1. 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

2. Controls specific to the recording of cash payments include which of 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.

3. Why would the purchase of goods be segregated from the receiving of goods?

A. Provides evidence of the completion assertion.

B. Provides purchasing with access to goods improperly ordered.

C. Enables better negotiations with suppliers.

D. Restricts opportunity to make fraudulent orders.

4. 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 exist between the preparation and payment of payroll.

C. the correct payroll entries are made in the firms ledger and journal.

D. each employee receives only one cheque or pay envelope.

5. 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.

6. Controls over the preparation and signing of cheques include all of the following except

A. prenumbered cheques should be used.

B. the cheque requisition and supporting documents should be cancelled (stamped) when the cheque is signed.

C. authorized personnel in the accounting department should be responsible for signing the cheques.

D. the signed cheque and the supporting documents should be returned to the accounts payable clerk for review and mailing.

7. Why does management have a tendency to understate expenses and payables?

A. report a lower level of working capital

B. increase debt to equity ratio

C. meet profitability targets

D. decrease gross margin percentage

8. An independent check by an accounting supervisor to verify the amount of the cheque, the amount journalized, and the amount posted to the accounts payable ledger provides evidence for which assertions? Select all that apply.

A. completeness

B. valuation

C. presentation

D. allocation

E. occurrence

9. Which of the following would be a control over ensuring that invoices are properly recorded? Select all that apply.

A. Periodic accounting for pre-numbered receiving reports and purchase orders.

B. Matching of purchase order with receiving report.

C. Required approval for each purchase requisition.

D. Independent check to verify the amounts recorded in purchase journal to listing of invoices.

E. Performance reviews by management to compare actual payables to budgeted amounts.

10. An effective control procedure to prevent inaccurate invoices is to

A. prepare invoices centrally.

B. compare totals for sales orders to sales invoices.

C. compare totals for shipping documents to sales invoices.

D. segregating functions of shipping and invoicing.

10. When preparing the payroll, which controls should be in place? Select all that apply.

A. Reasonableness check of hours worked.

B. Review of the personnel authorization form.

C. Verification of employee numbers.

D. Supervisory review of the payroll transactions.

E. Proper authorization of payroll changes.

fundamental auditing