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1) An auditor is testing sales transactions. What procedure may (s)he use to test for recording of fictitious receivables in the accounts receivable ledger? A B C D Vouching debits in the accounts receivable ledger to sales invoices and shipping documents. Sending out negative confirmations. Tracing a sample of shipping documents and sales invoices to the sales journal. Tracing a sample of sales invoices to the accounts receivable subsidiary ledger. 2) The primary audit test to determine if accounts payable are valued properly is A B C D 3) Verification that accounts payable are reported as a current liability in the balance sheet. A confirmation of accounts payable. Vouching accounts payable to supporting documentation. An analytical procedure. An auditor uses the AICPA Standard Form to Confirm Account Balance Information with Financial Institutions to A B C D 4) Gather significant evidence about the completeness assertions. Request a detailed search of the institution's records. Confirm basic information about deposits and direct liabilities on loans. Obtain assurance about contingent liabilities and security agreements. Which of the following is the most effective audit procedure for verification of the amount of dividends earned on investments in marketable equity securities? A B C Reconciling amounts received with published dividend records. Comparing the amounts received with preceding year dividends received. Tracing deposit of dividends to the cash receipts book. Recomputing selected extensions and footings of dividend schedules and comparing totals to the general D ledger. 5) Which of the following most likely would give the most assurance concerning the valuation assertion of accounts receivable? A B C D Comparing receivable turnover ratios with industry statistics for reasonableness. Inquiring about receivables pledged under loan agreements. Assessing the allowance for uncollectible accounts for reasonableness. Vouching amounts in the subsidiary ledger to details on shipping documents. 6) During an audit of an entity's equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management's assertion of A B C D Occurrence. Completeness. Existence. Classification and understandability. 7) The most reliable evidence an auditor can assess when determining a company's legal title to inventories is A B C D Monthly gross profit and inventory levels. Records of inventories stored at offsite locations. Paid vendor invoices. Purchase orders. 8) To test whether the current year's depreciation charges are generally accepted and applied consistently, an auditor should rely most heavily on A B C D Vouching of the current year's fixed asset acquisitions. Comparing depreciation schedule detail with schedules supporting the federal income tax return. Evaluating the methods applied and recomputing depreciation for a sample of fixed assets. Tracing totals from the depreciation schedule to journal entries and ledger postings 9) The auditor's primary objectives in an audit of an investment in securities do not include determining whether the securities are A B C D 10) In existence. Properly classified on the balance sheet. The property of the client. Authentic. When counting cash on hand, the auditor must exercise control over all cash and other negotiable assets to prevent A B C D Deposits in transit. Irregular endorsement. Substitution. Theft. 11) An auditor who wishes to test the completeness assertion for sales should trace A B C D Sales journal entries to shipping documents. Accounts receivable entries to sales invoices. Sales invoices to shipping documents. Shipping documents to the sales journal. 12) Analytical procedures may be applied to payroll to detect unusual items. Which of the following is an appropriate analytical procedure for payroll? A B C D 13) Compare the relationship of hours worked to payroll with that of the preceding year. Inspect authorizations on time cards. Compare rates authorized under a union contract with payroll records. Review payroll bank account reconciliation. In deciding whether recorded sales are valid, which of the following items of evidence is considered most competent? B Accounts receivable records showing amounts due from the customer. A memorandum from the director of the shipping department stating that another employee verified the personal C delivery of the merchandise to the customer. D A copy of the customer's purchase order. 14) When a company has a material amount of treasury stock certificates on hand, a yearend count of the certificates by the auditor is A B C D 15) Normally part of the audit plan. Not required if treasury stock is a deduction from equity. Required when the company classifies treasury stock with other assets. Required when the company had treasury stock transactions during the year. An appropriate audit procedure for testing the yearend cutoff for unrecorded liabilities is A B C D 16) Tracing recorded liabilities to supporting documents. Examining shipment date and terms of shipment on vendor invoices received prior and subsequent to year end. Preparing an aging schedule for accounts payable. Reviewing the general journal for unusual entries recorded immediately prior to year end. Which of the following is not an analytical procedure for testing payroll? A B C Tracing the recorded hours of an employee to the related jobcost records. Comparing the ratio of direct labor to sales with the industry information. Comparing the ratio of total payroll to total expenses with data for previous years. D Identifying differences between the payroll expense account and the amount budgeted. 17) The standard AICPA form directed to financial institutions requests all of the following except A B C D The principal amount paid on a direct liability. The date through which interest on a direct liability is paid. Confirmation of the account number and a description of a direct liability. Due date of a direct liability. 18) Auditor confirmation of accounts payable A B C D Should be performed prior to the balance sheet date. Is required to determine the existence of unrecorded liabilities. Is not a required procedure because reliable external evidence is ordinarily available to support the balance. Is required when creditor statements are available and control risk is low. 19) An auditor observes that controls over the perpetual inventory system are weak. An appropriate audit response is to A B C D 20) Require that a physical inventory count be scheduled at year end. Perform turnover ratio tests. Increase the testing of the inventory controls. Apply gross profit analyses by product lines and compare to prior years for reasonableness. In auditing longterm bonds payable to determine whether all liabilities have been recorded, an auditor most likely will A B C D Count the cash associated with the proceeds from the bonds. Examine documentation of assets purchased with bond proceeds for liens. Confirm the existence of individual bondholders at year end. Compare interest expense with the bond payable amount for reasonableness