1) A document that describes which accounts receivable accounts are to be written off and why is called a(n)

A) uncollectible account authorization form.

B) journal entry authorization form.

C) master file change form.

D) sales returns and allowances journal.

2) Proper accounting requires that an account receivable must be written off by the client when

A) the client company concludes that an amount is no longer collectible.

B) the customer files for bankruptcy.

C) a collection agency cannot inspire the customer to pay the debt.

D) the account is at least six months old.

3) As part of audit planning, you have calculated accounts receivable turnover for the last five years and compared it to industry averages. Your client's accounts receivable has decreased by about 1.25 times in the current year, while the industry rate has improved. One possible cause of this lowered accounts receivable turnover is

A) higher cost of goods sold.

B) increased bad debt expenses.

C) fictitious revenue.

D) fictitious expenses.

4) There are two important assumptions that underly the auditor's use of external confirmations. The first is that the person returning the confirmation is independent of the company and so will provide an unbiased response. The second is that

A) only authorized employees of the company have prepared the response.

B) the person completing the response has carefully checked the data being confirmed.

C) the respondent has not been coerced or bribed to respond to the confirmation.

D) adequate controls exist at the client company to prevent unauthorized responses.

5) When accounts payable and purchasing systems are highly automated, more detail is included in the transaction files. This deeper level of detail is illustrated by including

A) economic order quantities for each item that is held in inventory, including delivery times.

B) quantities, prices, and item descriptions from each line of the vendor invoice.

C) sequentially numbered purchase requisitions and purchase orders (with matching numbers).

D) receiving report numbers that match the numbers on the vendor invoices for improved tracking.

6) The most common fraud in the acquisitions area is for the perpetrator to

A) alter the cheque payment file before it is printed so that the payee name is changed.

B) issue payments to fictitious vendors and deposit the cheques to a fictitious account.

C) change the optical characters at the bottom of a cheque to alter the account to be credited.

D) issue duplicate payments for invoices and then pocket the second cheque.

7) An auditor wants to perform tests of controls on a client's cash disbursement procedures. If the control procedures leave no audit trail or documentary evidence, the auditor is most likely to test the procedures by

A) confirmation and observation.

B) confirmation and analytical procedures.

C) observation and inquiry.

D) inquiry and analytical procedures.

8) The controls over purchase requisitions and the related purchase orders are evaluated and tested as part of the

A) inventory and distribution cycle.

B) acquisitions and payments cycle.

C) human resources and payroll cycle.

D) capital acquisitions cycle.

9) As part of the audit of valuation, the auditor is conducting pricing tests by comparing to supplier invoices. The auditor is making sure that, for each item tested, sufficient supplier invoices are examined to cover the quantity of inventory that was on hand during the physical inventory count. What type of pricing error could this detect?

A) The client valued their inventory on the basis of the most recent invoice only.

B) The client has used the incorrect accounting method to value its inventory.

C) Extension errors could occur with numerous different inventory items.

D) The wrong inventory count quantity could have been recorded on the count sheets.

10) Which is the only class of transaction relating to the payroll cycle?

A) receiving of goods

B) obtaining of service

C) receipt of cash

D) sales