Question 1

The purchase cut-off test provides assurance that........

a. Receivables and sales are also recorded in the proper accounting period.

b. Transactions are recorded in the proper accounting period.

c. Only authorized purchases are recorded.

d. The test is unnecessary, as a physical count of inventory and fixed assets additions will ensure items are included in the proper accounting period.

Question 2

The best opportunity for auditors to detect material misstatements in inventory is to.............

a. Inquiry of the warehouse manager.

b. Physically observe the auditee's inventory count.

c. Recalculate cost of sales.

d. Perform analytical procedures.

Question 3

The control purpose behind fixed asset reports is:.............

a. Completeness, ownership, and valuation and proper accounting.

b. Completeness only.

c. Validity only.

d. Completeness, validity, and valuation.

Question 4

Internal controls should provide for detail-checking procedures. But generally speaking the matching of accounts payables and cheques paying those amounts should be sufficient control to ensure that only authorized purchases (payables) are paid.

TRUE or FALSE

Question 5

Which of the following is an auditors objective related to the valuation assertion for the auditees PPE and intangible assets?

a. Obtain evidence that the auditee has legal rights to its patents.

b. Obtain evidence that the auditee has legal title to the building included in its PPE.

c. Evaluate managements estimate of impairment of its manufacturing equipment.

d. Verify that the auditees depreciation policies are accurately described in the notes to the financial statements.