QUESTION 50

1. During the observation of physical inventory count, the auditor agrees inventory items with tags identifying them as non owned to the master inventory schedule. The purpose of this audit procedure is to ensure inventory was properly excluded. This test satisfies which audit objective and assertion?

   	a.	cutoff.
   	b.	rights.
   	c.	accuracy.
   	d.	existence.

2 points

QUESTION 51

1. When testing proper valuation of inventory, the auditor must analyze which of the following?

   	a.	Valuation method applied on a consistent basis, in accordance with GAAP and lower of cost or market.
   	b.	Valuation method applied on a consistent basis, in accordance with GAAP.
   	c.	Internal controls over inventory intake, processing and recording.
   	d.	Internal control over inventory intake, processing, recording and approvals.

2 points

QUESTION 52

1. Upon completion of physical count of inventory, an auditor discovered actual physical inventory was lower than what was recorded in the inventory master file. A possible explanation of the variance can be unrecorded ______________

   	a.	adjustments after the cutoff date.
   	b.	discounts on sales.
   	c.	purchases.
   	d.	discounts on purchases.

2 points

QUESTION 53

1. You are assigned to audit accounts over the capital acquisition and repayment cycle. What are the primary audit objectives you would most focus on?

   	a.	accuracy and completeness.
   	b.	accuracy and valuation
   	c.	completeness and existence.
   	d.	occurrence and valuation.

2 points

QUESTION 54

1. Retained earnings, bonds payable and accrued interests are examples of common accounts in the acquisition and repayment cycle. A primary characteristic of all accounts in this cycle include

   	a.	Many transactions affect the account balances due to the high volume of trading that occurs within these accounts.
   	b.	Materiality is not normally a consideration in these accounts due to the high transaction amounts.
   	c.	There is a legal contract between the company and holder of stock, bond, or similar ownership document.
   	d.	All of the above characteristics apply

2 points

QUESTION 55

1. An auditor is determining whether an issuance of notes payable for cash was correctly recorded. Her best course of action would be to

   	a.	confirm with the bond trustee as to the amount of bonds issued.
   	b.	confirm with the underwriter as to the appropriate market yield on the bonds.
   	c.	trace the cash received from the proceeds to the accounting records.
   	d.	verify that the amount was included in a footnote disclosure.