40. Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department?

Comparing the vendor's invoice with the receiving report.

Canceling supporting documentation after payment.

Verifying the mathematical accuracy of the vendor's invoice.

Preparing the check for signature by an authorized person.

41. Banks may process electronic "substitute checks" in place of customer written hard copy checks due to the:

Check Clearing for the 21^st Century Act.

Public Company Accounting Oversight Board's Standard No. 2.

Foreign Corrupt Practices Act.

Sarbanes-Oxley Act.

42. An auditor compares annual revenues and expenses with similar amounts from the prior year and investigates all changes exceeding 10%. This procedure most likely could indicate that:

Fourth quarter payroll taxes were properly accrued and recorded, but were not paid until early in the subsequent year.

Unrealized gains from increases in the value of available-for-sale securities were recorded in the income account for trading securities.

The annual provision for uncollectible accounts expense was inadequate because of worsening economic conditions.

Notice of an increase in property tax rates was received by management, but was not recorded until early in the subsequent year.

43. What type of error is the CPA most likely to discover when he/she examines all shipping reports dated in January of 20X1, shipped FOB shipping point, which were recorded in December of 20X0 as credit sales?

Accounts receivable are overstated at December 31, 20X0.

Accounts receivable are understated at December 31, 20X0.

Operating expenses are overstated for the 12 months ended December 31, 20X0.

Sales returns and allowance are overstated at December 31, 20X0.

44. The confirmation of accounts receivable is most closely associated with:

Business risk.

Detection risk.

Inherent risk.

Relative risk

45. When scheduling the audit work to be performed on an engagement, the auditors should consider confirming accounts receivable balances at an interim date if:

Subsequent collections are to be reviewed.

Internal control over receivables is good.

Negative confirmation requests are to be used.

There is a simultaneous examination of cash and accounts receivable.

46. In your review of ABC Company's financials, you note that Receivables have increased approximately 200% from the previous year, while Cash has declined. Further investigation reveals that 70% of ABC's receivables were booked within 7 days of the end of the quarter. If financial statement fraud is involved, which type is most likely?

Fictitious revenues.

Timing differences.

Improper asset valuations.

Improper disclosures.

47. A set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements is referred to as a(n)

Financial reporting framework.

Public Company Accounting Oversight Board Criteria.

Quality control presentation standard.

Special purpose audit standard.

48. Which of the following is not included as a part of the description of the auditor's responsibility in a nonpublic company unmodified report?

The audit was performed in accordance with generally accepted accounting principles.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor's judgment.

An audit includes evaluating the appropriateness of accounting policies used.

48. The auditors' report may be addressed to the company whose financial statements are being examined or to that company's:

Chief operating officer.

President.

Board of Directors.

Chief financial officer.