Audit essay

Which of the following controls may prevent the failure to bill customers for some shipments? A. Each shipment should be supported by a presumed sales invoice that is accounted for. B. Each sales order should be approved by authorized personnel. C.

Sales journal entries should be reconciled to daily sales summaries. D. Each sales invoice should be supported by a shipping document. 1 1 . If the objective of a test of details is to detect overstatements of sales, the auditor should trace transactions from the A.

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Cash receipts journal to the sales journal. B. Sales journal to the cash receipts journal.C. Source documents to the accounting records.

D. Accounting records to the source documents. 1 2. Which of the following is least likely to be considered when assessing inherent risk? A. Neurotic transactions. B. Estimation transactions. C.

Susceptibility to theft. D. Expected effectiveness of controls.

13. The risk that an auditor’s procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as A. Audit risk B. Inherent risk C. Control risk D. Detection risk 14.Evidential matter concerning proper segregation of duties ordinarily is best obtained by A.

Preparation of a flowchart of duties performed by available personnel. B. Inquiring whether control activities operated consistently throughout the period.

C. Reviewing job descriptions prepared by the personnel department. D. Direct personal observation of the employees who apply control activities. 1 5.

According to the Code of Professional Ethics for Caps, which of the following fee arrangements is prohibited? A. A fee for a review of financial tenements that is based on time spent on the engagement. B.A fee for a review of financial statements that is based on time spent and a premium for the risk involved. C. A fee for a review engagement that is based on a fixed fee of Pl 5,000.

D. A fee for a review engagement that varies depending on the amount of financing that the company may obtain. 1 6. Which of the following is not ordinarily performed in response to the risk of management override? A. Evaluating the rationale for significant unusual transactions. B.

Observe counts of inventory at all locations. C. Review accounting estimates for bias.

D. Test appropriateness of journal entries and adjustments. 7. Which of the following procedures is not included in a review engagement? A. Inquiries of management.

B. Inquiries regarding events subsequent to the balance sheet date. C. Any procedures designed to identify relationships among data that appear to be unusual. D.

Tests of internal control. 18. In considering internal control, the auditor is basically concerned that it provides reasonable assurance that A. Operational efficiency has been achieved in accordance with management plans. B. Material misstatements due to errors and fraud have been prevented or detected.

C.Controls have not been circumvented by collusion. D. Management cannot override the system. 19. Which of the following is a general principle relating to the reliability of audit evidence? A. Audit evidence obtained from indirect sources rather than directly is more reliable than evidence obtained directly by the auditor. B.

Audit evidence provided by copies is more reliable than that provided by facsimiles. C Audit evidence obtained from knowledgeable independent resources outside the client company is more reliable than audit evidence obtained from independent sources.D. Audit evidence provided by original documents is more reliable than audit evidence generated through a system of effective controls. 20. Which of the following statements relating to the appropriateness of audit evidence is always true? A.

Audit evidence gathered by an auditor from outside an enterprise is reliable. B. Accounting data developed under satisfactory conditions of internal control are more relevant than data developed under unsatisfactory internal control conditions. C. Oral presentations made by management are not valid evidence.

D.Evidence gathered by auditors must be both valid and relevant to be considered appropriate. 21 . An auditor may achieve audit objectives related to particular assertions by A. Performing analytical procedures. B. Adhering to a system of quality control. C.

Preparing auditor working papers. D. Increasing the level of detection risk.

22. Which Of the following is the best example Of a substantive test? A. Examining a sample of cash disbursements to test whether expenses have been properly approved. B. Confirmation of balances of accounts achieve able. C.

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