not a step in an auditor’s assessment of control risk?a. Evaluate the effectiveness of internal control with tests of controls.b. Obtain an understanding of the entity’s information system and control environment.c. Perform tests of details of transactions to detect
Which of the following types of evidence would an auditor most likely examine to determine whether controls are operating as designed?a. Confirmations of receivables verifying account balances.b. Letters of representations corroborating inventory pricing.c. Attorneys’ responses to the auditor’s
In assessing control risk, an auditor ordinarily selects from a variety of techniques, includinga. Inquiry and analytical procedures.b. Reperformance and observation.c. Comparison and confirmation.d. Inspection and verification.
After obtaining an understanding of internal control and assessing the risk of material misstatement, an auditor decided to perform tests of controls. The auditor most likely decided thata. It would be efficient to perform tests of controls that would result in a reduction in planned substantive
The objective of tests of details of transactions performed as tests of controls is toa. Monitor the design and use of entity documents such as prenumbered shipping forms.b. Determine whether controls have been implemented.c. Detect material misstatements in the account balances of the financial
An auditor generally tests the segregation of duties related to inventory bya. Personal inquiry and observation.b. Test counts and cutoff procedures.c. Analytical procedures and invoice recomputation.d. Document inspection and reconciliation.
Before assessing control risk at a level lower than the maximum, the auditor obtains reasonable assurance that controls are in use and operating effectively. This assurance is most likely obtained in part bya. Preparing owcharts.b. Performing substantive tests.c. Analyzing tests of trends and
How frequently must an auditor test operating effectiveness of controls that appear to function as they have in past years and on which the auditor wishes to rely in the current year?a. Monthly.b. Each audit.c. At least every second audit.d. At least every third audit.
Regardless of the assessed level of control risk, an auditor would perform somea. Tests of controls to determine the effectiveness of internal control policies.b. Analytical procedures to verify the design of internal control.c. Substantive tests to restrict detection risk for significant
Which of the following statements is correct concerning an auditor’s assessment of control risk?a. Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity’s internal control.b. Evidence about the operation of internal control in prior
An auditor may compensate for a weakness in internal control by increasing thea. Level of detection risk.b. Extent of tests of controls.c. Preliminary judgment about audit risk.d. Extent of analytical procedures.
An auditor uses the knowledge provided by the understanding of internal control and the assessed level of the risk of material misstatement primarily toa. Determine whether procedures and records concerning the safeguarding of assets are reliable.b. Ascertain whether the opportunities to allow any
When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase thea. Extent of tests of controls.b. Level of detection risk.c. Extent of tests of details.d. Level of inherent risk.
An auditor assesses control risk because ita. Is relevant to the auditor’s understanding of the control environment.b. Provides assurance that the auditor’s materiality levels are appropriate.c. Indicates to the auditor where inherent risk may be the greatest.d. Affects the level of detection
Assessing control risk at a low level most likely would involvea. Performing more extensive substantive tests with larger sample sizes than originally planned.b. Reducing inherent risk for most of the assertions relevant to significant account balances.c. Changing the timing of substantive tests by
After assessing control risk, an auditor desires to seek a further reduction in the assessed level of control risk. At this time, the auditor would consider whethera. It would be efficient to obtain an understanding of the entity’s information system.b. The entity’s controls have been
Control risk should be assessed in terms ofa. Specific controls.b. Types of potential fraud.c. Financial statement assertions.d. Control environment factors.
Which of the following may not be required on a particular audit of a nonissuer (nonpublic) company?a. Risk assessment procedures.b. Tests of controls.c. Substantive procedures.d. Analytical procedures.
In obtaining an understanding of an entity’s internal control, an auditor is required to obtain knowledge about the Operating effectiveness of controls Design of controlsa. Yes Yesb. No Yesc. Yes Nod. No No
Which of the following statements regarding auditor documentation of the client’s internal control is correct?a. Documentation must include owcharts.b. Documentation must include procedural write-ups.c. No documentation is necessary although it is desirable.d. No one particular form of
A primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor witha. Knowledge necessary to assess the risks of material misstatements.b. Evidence to use in assessing inherent risk.c. A basis for modifying tests of controls.d. An evaluation of
During the consideration of internal control in a financial statement audit, an auditor is not obligated toa. Search for significant deficiencies in the operation of the internal control.b. Understand the internal control and the information system.c. Determine whether the control activities
Decision tables differ from program owcharts in that decision tables emphasizea. Ease of manageability for complex programs.b. Logical relationships among conditions and actions.c. Cost benefit factors justifying the program.d. The sequence in which operations are performed.
When obtaining an understanding of an entity’s internal control, an auditor should concentrate on the substance of controls rather than their form becausea. The controls may be operating effectively but may not be documented.b. Management may establish appropriate controls but not enforce
An auditor should obtain sufficient knowledge of an entity’s information system to understand thea. Safeguards used to limit access to computer facilities.b. Process used to prepare significant accounting estimates.c. Controls used to assure proper authorization of transactions.d. Controls used
In obtaining an understanding of an entity’s internal control relevant to audit planning, an auditor is required to obtain knowledge about thea. Design of the controls pertaining to internal control components.b. Effectiveness of controls that have been implemented.c. Consistency with which
In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required toa. Document the auditor’s understanding of the entity’s internal control.b. Search for significant deficiencies in the operation of internal control.c. Perform tests of
Which statement is correct concerning the relevance of various types of controls to a financial audit?a. An auditor may ordinarily ignore a consideration of controls when a substantive audit approach is taken.b. Controls over the reliability of financial reporting are ordinarily most directly
Which of the following procedures most likely would provide an auditor with evidence about whether an entity’s internal control activities are suitably designed to prevent or detect material misstatements?a. Reperforming the activities for a sample of transactions.b. Performing analytical
An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors’ invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the
Which of the following is a provision of the Foreign Corrupt Practices Act?a. It is a criminal offense for an auditor to fail to detect and report a bribe paid by an American business entity to a foreign official for the purpose of obtaining business.b. The auditor’s detection of illegal acts
Which of the following is not a component of an entity’s internal control?a. Control risk.b. Control activities.c. Monitoring.d. Control environment.A.3. Related Topics
Which of the following factors are included in an entity’s control environment?Audit committee Integrity and ethical values Organizationala. Yes Yes Nob. Yes No Yesc. No Yes Yesd. Yes Yes Yes
Management philosophy and operating style most likely would have a significant inuence on an entity’s control environment whena. The internal auditor reports directly to management.b. Management is dominated by one individual.c. Accurate management job descriptions delineate specific duties.d.
The overall attitude and awareness of an entity’s board of directors concerning the importance of internal control usually is reected in itsa. Computer-based controls.b. System of segregation of duties.c. Control environment.d. Safeguards over access to assets.
An entity’s ongoing monitoring activities often includea. Periodic audits by the audit committee.b. Reviewing the purchasing function.c. The audit of the annual financial statements.d. Control risk assessment in conjunction with quarterly reviews.
Proper segregation of functional responsibilities calls for separation of the functions ofa. Authorization, execution, and payment.b. Authorization, recording, and custody.c. Custody, execution, and reporting.d. Authorization, payment, and recording.A.2. Major Components of Internal Control
When considering internal control, an auditor should be aware of the concept of reasonable assurance, which recognizes thata. Internal control may be ineffective due to mistakes in judgment and personal carelessness.b. Adequate safeguards over access to assets and records should permit an entity to
Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity’s internal control?a. Incompatible duties.b. Management override.c. Mistakes in judgment.d. Collusion among employees.
Should an auditor communicate the following matters to those charged with governance of an audit client?Significant audit adjustments recorded by the entity Management’s consultation with other accountants about significant accounting mattersa. Yes Yesb. Yes Noc. No Yesd. No No
In identifying matters for communication with those charged with governance of an audit client, an auditor most likely would ask management whethera. The turnover in the accounting department was unusually high.???? ????????????
????????????????????????????????????????????????????????????????????????????????????????????????????????not a specialist upon whose work an auditor may rely????? ???????????? ???????????????????????????????????? ???????????? ????????????????????????????????????????c. Internal auditor.????
In using the work of a specialist, an understanding as to the nature of the specialist’s work. The documentation of this understanding should cover???? ????????????
In using the work of a specialist, an auditor referred to an appropriate reporting practice if the???? ????????????
In using the work of a specialist, an auditor may refer to the specialist in the auditor’s report if, as a result of thea. Becomes aware of conditions causing substantial doubt about the entity’s ability to continue as a going concern.???? ????????????
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In an audit of a nonissuer (nonpublic) company, the????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????a. Involve routine, high-volume
????????????????????????????????????????????????????????????????????????????????????????????????????????least likely to be considered a risk assessment procedure????? ???????????? ???????????????????????????????????????????????????????????????????????????????????????????? ????????????
????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????procedures that may be designed after assessing the risks of material
????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????auditors identify risks, relate risk to what could go wrong, consider the magnitude of risks
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The accounts receivable turnover ratio increased during????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????a. Items shipped on consignment during December were recorded as credit sales; no cash receipts have yet been received on
????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????an auditor most likely consider in performing analytical procedures during risk
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????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????audit should focus ona. Reducing the scope of tests of controls and
The audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the???? ????????????
The in-charge auditor most likely would have a????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????a. That
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Wiley CPA Excel Exam Review Study Guide Auditing And Attestation 2015 14th Edition O. Ray Whittington - Solutions

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