Ch10

Question 1 (1 point) Inventories received before the period-end are recorded as current purchases and those received after the period end are included in the next period. What assertion is being described? 0 cut-off O completeness 0 accuracy 0 occurrence Question 10 [1 point) When an auditor tests a client's cost accounting records, the auditor's tests are primarily designed to determine that: O The internal controls are in accordance with generally accepted accounting principles and are functioning as planned. 0 Costs have been properly assigned to finished goods, work in progress, and cost of goods sold. 0 Quantities on hand have been determined based on acceptable cost accounting techniques that reasonably approximate actual quantities on hand. 0 Physical inventories are in substantial agreement with book inventories. Question 2 (1 point) A computer operator perpetrated a theft by preparing erroneous T4 forms. The operator's income tax withheld was overstated by $2,000, and the income tax withheld for all other employees was understated by the same amount. Which of the following audit procedures would detect such a fraud most effectively? 0 Footing and cross footing of the payroll register followed by tracing postings to the general ledger. O Multiplication of the applicable rate by the individual's gross taxable earnings. 0 Using employee TD1 forms and withholding tables to determine whether deductions authorized per pay period agree with amounts deducted per pay penod. O Vouching cancelled cheques to income tax withholding remittance forms. 7 Hide hint for Question 2 Before you do too much work, consider the "quick and dirty" solution. Question 2 [1 point} The application of analytical procedures to the audit of inventories is often 0 not very useful. 0 a requirement of the standards. 0 the only procedure necessary 0 used extensively. Question 3 (1 point) During the observation of the inventory count. the auditor has no responsibility to 0 make some test counts of inventory quantities. O supervise client staff counting of the inventory. 0 watch for inventory movement during the inventory count. 0 watch for damaoed and obsolete inventorv items. Question 3 (1 point) A copy of the receiving report should be sent directly by the receiving department to the 0 accounts receivable department. 0 accounts payable department 0 purchasing department 0 financial controller Question 4 (1 point) Payroll deductions consist of amounts with held from payroll for income taxes, CPP, El and other deductions. Which of the following statements is false? 0 Auditors will usually perform significant work on payroll deductions even though the ending balances are not material. 0 Auditors will usually trace outstanding payroll deductions payable to payment in the subsequent period. 0 Auditors will usually not verify payroll deductions because they are not funds owned by the company. 0 Auditors will usually examine and recalculate the annual filing of T4 information slips. Question 4 (1 point) Which of the following best describes the independent auditor's approach to obtaining satisfaction concerning amortization expense in the income statement? Determine the method for computing amortization expense, and ascertain that it is in accordance with generally accepted accounting principles 0 Reconcile the amount of amortization expense to those amounts credited to accumulated amortization accounts 0 Establish the basis for amortizable assets and verify the amortization expense 0 Verify the mathematical accuracy of the amortization charged as a result of amortization expense Question 5 (1 point) An auditor would most likely learn of slow-moving inventory through: 0 Physical observation of inventory 0 Review of perpetual inventory files 0 Enquiry of store personnel 0 Enquiry of sales personnel QUESIIOI'I D [1 DOII'IIJ Budd, the purchasing agent of Lake Hardware Wholesalers Ltd. Has a relative who owns a retail hardware store. Budd arranged for hardware to be delivered by manufacturers to the retail store on a COD basis, thereby enabling his relative to buy at Lake's wholesale prices. Budd was probably able to accomplish this because Lake's poor internal controls over: 0 Inventory receipts O Perpetual inventory records 0 Cash receipts 0 Purchase orders Question 6 (1 point) The segregation of receiving goods {CUSTODY} from the requisitionng and purchasing of those goods [APPROVAL] prevents those making requisitions from ordering goods directly from suppliers and also prevents the purchasing department from gaining access to goods improperly ordered. Question 6 (1 point) With respect to property, plant, and equipment. in the first audit engagement, evidence must be obtained as to the fairness of the opening balances and the ownership of the assets making up the balances, whereas in a recurring engagement, the auditor concentrates on the current year's transactions Question 7 (1 point) The accuracy of perpetual inventory transaction files may be established in part, by comparing perpetual inventory records with: 0 Purchase orders 0 Receiving reports 0 Vendor payments 0 Purchase requisitions Question 7 (1 point) An authorized purchase order should be issued to support the acquisition of all goods and services. Which of the following statements is FALSE? 0 The purchase order copy provided to the Receiving department must always have blank order quantities. 0 Purchase orders must be sequentially numbered, and controlled. 0 Purchase orders must only be issued to qualified vendors set up in the AP master file. 0 A copy of the purchase order should be provided to the accounting department. Question 8 (1 point) |Cuccina Manufacturing has a staff of 25 people paid on an hourly basis. At the beginning of each payroll period, the payroll clerk prepares time cards for each of the staff and places them into racks adjacent to the time clock. The main control objective of this procedure is: 0 To make sure that payroll is properly charged to correct accou nt- classification. 0 To make sure that all payroll is verified- accuracy. 0 To make sure that payroll is recorded in the correct period- cut-off. 0 To make sure that all payroll is recorded- completeness. Question 8 (1 point) Which of the following is an internal control weakness related to fixed assets- equipment? 0 Factory equipment replacements are generally made when estimated useful lives, as indicated in amortization schedules, have expired. 0 Cheques issued in payment of purchases of equipment are signed by the production supervisor O Proceeds from sales of fully amortized equipment are credited to other income 0 All acquisitions of factory equipment must be made by the department in need of the equipment Question 9 (1 point] Observation of inventory counts is a required audit procedure whenever O inventories are material. 0 inventories are material and it is practicable to do so. 0 inventories are material and the auditor considers it to be necessary. 0 it is practicable to do so. Question 9 (1 point] Accounts payable is usually the smallest current liability on the balance sheet and a insignificant factor in the evaluation of an entity's shortterm solvency, especially when the accounts payable is affected by a high volume of transactions and thus is susceptible to misstatements. Question 10 {1 point] A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the control objective that: 0 Only proper employees worked and their pay was properly computed 0 All employees worked the number hours for which their pay was computed 0 Jobs on which employees worked were charged with the appropriate labour cost 0 Internal controls relating to payroll disbursements are operating effectively