Ch6

Question 1 (1 point) Credit checks should be performed for all customers after sending the customer order to the warehouse for processing, pickup and delivery. Question 1 (1 point) Nonsampling risk arises when an auditor 0 does not use sampling 0 tests all of the items in a population. 0 uses an inappropriate audit procedure 0 spends too much time testing the accounts most at risk of material misstatement Question 2 (1 point] Sampling is required when an audit procedure is tested on an entire group of transactions or all items within an account balance Question 10 (1 point) When testing controls, the tolerable error is O the tolerable rate of deviation that an auditor will accept before concluding that a control is ineffective. the maximum amount of error in an account balance that an auditor will accept before concluding that an account is materially misstated. O the tolerable rate of deviation that an auditor will accept before concluding that a control is effective. 0 the minimum rate of deviation that an auditor will accept. Question 2 (1 point) In connection with her examination of Candi Supply Corp for the year ended August 31, 20x5, you have mailed accounts receivable confirmations to three groups as follows: Group1, Wholesale customers, Positve AR confirmations Group2, Retail customers with current balances, Negative AR confirmations Group3, Retail customers with overdue balances, Positive AR confirmationsThe confirmation responses from each group vary from 10% to 90%. The most likely response rates are: Group 1- 90%; Group 2- 50%; Group 3- 10% Group 1- 90%; Group 2- 10%; Group 3-50% Group 1- 50%; Group 2- 90%; Group 3- 10% Group 1- 10%; Group 2- 50%; Group 3- 90%Question 3 (1 point) You are waiting in the lineup of a fast food restaurant, and there is a sign posted that reads "If we don't give you a receipt, your meal is free!". Why would the restaurant post this message? 0 To promote sales at the restaurant. 0 To motivate staff to process orders quicker. 0 To give patrons something to read while they are waiting for their meal. 0 To ensure that all sales are recorded in the cash register. Question 4 (1 point] When auditing sales and receivables, the auditor is expressing an opinion on the O occurrence of sales and existence of receivables. O valuation of sales and occurrence of receivables. O valuation of sales and existence of receivables. O valuation of sales and cut-off for receivables. Question 5 (1 point) The account balance audit objective, "Accounts receivable presents gross claims on customers at balance date and agree with the sum of the accounts receivable subsidiary ledger", is derived from the assertion category of O completeness O valuation and allocation 0 rights and obligations O existence Question 6 (1 point) When considering the cut-off assertion for sales transactions, the auditor places specific emphasis on transactions 0 recorded close to the period end. 0 representing sales returns. 0 recorded at the beginning of the period. 0 approved by the board of directors. Question 7 (1 point) Which of the following is not an example of a programmed application control for sales? 0 only orders for goods in the entity's product range are accepted 0 quantities, amounts and dates are queried and rejected if outside of the normal range 0 numerical continuity of documents is checked by the system Q duplicate document numbers are accepted Question 8 (1 point} In recording sales, the primary control objective is to 0 ensure all cash receipts are recorded 0 ensure all sales invoices are recorded. 0 ensure cash receipts are recorded accurately and in the right period. 0 ensure sales invoices are recorded accurately and in the right period. Question 8 (1 point) In a random sample of 1,000 records, an auditor determines that the sample error rate (SER) is 2%. The auditor can state that the exception rate in the population is: 0 Not more than 3%. 0 Not less than 2%. O Probably about 2% 0 Not less than 1% Question 9 (1 point) Which sampling method involves the selection of items that are grouped together within the population of items available? 0 random selection 0 systematic selection 0 haphazard selection 0 block selection Question 9 (1 point) Copies of sales invoices show different unit prices for apparently identical items. A control to prevent this error would be: 0 Prices should be automatically entered on invoices based upon master file data. 0 Statistical sales data are compiled and reconciled with recorded sales. 0 Differences reported by customers are satisfactorily investigated. 0 All sales invoices are compared with shipping documents. Question 10 (1 point] For good internal control, the credit manager should be responsible to: 0 Operations manager. 0 Treasurer. 0 Customer service manager. 0 Sales manager