Question 1

The six general audit techniques.....

Multiple Choice

a. can be used both for tests of internal controls and for substantive procedures.

b. can be used only for tests of internal controls.

c. can be used only for substantive procedures.

d. are not always necessary if internal controls are strong.

Question 2

Kagan Enterprises is a manufacturer of specialized diving gear. What internal control could be tested by its auditor to support the objective of proper period cutoff for their Cost of Goods Sold accounts?

Multiple Choice

a. The warehouse manager prepares a detailed shipping document for all inventory items that leave the warehouse.

b. The controller performs a detailed analysis of raw material inventory, work-in-process, and finished goods inventory to detect any unexpected variance.

c. The operations manager reviews the inventory listing for any outdated gear or slow-moving inventory.

d. An inventory count is performed each quarter.

Question 3

Since auditors must use due care, they are not concerned with how long an audit takes. TRUE or FALSE???

Question 4

For continuing audits, auditors can rely on the control testing done in prior years. TRUE or FALSE???

Question 5

The auditor obtains a trial balance of the customers' accounts. The auditor selects 75 accounts for positive confirmation. The number of accounts selected refers to

Multiple Choice

a. The control test.

b. The extent of the procedure.

c. The timing of the procedure.

d. The nature of the procedure.

Question 6

Which of the following is a device designed to help the audit team obtain evidence about the control environment and about the accounting and control procedures of an audit client?

Multiple Choice

a. A narrative memorandum describing the control system.

b. A well-indexed file of working papers.

c. An internal control questionnaire.

d. A flowchart of the documents and procedures used by the company.

Question 7

In late December, a retail store received a number of online orders. One sales rep was covering for three different functions because a number of employees were taking vacation. Bombarded with work, the sales rep packed all the online purchases but forgot to record them in the accounting book. Which financial statement assertion(s) were affected?

Multiple Choice

a. Existence and ownership

b. Ownership and completeness

c. Valuation

d. Existence and completeness