LATIHAN SOAL BAB 11 - AUDITING II's Weblog



LATIHAN SOAL BAB 11

|1. |Which of the following best describes the process for assessing control risk? |

| |[pic]A. |

| |(1) Perform tests of controls, and (2) evaluate the evidence and assess control risk. |

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| |[pic]B. |

| |(1) Identify necessary controls, (2) perform tests of controls, and (3) evaluate the evidence and assess control risk. |

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| |[pic]C. |

| |(1) Identify potential misstatements that could occur, (2) identify necessary controls, (3) perform tests of controls, and |

| |(4) evaluate the evidence and assess control risk. |

| | |

| | |

| |[pic]D. |

| |(1) Consider the knowledge acquired from obtaining the understanding of internal control, (2) identify potential |

| |misstatements that could occur, (3) identify necessary controls, (4) perform tests of controls, and (5) evaluate the evidence|

| |and assess control risk. |

| | |

|2. |Which of the following represents the necessary control and the test of control that would control the risk of duplicate |

| |payment of an accounts payable voucher? |

| |[pic]A. |

| |Necessary control; The computer matches check information with the supporting voucher: Test of control; Submit test data to |

| |see that the computer appropriately matches check information with voucher information. |

| | |

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| |[pic]B. |

| |Necessary control; The computer electronically cancels the voucher and supporting information when the check is issued: Test |

| |of control; Submit test data to see that the computer rejects duplicate payments. |

| | |

| | |

| |[pic]C. |

| |Necessary control; The computer matches voucher date with the check date: Test of control; Submit test data to see that the |

| |computer appropriately matches dates on the voucher and on the check. |

| | |

| | |

| |[pic]D. |

| |Necessary control; There is separate duties for approving voucher and signing checks: Test of control; Observe segregation of|

| |duties |

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|3. |Controls over the completeness assertion generally |

| |[pic]A. |

| |start by capturing information about a transaction when it is initiated and then follow the transaction forward through |

| |receipt or deliver and recording. |

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| | |

| |[pic]B. |

| |compare information associated with the recording of transactions with information associated with the passage of title, |

| |which is normally captured during the delivery or receipt of goods and services. |

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| | |

| |[pic]C. |

| |compare information associated with the recording of transactions with information obtained both with the delivery or receipt|

| |of goods and services and information associated with the initiation of the transaction. |

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| | |

| |[pic]D. |

| |compare information associated with the recording of transactions with information created when the transaction is initiated.|

| | |

|4. |When obtaining an understanding of internal controls the auditor identifies important programmed application controls over |

| |the occurrence of sales, however, the auditor also has serious concerns about the adequacy of the control environment due to |

| |a weak tone at the top about control consciousness.   Which of the following best describes how the auditor should respond to|

| |this situation when planning tests of occurrence of sales? |

| |[pic]A. |

| |The auditor could assess control risk as low for an assertion after performing computer assisted audit techniques on controls|

| |relevant to that assertion. |

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| | |

| |[pic]B. |

| |The auditor could assess control risk as low for an assertion after performing computer assisted audit techniques on controls|

| |relevant to that assertion and assessing the adequacy of segregation of duties. |

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| | |

| |[pic]C. |

| |The auditor will probably assess control risk at the maximum irrespective of the quality of the programmed application |

| |controls. |

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| |[pic]D. |

| |The auditor could assess control risk as low for an assertion if significant performance reviews are placed in operation. |

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|5. |After obtaining an understanding of internal control and assessing control risk the auditors decided not to perform |

| |additional tests of controls. The auditor most likely concluded that the |

| |[pic]A. |

| |additional evidence to support a further reduction in control risk was not cost beneficial to obtain. |

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| | |

| |[pic]B. |

| |assessed level of inherent risk exceeded the assessed level of control risk. |

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| |[pic]C. |

| |internal controls were properly designed and justifiably may be relied upon. |

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| |[pic]D. |

| |evidence obtained through tests of controls would not support an increased level control risk. |

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|6. |When an auditor increases the planned assessed level of control risk because certain control procedures were determined to be|

| |ineffective, the auditor would most likely increase the |

| |[pic]A. |

| |extent of tests of controls. |

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| |[pic]B. |

| |planned level of detection risk. |

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| |[pic]C. |

| |planned level of substantive tests. |

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| |[pic]D. |

| |level of inherent risk. |

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|7. |Which of the following is not a step in an auditor's decision to asses control risk at below the maximum? |

| |[pic]A. |

| |Evaluate the effectiveness of the internal control procedures with tests of controls. |

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| |[pic]B. |

| |Obtain an understanding of the entity's accounting system and control environment. |

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| |[pic]C. |

| |Perform tests of details of transactions to detect material misstatements in the financial statements. |

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| |[pic]D. |

| |Consider whether control procedures can have a pervasive effect on financial statement assertions. |

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|8. |The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the risk that |

| |[pic]A. |

| |specified controls requiring segregation of duties may be circumvented by collusion. |

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| | |

| |[pic]B. |

| |entity policies may be overridden by senior management. |

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| |[pic]C. |

| |tests of controls may fail to identify procedures relevant to assertions. |

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| |[pic]D. |

| |material misstatements may exist in the financial statement assertions. |

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|9. |A procedure that would most likely be used by an auditor in performing tests of control procedures that involve segregation |

| |of functions and that leave no transaction trail is |

| |[pic]A. |

| |inspection. |

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| |[pic]B. |

| |observation. |

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| |[pic]C. |

| |reperformance. |

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| |[pic]D. |

| |reconciliation. |

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|10. |If an auditor decides to assess control risk as low based on computer application control procedures, which of the following|

| |would not be part of the auditor's strategy for testing controls? |

| |[pic]A. |

| |testing the effectiveness of computer general control procedures |

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| |[pic]B. |

| |testing the effectiveness of management controls over computer output |

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| |[pic]C. |

| |testing the effectiveness of manual follow-up procedures |

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| |[pic]D. |

| |testing the effectiveness of computer application control procedures |

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|11. |When control risk is assessed at the maximum level for all financial statement assertions, an auditor should document the |

| |auditor's |

| |[pic]A. |

| |conclusion that control risk is at the maximum level – no; basis for concluding that control risk is at the maximum level – |

| |no. |

| | |

| | |

| |[pic]B. |

| |conclusion that control risk is at the maximum level – no; basis for concluding that control risk is at the maximum level – |

| |yes. |

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| | |

| |[pic]C. |

| |conclusion that control risk is at the maximum level – yes; basis for concluding that control risk is at the maximum level –|

| |no. |

| | |

| | |

| |[pic]D. |

| |conclusion that control risk is at the maximum level – yes; basis for concluding that control risk is at the maximum level –|

| |yes. |

| | |

|12. |If an auditor submits test data on an on-line, real-time basis to test computer application controls, this is most likely |

| |done as part of which of the following approaches to testing controls? |

| |[pic]A. |

| |parallel simulation |

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| |[pic]B. |

| |test data |

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| |[pic]C. |

| |integrated test facility |

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| |[pic]D. |

| |systems control audit review file |

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|13. |If the auditor assessed control risk as low for an assertion based on tests performed during the first 10 months of the |

| |year, which of the following would be LEAST LIKELY to be performed to update the auditor's conclusion about control risk? |

| |[pic]A. |

| |The auditor would consider the significance of the assertion involved. |

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| |[pic]B. |

| |The auditor would consider the results of the tests of controls used to make that evaluation. |

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| |[pic]C. |

| |The auditor would consider the evidential matter about design or operation that may result from substantive test performed |

| |in the remaining period. |

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| |[pic]D. |

| |The auditor would consider the changes in the industry and the entity's operating environment. |

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|14. |Which of the following factors would generally NOT influence the auditor's decision about sample size when making decisions |

| |about the extent of tests of controls? |

| |[pic]A. |

| |the nature of the control |

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| |[pic]B. |

| |the operating effectiveness of the control environment |

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| |[pic]C. |

| |the frequency of operation of the control |

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| |[pic]D. |

| |the importance of the control |

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|15. |A dual-purpose test normally involves: |

| |[pic]A. |

| |performing analytical procedures and tests of controls simultaneously. |

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| |[pic]B. |

| |using the same evidence to draw a conclusion for tests of controls and for substantive tests. |

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| |[pic]C. |

| |using the same evidence to draw a conclusion about tests of controls and to develop a preliminary audit strategy. |

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| |[pic]D. |

| |performing tests of details of transactions and analytical procedures simultaneously. |

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|16. |An auditor makes the following assessments of internal controls for material transaction classes: |

| |•     Completeness assertion related to credit sales as high |

| |•     Existence and Occurrence assertion related to credit sales as low |

| |•     Completeness assertion related to the cash receipts function as low |

| |•     Existence and Occurrence assertion related to the cash receipts function as high |

| |•     Completeness assertion related to the sales returns function as low |

| |•     Existence and Occurrence assertion related to the sales and returns function as high |

| | |

| |Based on these assessments the auditor is likely to conservatively set control risk for the existence of accounts receivable|

| |at: |

| |[pic]A. |

| |low. |

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| |[pic]B. |

| |moderate. |

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| |[pic]C. |

| |high. |

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| |[pic]D. |

| |maximum. |

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|17. |A material weakness in internal controls is one in which: |

| |[pic]A. |

| |there is less than a remote chance that a misstatement that is more than inconsequential will occur. |

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| | |

| |[pic]B. |

| |there is more than a remote chance that a misstatement that is more than inconsequential will occur. |

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| |[pic]C. |

| |there is less than a remote chance that a material misstatement will occur. |

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| | |

| |[pic]D. |

| |there is more than a remote chance that a material misstatement will occur. |

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|18. |For a private company which of the following statements is true about reporting deficiencies in internal controls? |

| |[pic]A. |

| |reporting in the auditor's report – none; reporting to the audit committee – only material weaknesses |

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| |[pic]B. |

| |reporting in the auditor's report – none; reporting to the audit committee – both significant deficiencies and only |

| |weaknesses |

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| |[pic]C. |

| |reporting in the auditor's report – only material weaknesses; reporting to the audit committee – both significant |

| |deficiencies and only weaknesses |

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| |[pic]D. |

| |reporting in the auditor's report – only material weaknesses; reporting to the audit committee – only material weaknesses |

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LATIHAN SOAL BAB 12

|1. |Which of the following best describes the steps involved in assessing the risk of material misstatements? |

| |[pic]A. |

| |(1) Evaluate the type of potential misstatements that can occur, (2) evaluate the magnitude of potential misstatements, (3) |

| |evaluate the likelihood of potential misstatements. |

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| |[pic]B. |

| |(1) Assess inherent risk, (2) assess control risk, (3) assess detection risk. |

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| |[pic]C. |

| |(1) Evaluate the magnitude of potential misstatements, (2) evaluate the likelihood of potential misstatements. |

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| |[pic]D. |

| |(1) Assess inherent risk, (2) assess control risk, (3) assess analytical procedures risk, (4) assess test of details risk. |

| | |

|2. |A construction industry client uses the percentage of completion method to recognize revenue and expense on current projects.|

| |Which of the following best describes the types of potential misstatements that the auditor should be concerned about? |

| |[pic]A. |

| |It is possible that inventory is overstated. The auditor should be alert to problems with the existence and occurrence or |

| |valuation and allocation of inventory. |

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| |[pic]B. |

| |Significant revenues, expense, assets and liabilities arise from this accounting estimate. The auditor should be alert for |

| |problems with the valuation and allocation assertion. |

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| |[pic]C. |

| |A weak control environment may have a pervasive impact on many assertions. |

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| |[pic]D. |

| |Weak industry trends might impact the completeness of revenues. |

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|3. |Analytical procedures for a retailer show significant increases in both profit margins and inventory turn days. Which of the |

| |following best describes the types of potential misstatements that the auditor should be concerned about? |

| |[pic]A. |

| |The auditor should be concerned about revenue recognition problems. |

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| | |

| |[pic]B. |

| |The auditor should be concerned about the completeness of inventory. |

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| |[pic]C. |

| |The auditor should be concerned about the existence of inventory. |

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| |[pic]D. |

| |The auditor should be concerned about the completeness of revenues. |

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|4. |If the auditor plans to following a primarily substantive approach detection risk is normally assessed as: |

| |[pic]A. |

| |maximum or moderate |

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| |[pic]B. |

| |high or moderate |

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| |[pic]C. |

| |moderate or low |

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| |[pic]D. |

| |low or very low |

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|5. |If the auditor plans to follow a lower assessed level of control risk approach the auditor will usually plan: |

| |[pic]A. |

| |less extensive substantive tests at year-end. |

| | |

| | |

| |[pic]B. |

| |more extensive substantive tests at year-end. |

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| |[pic]C. |

| |less extensive substantive tests at an interim date. |

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| |[pic]D. |

| |more extensive substantive tests at an interim date. |

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|6. |Which of the following best contrasts tests of controls and substantive tests? |

| |[pic]A. |

| |Tests of controls are usually performed at interim and substantive tests are usually performed at year-end. |

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| | |

| |[pic]B. |

| |Both tests of controls and substantive tests are primarily designed to provide evidence about control risk. |

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| |[pic]C. |

| |Tests of control are designed to draw a conclusion about frequency of deviations from proscribed controls and substantive |

| |tests are designed to draw conclusions about monetary errors. |

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| |[pic]D. |

| |Both tests of controls and substantive tests are always required by GAAS. |

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|7. |Generalized audit software is normally NOT designed to perform which of the following? |

| |[pic]A. |

| |Reconcile detail audit data with the general ledger. |

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| |[pic]B. |

| |Perform tests on an entire population. |

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| |[pic]C. |

| |Select and print audit samples. |

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| |[pic]D. |

| |Assess detection risk. |

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|8. |Which of the following would NOT describe the nature of a substantive test? |

| |[pic]A. |

| |initial procedures |

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| |[pic]B. |

| |tests of details of accounting estimates |

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| |[pic]C. |

| |tests of details of disclosures |

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| |[pic]D. |

| |risk assessment procedures |

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|9. |If an auditor sends a confirmation of a customers balance in accounts receivables, this best described as a(n): |

| |[pic]A. |

| |initial procedure. |

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| |[pic]B. |

| |analytical procedure. |

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| |[pic]C. |

| |test of details of balances. |

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| |[pic]D. |

| |test of details of accounting estimates. |

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|10. |Which of the following factors would tend to increase sample sizes? |

| |[pic]A. |

| |The audit population is homogeneous. |

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| | |

| |[pic]B. |

| |The auditor is willing to accept a large amount of tolerable misstatement. |

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| |[pic]C. |

| |The audit population is a large audit population. |

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| |[pic]D. |

| |The auditor is willing to accept a high level of detection risk. |

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|11. |Which of the following would normally NOT be performed when auditing an accounting estimate? |

| |[pic]A. |

| |Send a confirmation or obtain evidence from an outside third party. |

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| |[pic]B. |

| |Perform procedures to review and test management's process in making the estimate. |

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| |[pic]C. |

| |Prepare an independent expectation of the estimate. |

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| |[pic]D. |

| |Review subsequent transactions and events occurring prior to completing the audit that pertain to the estimate. |

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|12. |As the acceptable level of detection risk decreases, the assurance directly provided from |

| |[pic]A. |

| |substantive tests should increase. |

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| |[pic]B. |

| |substantive tests should decrease. |

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| |[pic]C. |

| |tests of controls should increase. |

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| |[pic]D. |

| |tests of controls should decrease. |

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|13. |As the acceptable level of detection risk decreases, an auditor may change the |

| |[pic]A. |

| |timing of substantive tests by performing them at an interim date rather than at year-end. |

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| | |

| |[pic]B. |

| |nature of substantive tests from a less effective to a more effective procedure. |

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| |[pic]C. |

| |timing of tests of controls by performing them at several dates rather than at one time. |

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| |[pic]D. |

| |assessed level on inherent risk to a higher amount. |

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|14. |Which of the following conditions does NOT need to exist in order for the auditor to consider moving the timing of a |

| |substantive test to an interim date? |

| |[pic]A. |

| |Internal control during the interim period and year-end is effective. |

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| |[pic]B. |

| |There are no conditions or circumstances that might predispose management to misstate the financial statements in the |

| |remaining period. |

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| |[pic]C. |

| |Inherent risk would be assessed as low. |

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| |[pic]D. |

| |The year-end balances of the accounts examined at the interim date are reasonably predictable as to amount, relative |

| |significance, and composition. |

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|15. |If detection risk is assessed as low the auditor will normally consider which of the following? |

| |[pic]A. |

| |Perform more effective audit procedures, with larger samples sizes, at year-end. |

| | |

| | |

| |[pic]B. |

| |Perform more effective audit procedures, with smaller samples sizes, at year-end. |

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| | |

| |[pic]C. |

| |Perform less effective audit procedures, with smaller samples sizes, at an interim date. |

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| | |

| |[pic]D. |

| |Perform more effective audit procedures, with smaller samples sizes, at an interim date. |

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|16. |An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of transaction and |

| |account balances usually is determined by the |

| |[pic]A. |

| |availability of data aggregated at a high level. |

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| |[pic]B. |

| |relative effectiveness of the tests. |

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| |[pic]C. |

| |timing of tests performed at the balance sheet date. |

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| |[pic]D. |

| |auditor's familiarity with industry trends. |

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|17. |Auditors try to identify predictable relationships when using analytical procedures. Relationships involving transactions |

| |form which of the following accounts most likely would yield the highest level of evidence using analytical procedures? |

| |[pic]A. |

| |total revenues and number of sales for a retail grocer |

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| |[pic]B. |

| |total revenues, the number of rooms, occupancy rates, and average room rate for a hotel |

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| |[pic]C. |

| |total revenues and the number of subscribers for a magazine |

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| |[pic]D. |

| |total interest expense and the average principal balance outstanding for a construction company building new homes |

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|18. |After identifying related party transactions, an auditor most likely would |

| |[pic]A. |

| |substantiate that the transactions were consummated on terms equivalent to those prevailing in arms-length transactions. |

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| | |

| |[pic]B. |

| |discuss the implications of the transactions with third parties, such as the entity's attorney and bankers. |

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| |[pic]C. |

| |determine whether the transactions were approved by the board of directors or other appropriate officials. |

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| |[pic]D. |

| |ascertain whether the transactions would have occurred if the parties had not been related. |

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|19. |The purpose of an audit program for substantive tests is to: |

| |[pic]A. |

| |describe the nature of procedures to be performed - yes; describe the timing of substantive – yes; ensure that audit |

| |evidence is obtained for all audit objectives – yes. |

| | |

| | |

| |[pic]B. |

| |describe the nature of procedures to be performed - yes; describe the timing of substantive – yes; ensure that audit |

| |evidence is obtained for all audit objectives – not necessarily. |

| | |

| | |

| |[pic]C. |

| |describe the nature of procedures to be performed - yes; describe the timing of substantive – not necessarily; ensure that |

| |audit evidence is obtained for all audit objectives – yes. |

| | |

| | |

| |[pic]D. |

| |describe the nature of procedures to be performed - not necessarily; describe the timing of substantive – not necessarily; |

| |ensure that audit evidence is obtained for all audit objectives – yes. |

| | |

Latihan Chapter 13

|1. |In the audit of Fine Host Corporation, the SEC found that the audit team, under the supervision of John Bacsik, |

| |[pic]A. |

| |did not project the results of the sample on the entire population. |

| | |

| | |

| |[pic]B. |

| |used a sample size that was too small. |

| | |

| | |

| |[pic]C. |

| |did not use statistical sampling for substantive tests. |

| | |

| | |

| |[pic]D. |

| |did not use statistical sampling for tests of controls. |

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|2. |An advantage to using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods |

| |[pic]A. |

| |afford greater assurance than a nonstatistical sample of equal size. |

| | |

| | |

| |[pic]B. |

| |provide an objective basis for quantitatively evaluating sample risks. |

| | |

| | |

| |[pic]C. |

| |can more easily convert the sample into a dual purpose test useful for substantive testing. |

| | |

| | |

| |[pic]D. |

| |eliminate the need to use judgment in determining appropriate sample sizes. |

| | |

|3. |The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the |

| |[pic]A. |

| |effectiveness of the audit. |

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| | |

| |[pic]B. |

| |efficiency of the audit. |

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| | |

| |[pic]C. |

| |preliminary estimates of materiality levels. |

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| | |

| |[pic]D. |

| |allowable risk of tolerable error. |

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|4. |Which of the following is NOT related to nonsampling risk? |

| |[pic]A. |

| |human mistakes, such as failing to recognize errors in documents |

| | |

| | |

| |[pic]B. |

| |applying auditing procedures inappropriate to the audit objective |

| | |

| | |

| |[pic]C. |

| |using nonstatistical sampling for procedures such as sending confirmations |

| | |

| | |

| |[pic]D. |

| |misinterpreting the results of a sample |

| | |

|5. |The purpose of an audit sample for tests of controls is to: |

| |[pic]A. |

| |determine the estimated risk of assessing control risk too low. |

| | |

| | |

| |[pic]B. |

| |determine the estimated risk of assessing control risk too high. |

| | |

| | |

| |[pic]C. |

| |determine the estimated rate of deviations from prescribed control procedures in a population. |

| | |

| | |

| |[pic]D. |

| |determine the estimated rate of deviation from prescribed control procedures in a sample. |

| | |

|6. |To determine the sample size for a test of controls, an auditor should consider nature of the control, the frequency of |

| |operation of the control, the importance of the control, the tolerable deviation rate, the allowable risk of assessing |

| |control risk too low, the population size and the |

| |[pic]A. |

| |expected deviation rate. |

| | |

| | |

| |[pic]B. |

| |upper precision limit. |

| | |

| | |

| |[pic]C. |

| |risk of incorrect acceptance. |

| | |

| | |

| |[pic]D. |

| |risk of incorrect rejection. |

| | |

|7. |If an auditor plans to assess control risk as low, which of the following best describes a reasonable range for the auditor's|

| |tolerable deviation rate? |

| |[pic]A. |

| |1% - 5% |

| | |

| | |

| |[pic]B. |

| |2% - 7% |

| | |

| | |

| |[pic]C. |

| |6% - 12% |

| | |

| | |

| |[pic]D. |

| |11% - 20% |

| | |

|8. |Which of the following factors is associated with smaller sample sizes for tests of controls? |

| |[pic]A. |

| |The control is a manual control. |

| | |

| | |

| |[pic]B. |

| |The control operates frequently (e.g., on every transaction) |

| | |

| | |

| |[pic]C. |

| |The auditor determines that he or she can accept a small amount of sampling risk – the risk of assessing control risk too |

| |low. |

| | |

| | |

| |[pic]D. |

| |The auditor determines that he or she can accept a larger tolerable deviation rate. |

| | |

|9. |Which of the following statements is correct concerning audit sampling for tests of controls? |

| |[pic]A. |

| |The population size has little or no effect on determining sample size except for small populations (population sizes less |

| |than 5,000). |

| | |

| | |

| |[pic]B. |

| |The expected population deviation rate has little or no effect on determining sample size except for small populations |

| |(population sizes less than 5,000). |

| | |

| | |

| |[pic]C. |

| |For larger population sizes, as the population size doubles the sample size also should double. |

| | |

| | |

| |[pic]D. |

| |For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases. |

| | |

|10. |In planning a statistical sample for a test of controls, an auditor increased the expected population deviation rate from |

| |the prior year's rate because of the results of the prior year's tests of controls and the overall control environment. If |

| |other factors remain constant, compared to last year this will cause an increase in |

| |[pic]A. |

| |tolerable rate. |

| | |

| | |

| |[pic]B. |

| |allowance for sampling risk. |

| | |

| | |

| |[pic]C. |

| |risk of assessing control risk too low. |

| | |

| | |

| |[pic]D. |

| |sample size. |

| | |

|11. |An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal control |

| |procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this |

| |limitation and |

| |[pic]A. |

| |evaluate the results as if the sample size had been 19. |

| | |

| | |

| |[pic]B. |

| |treat the missing check as a deviation for the purpose of evaluating the sample. |

| | |

| | |

| |[pic]C. |

| |treat the missing check in the same manner as the majority of the other 19 checks, that is, countersigned or not. |

| | |

| | |

| |[pic]D. |

| |choose another check to replace the missing check in the sample. |

| | |

|12. |In the audit of the financial statements of Delta Company, the auditor determines that in performing a test of controls, the|

| |deviation rate in the sample does not support the planned control risk when, in fact, the true deviation rate in the |

| |population does support the planned control risk. This situation illustrates the risk of |

| |[pic]A. |

| |assessing control risk too high. |

| | |

| | |

| |[pic]B. |

| |assessing control risk too low. |

| | |

| | |

| |[pic]C. |

| |incorrect rejection. |

| | |

| | |

| |[pic]D. |

| |incorrect acceptance. |

| | |

|13. |An auditor may use either of two statistical sampling approaches in substantive testing, probability-proportional-to-size |

| |(PPS) sampling or classical variables sampling. PPS sampling is primarily applicable in testing for |

| |[pic]A. |

| |the number of errors in year-end sales cutoff. |

| | |

| | |

| |[pic]B. |

| |an overstatement of accounts receivable. |

| | |

| | |

| |[pic]C. |

| |an understatement of accounts payable. |

| | |

| | |

| |[pic]D. |

| |proper segregation of duties in accounts receivable collections. |

| | |

|14. |In a probability-proportional-to-size sample with a sampling interval of $10,000, an auditor discovered that a selected |

| |account receivable with a recorded amount of $5,000 had an audit amount of $2,000. The projected misstatement of this sample|

| |was |

| |[pic]A. |

| |$3,000. |

| | |

| | |

| |[pic]B. |

| |$4,000. |

| | |

| | |

| |[pic]C. |

| |$6,000. |

| | |

| | |

| |[pic]D. |

| |$8,000. |

| | |

|15. |Which of the following most likely would be an advantage in using classical variables sampling rather than |

| |probability-proportional-to-size (PPS) sampling? |

| |[pic]A. |

| |An estimate of the standard deviation of the population's recorded amounts is not required. |

| | |

| | |

| |[pic]B. |

| |The auditor rarely needs the assistance of a computer program to design an efficient sample. |

| | |

| | |

| |[pic]C. |

| |Inclusion of zero and negative balances generally does not require special design considerations. |

| | |

| | |

| |[pic]D. |

| |Any amount that is individually significant is automatically identified and selected. |

| | |

|16. |While performing a substantive test of details during an audit, the auditor determined that the sample results supported the|

| |conclusion that the recorded account balance was materially misstated. It was, in fact, not materially misstated. This |

| |situation illustrates the risk of |

| |[pic]A. |

| |incorrect rejection. |

| | |

| | |

| |[pic]B. |

| |incorrect acceptance. |

| | |

| | |

| |[pic]C. |

| |assessing control risk too low. |

| | |

| | |

| |[pic]D. |

| |assessing control risk too high. |

| | |

|17. |An advantage of using statistical sampling techniques is that such techniques |

| |[pic]A. |

| |mathematically measure and control sampling risk. |

| | |

| | |

| |[pic]B. |

| |eliminate the need for judgmental decisions. |

| | |

| | |

| |[pic]C. |

| |define the values of tolerable error and risk of incorrect acceptance required to provide audit satisfaction. |

| | |

| | |

| |[pic]D. |

| |have been established in the courts to be superior to judgment sampling. |

| | |

|18. |When planning a statistical PPS sample, which of the following factors would normally increase sample size compared to the |

| |same population for the previous year? |

| |[pic]A. |

| |The population size in terms of book value has decreased. |

| | |

| | |

| |[pic]B. |

| |The auditor decides to accept a larger amount of tolerable misstatement. |

| | |

| | |

| |[pic]C. |

| |The auditor decides to accept a smaller amount of risk of incorrect acceptance. |

| | |

| | |

| |[pic]D. |

| |The auditor estimates that the anticipated misstatement in the population has decreased. |

| | |

|19. |The auditor's decision about the risk of incorrect acceptance affects which of the following factors in a statistical PPS |

| |sample? |

| |[pic]A. |

| |tolerable misstatement |

| | |

| | |

| |[pic]B. |

| |reliability factor |

| | |

| | |

| |[pic]C. |

| |book value of the population |

| | |

| | |

| |[pic]D. |

| |anticipated misstatement |

| | |

|20. |An auditor uses nonstatistical ratio estimation to evaluate the results of a sample.   The population book value was |

| |$2,000,000 and contained 350 items. The auditor selected 100 items with a book value of $500,000. The audited value of the |

| |sample was $480,000. The estimated audited value of the population is: |

| |[pic]A. |

| |$1,980,000. |

| | |

| | |

| |[pic]B. |

| |$1,930,000. |

| | |

| | |

| |[pic]C. |

| |$1,920,000. |

| | |

| | |

| |[pic]D. |

| |$1,900,000. |

| | |

Latihan Chapter 14

|1. |An auditor wants to determine that all sales adjustments are recorded. This relates to which of the following audit |

| |objectives? |

| |[pic]A. |

| |the transaction class audit objective for occurrence |

| | |

| | |

| |[pic]B. |

| |the transaction class audit objective for accuracy |

| | |

| | |

| |[pic]C. |

| |the account balance audit objective for valuation |

| | |

| | |

| |[pic]D. |

| |the transaction class audit objective for completeness |

| | |

|2. |If the auditor is concerned about the risk of fraud in the revenue cycle, which of the following best describes auditor |

| |concerns about eh potential for fraud related to credit sales? |

| |[pic]A. |

| |management fraud – high risk; employee fraud – high risk |

| | |

| | |

| |[pic]B. |

| |management fraud – high risk; employee fraud – low risk |

| | |

| | |

| |[pic]C. |

| |management fraud – low risk; employee fraud – high risk |

| | |

| | |

| |[pic]D. |

| |management fraud – low risk; employee fraud – low risk |

| | |

|3. |The auditor is studying a ratio of accounts receivable growth rate to the growth rate of sales. Which of the following |

| |indicates a potential risk of collection problems in accounts receivable? |

| |[pic]A. |

| |Sales grew by 10% and receivables grew by 11% from year one to year two. |

| | |

| | |

| |[pic]B. |

| |Sales declines by 2% and receivables declined by 7% from year one to year two. |

| | |

| | |

| |[pic]C. |

| |Sales grew by 10% and receivables declined by 2% from year one to year two. |

| | |

| | |

| |[pic]D. |

| |Sales grew by 5% and receivables grew by 17% from year one to year two. |

| | |

|4. |Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize |

| |sales volume at the expense of high bad debt write-offs? |

| |[pic]A. |

| |Employees responsible for authorizing sales and bad-debt write offs are denied access to cash. |

| | |

| | |

| |[pic]B. |

| |Employees who review exception reports based on the computer matching of shipping information and data on sales invoices do |

| |not have the authority to write-off bad debts. |

| | |

| | |

| |[pic]C. |

| |Employees who approve credit limits included in a master customer file are separated from the sales function. |

| | |

| | |

| |[pic]D. |

| |The accounts receivable master file (accounts receivable subsidiary ledger) is reconciled with the general ledger control |

| |account by an employee independent of the authorization of credit. |

| | |

|5. |Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded? |

| |[pic]A. |

| |The computer compares sales orders with a customer's credit limit and current account balances. |

| | |

| | |

| |[pic]B. |

| |The accounts receivable master file (accounts receivable subsidiary ledger) is reconciled with the general ledger control |

| |account. |

| | |

| | |

| |[pic]C. |

| |The accounting department supervisor controls the mailing of monthly statements to customer and investigates any difference |

| |reported by customers. |

| | |

| | |

| |[pic]D. |

| |The computer prints a report of all shipments that have not been matched with a sales invoice. |

| | |

|6. |Which of the following internal control procedures most likely would assure that no fictitious billings have been posted to |

| |the accounts receivable ledger? |

| |[pic]A. |

| |The computer compares the sum of daily sales with the total of posting (debits) to the accounts receivable master file. |

| | |

| | |

| |[pic]B. |

| |The computer compares each sales invoice with supporting shipping information. |

| | |

| | |

| |[pic]C. |

| |The accounts receivable master file (accounts receivable subsidiary ledger) is reconciled with the general ledger control |

| |account. |

| | |

| | |

| |[pic]D. |

| |Each shipment on credit is supported by prenumbered sales invoice. |

| | |

|7. |An auditor most likely would review an entity's periodic accounting for the numerical sequence of shipping documents and |

| |invoices to support management's financial statement assertion of |

| |[pic]A. |

| |existence or occurrence. |

| | |

| | |

| |[pic]B. |

| |rights and obligations. |

| | |

| | |

| |[pic]C. |

| |valuation or allocation. |

| | |

| | |

| |[pic]D. |

| |completeness. |

| | |

|8. |Sound internal control procedures dictate that defective merchandise returned by customers should be presented initially to |

| |the |

| |[pic]A. |

| |accounts receivable supervisor. |

| | |

| | |

| |[pic]B. |

| |receiving clerk. |

| | |

| | |

| |[pic]C. |

| |sales management. |

| | |

| | |

| |[pic]D. |

| |sales clerk. |

| | |

|9. |An auditor would consider a cashier's job description to contain compatible duties if the cashier receives remittances from |

| |the mailroom and also prepares the |

| |[pic]A. |

| |prelist of individual checks. |

| | |

| | |

| |[pic]B. |

| |monthly bank reconciliation. |

| | |

| | |

| |[pic]C. |

| |daily deposit slip. |

| | |

| | |

| |[pic]D. |

| |remittance advices. |

| | |

|10. |The questions below appear on an Internal Control Questionnaire. Which question, if answered NO, would have disclosed|

| |that the cashier diverted cash received over the counter from a customer to his or her own use and wrote off the |

| |receivable as a bad debt? |

| |[pic]A. |

| |Are aging schedules of accounts receivable prepared periodically and reviewed by a responsible official? |

| | |

| | |

| |[pic]B. |

| |Are journal entries approved by a responsible official? |

| | |

| | |

| |[pic]C. |

| |Are receipts given directly to the cashier by the person who opens the mail? |

| | |

| | |

| |[pic]D. |

| |Are remittance advices, letter, or envelopes that accompany receipts separated and given directly to the accounting |

| |department? |

| | |

|11. |In updating a computerized accounts receivable file, which one of the following would be used as a batch control to |

| |verify the accuracy of posting cash remittances? |

| |[pic]A. |

| |the sum of net sales. |

| | |

| | |

| |[pic]B. |

| |the sum of cash deposits less discounts taken by customers |

| | |

| | |

| |[pic]C. |

| |the sum of cash deposits plus discounts taken by customers |

| | |

| | |

| |[pic]D. |

| |the sum of net sales plus discounts taken by customers |

| | |

|12. |An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee |

| |misappropriation of cash by using |

| |[pic]A. |

| |employee fidelity bonds. |

| | |

| | |

| |[pic]B. |

| |independently prepared mailroom prelists. |

| | |

| | |

| |[pic]C. |

| |daily check summaries. |

| | |

| | |

| |[pic]D. |

| |a bank lockbox system. |

| | |

|13. |Immediately upon receipt of cash, a responsible employee should |

| |[pic]A. |

| |prepare a prelisting of cash received or a remittance listing. |

| | |

| | |

| |[pic]B. |

| |record the amount in the cash receipts journal. |

| | |

| | |

| |[pic]C. |

| |update the subsidiary accounts receivable records. |

| | |

| | |

| |[pic]D. |

| |prepare a deposit slip in triplicate. |

| | |

|14. |An auditor's purpose in reviewing credit ratings of customers with delinquent accounts receivable is most likely to |

| |obtain evidence concerning management's assertions about |

| |[pic]A. |

| |presentation and disclosure. |

| | |

| | |

| |[pic]B. |

| |existence or occurrence. |

| | |

| | |

| |[pic]C. |

| |rights and obligations. |

| | |

| | |

| |[pic]D. |

| |valuation or allocation. |

| | |

|15. |The negative request form of accounts receivable confirmation is useful particularly when the |

| |[pic]A. |

| |assess level of control risk for accounts receivable is high, the number of small balances is many, and the |

| |consideration by the recipient is likely |

| | |

| | |

| |[pic]B. |

| |assess level of control risk for accounts receivable is high, the number of small balances is few, and the |

| |consideration by the recipient is likely |

| | |

| | |

| |[pic]C. |

| |assess level of control risk for accounts receivable is low, the number of small balances is many, and the |

| |consideration by the recipient is likely |

| | |

| | |

| |[pic]D. |

| |assess level of control risk for accounts receivable is low, the number of small balances is many, and the |

| |consideration by the recipient is unlikely |

| | |

|16. |Which of the following most likely would be detected by an auditor's review of a client's sales cutoff? |

| |[pic]A. |

| |unrecorded sales for the year |

| | |

| | |

| |[pic]B. |

| |lapping of year-end accounts receivable |

| | |

| | |

| |[pic]C. |

| |excessive sales discounts |

| | |

| | |

| |[pic]D. |

| |unauthorized goods returned for credit |

| | |

|17. |Which of the following most likely would give the most assurance concerning the valuation assertion of accounts |

| |receivable? |

| |[pic]A. |

| |Tracing amounts in the subsidiary ledger to details on shipping documents. |

| | |

| | |

| |[pic]B. |

| |Comparing receivable turnover ratios to industry statistics for reasonableness. |

| | |

| | |

| |[pic]C. |

| |Inquiring about receivables pledged under loan agreements. |

| | |

| | |

| |[pic]D. |

| |Assessing the allowance for uncollectable accounts for reasonableness. |

| | |

|18. |Cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent |

| |year provide assurance about management's assertion of |

| |[pic]A. |

| |presentation. |

| | |

| | |

| |[pic]B. |

| |completeness. |

| | |

| | |

| |[pic]C. |

| |rights. |

| | |

| | |

| |[pic]D. |

| |existence. |

| | |

|19. |When sending positive confirmations, which of the following would NOT be an appropriate way to address non-response by a |

| |customer? |

| |[pic]A. |

| |Search for evidence of subsequent cash receipt from the customer. |

| | |

| | |

| |[pic]B. |

| |Match open invoices to underlying bills of lading and customer's orders. |

| | |

| | |

| |[pic]C. |

| |Send negative confirmations in the place of positive confirmations |

| | |

| | |

| |[pic]D. |

| |Assume that the non-response is 100% in error and project the misstatement on the population. |

| | |

LATIHAN CHAPTER 15.

|1. |Which of the following industries would have the greatest concerns about purchases cutoff at month end, unrecorded |

| |liabilities, and accounting for advertising allowances provided by vendors? |

| |[pic]A. |

| |manufacturer of construction equipment. |

| | |

| | |

| |[pic]B. |

| |retail grocer |

| | |

| | |

| |[pic]C. |

| |a hotel |

| | |

| | |

| |[pic]D. |

| |a local school district |

| | |

|2. |If the auditor is concerned about the risk of fraud in the expenditure cycle, which of the following best describes auditor |

| |concerns about the potential for fraud in the expenditure cycle? |

| |[pic]A. |

| |management fraud – high risk; employee fraud – high risk |

| | |

| | |

| |[pic]B. |

| |management fraud – high risk; employee fraud – low risk |

| | |

| | |

| |[pic]C. |

| |management fraud – low risk; employee fraud – high risk |

| | |

| | |

| |[pic]D. |

| |management fraud – low risk; employee fraud – low risk |

| | |

|3. |The auditor is studying a ratio of accounts payable turn days. Which of the following indicates a potential risk of |

| |unrecorded liabilities? |

| |[pic]A. |

| |Accounts payable turn days increased from 28 days to 45 days from year one to year two. |

| | |

| | |

| |[pic]B. |

| |Accounts payable turn days increased from 28 days to 30 days from year one to year two. |

| | |

| | |

| |[pic]C. |

| |Accounts payable turn days decreased from 28 days to 15 days from year one to year two. |

| | |

| | |

| |[pic]D. |

| |Accounts payable turn days decreased from 30 days to 25 days from year one to year two. |

| | |

|4. |The internal document commonly used to authorize the recording and payment of a credit purchase in the purchases journal is |

| |a: |

| |[pic]A. |

| |purchase requisition. |

| | |

| | |

| |[pic]B. |

| |purchase order. |

| | |

| | |

| |[pic]C. |

| |vendor's invoice. |

| | |

| | |

| |[pic]D. |

| |voucher. |

| | |

|5. |When goods are received, the computer would compare receiving information with information from which of the following |

| |documents and generate an exception report of any discrepancies? |

| |[pic]A. |

| |purchase order and purchase requisition information |

| | |

| | |

| |[pic]B. |

| |vendor's invoice information |

| | |

| | |

| |[pic]C. |

| |vendor's shipping document and purchase order information |

| | |

| | |

| |[pic]D. |

| |vendor's shipping document and vendor's invoice information |

| | |

|6. |Describe the programmed control procedure that provides assurance that all the merchandise for which the client was billed |

| |was received. Assume that the computer prepares an exception report and that follow-up procedures are effective. Programmed |

| |edit checks compare: |

| |[pic]A. |

| |quantities and prices on the voucher with quantities and prices on the purchase order. |

| | |

| | |

| |[pic]B. |

| |quantities on the voucher with quantities entered in receiving. |

| | |

| | |

| |[pic]C. |

| |quantities and prices on the voucher with quantities and prices on the vendor's invoice. |

| | |

| | |

| |[pic]D. |

| |quantities times price on the voucher with the amount of cash disbursements. |

| | |

|7. |Internal control is strengthened when the quantity of merchandise ordered is omitted from the purchasing information that can|

| |be accessed through the computer by the |

| |[pic]A. |

| |department that initiated the requisition. |

| | |

| | |

| |[pic]B. |

| |receiving department. |

| | |

| | |

| |[pic]C. |

| |purchasing agent. |

| | |

| | |

| |[pic]D. |

| |accounts payable department. |

| | |

|8. |Which of the following programmed control procedure would be most effective in assuring that recorded purchases are |

| |accurately recorded for transactions that actually occurred? |

| |[pic]A. |

| |The computer compares the quantity ordered from purchase order information with the quantity received from the receiving |

| |department. |

| | |

| | |

| |[pic]B. |

| |Vendor invoice information is compared with purchase order information. |

| | |

| | |

| |[pic]C. |

| |Receiving reports require the signature of the individual who authorized the purchase. |

| | |

| | |

| |[pic]D. |

| |The computer matches voucher information with information supporting purchase orders, receiving reports, and vendor's |

| |invoices. |

| | |

|9. |Which of the following programmed control procedures would be most effective in identifying unrecorded liabilities? |

| |[pic]A. |

| |An exception report identifies all purchase orders that have not been received. |

| | |

| | |

| |[pic]B. |

| |An exception report identifies all vendors' invoices that do not have a voucher. |

| | |

| | |

| |[pic]C. |

| |An exception report identifies all receivings that do not have a voucher. |

| | |

| | |

| |[pic]D. |

| |An exception report identifies all receivings that do not have a vendor's invoice. |

| | |

|10. |An accounts payable terminal operator at a subsidiary company fabricated false invoices from a fictitious vendor, and |

| |entered them in the parent company's accounts payable / cash disbursement system. Ten checks totaling $155,000 were issued |

| |to the vendor. What internal control objective was not achieved to allow the fraudulent misstatement discussed above? |

| |[pic]A. |

| |completeness |

| | |

| | |

| |[pic]B. |

| |cutoff |

| | |

| | |

| |[pic]C. |

| |occurrence |

| | |

| | |

| |[pic]D. |

| |classification |

| | |

| | |

| |[pic]E. |

| |accuracy |

| | |

|11. |Which of the following control procedures is not usually performed in the vouchers payable department? |

| |[pic]A. |

| |determining the mathematical accuracy of the vendor's invoice |

| | |

| | |

| |[pic]B. |

| |having an authorized person approve the voucher |

| | |

| | |

| |[pic]C. |

| |controlling the mailing of the check and remittance advice |

| | |

| | |

| |[pic]D. |

| |matching the receiving report with the purchase order |

| | |

|12. |Which of the following programmed control procedures would be most effective in preventing duplicate payments? |

| |[pic]A. |

| |No checks can be made payable to “cash” or “bearer.” |

| | |

| | |

| |[pic]B. |

| |Prenumbered checks are used and the computer prints an exception report of any breaks in sequence. |

| | |

| | |

| |[pic]C. |

| |After cash disbursement information is compared with uncanceled voucher information the voucher is electronically canceled. |

| | |

| | |

| |[pic]D. |

| |Run-to-run totals compare the beginning balance of the accounts payable file, less cash disbursements, with the ending |

| |accounts payable file. |

| | |

|13. |Which of the following auditing procedures is best for identifying unrecorded trade accounts payable? |

| |[pic]A. |

| |examining unusual relationships between monthly accounts payable balances and recorded cash payments |

| | |

| | |

| |[pic]B. |

| |reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet |

| |date |

| | |

| | |

| |[pic]C. |

| |investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are |

| |supported by receiving reports |

| | |

| | |

| |[pic]D. |

| |reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply |

| |to the prior period |

| | |

|14. |Which of the following best describes the auditor's responsibility to confirming accounts payable? |

| |[pic]A. |

| |Confirmation of accounts payable is required by generally accepted auditing standards. |

| | |

| | |

| |[pic]B. |

| |Confirmation of accounts payable is a matter of professional judgment and would normally be performed when detection risk is|

| |low. |

| | |

| | |

| |[pic]C. |

| |Confirmation of accounts payable is a matter of professional judgment and would normally be performed when detection risk is|

| |high. |

| | |

| | |

| |[pic]D. |

| |Confirmation of accounts payable is a matter of professional judgment and would normally be performed when control risk is |

| |low. |

| | |

|15. |An auditor decided to confirm accounts payable to accomplish a low level of detection risk for the completeness assertion. |

| |Which of the following is the most reasonable sampling plan? |

| |[pic]A. |

| |Confirm accounts payable with an emphasis on all vendors including zero and small balances. |

| | |

| | |

| |[pic]B. |

| |Confirm accounts payable with an emphasis on the largest account payables. |

| | |

| | |

| |[pic]C. |

| |Confirm accounts payable using probability-proportionate-to-size sampling. |

| | |

| | |

| |[pic]D. |

| |Confirm accounts payable with an emphasis on new vendors, irrespective of the size of the account balance. |

| | |

|16. |Which of the following procedures is least likely to be performed before the balance sheet date? |

| |[pic]A. |

| |testing of internal control over cash |

| | |

| | |

| |[pic]B. |

| |confirmation of receivables |

| | |

| | |

| |[pic]C. |

| |search for unrecorded liabilities |

| | |

| | |

| |[pic]D. |

| |observation of inventory |

| | |

LATIHAN Chapter 16

|1. |For which of the following companies would the auditor have the LEAST concern about the existence of inventory? |

| |[pic]A. |

| |manufacturer of construction equipment |

| | |

| | |

| |[pic]B. |

| |a retail grocer |

| | |

| | |

| |[pic]C. |

| |a computer manufacturer |

| | |

| | |

| |[pic]D. |

| |a hotel |

| | |

|2. |Which of the following would NOT be a signal that an audit client might have a possible problem with phantom inventory (the |

| |existence assertion)? |

| |[pic]A. |

| |inventory increasing faster than sales |

| | |

| | |

| |[pic]B. |

| |decreasing inventory turnover |

| | |

| | |

| |[pic]C. |

| |cost of goods sold on the books not agreeing with tax returns |

| | |

| | |

| |[pic]D. |

| |shipping cost increasing as a percentage of inventory |

| | |

|3. |Which of the following is NOT an important document that supports the recording of inventory in the production process? |

| |[pic]A. |

| |daily production reports |

| | |

| | |

| |[pic]B. |

| |material move tickets |

| | |

| | |

| |[pic]C. |

| |time tickets |

| | |

| | |

| |[pic]D. |

| |material issue slips |

| | |

|4. |Which of the following is an important control over the valuation of inventory? |

| |[pic]A. |

| |The computer accounts for prenumbered materials issues slips and reconciles slips with recording in daily production reports.|

| | |

| | |

| |[pic]B. |

| |The computer accounts for hours worked and hours charged to daily production reports. |

| | |

| | |

| |[pic]C. |

| |Signed inventory move tickets are used to control movement of goods through production department, with tickets reconciled to|

| |daily production reports and completed production reports. |

| | |

| | |

| |[pic]D. |

| |Production planning and control approves all production orders. |

| | |

|5. |Which one of the following controls will be most likely to discover that production costs are not recorded? |

| |[pic]A. |

| |The computer generates a report of all material issue slips, time tickets, and inventory move tickets that are not included |

| |in the daily production reports. |

| | |

| | |

| |[pic]B. |

| |The company has designed independent checks on the agreement of entries for the allocation of manufacturing costs to work in |

| |process with data on materials and labor usage in daily production activity reports. |

| | |

| | |

| |[pic]C. |

| |The company has designed independent checks on the agreement of entries for the transfer of work in process to finished goods|

| |with data in completed production reports. |

| | |

| | |

| |[pic]D. |

| |Management approves all overhead rates and standard costs |

| | |

|6. |A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is low, |

| |an auditor would probably |

| |[pic]A. |

| |insist that the client perform physical counts of inventory items several times during the year. |

| | |

| | |

| |[pic]B. |

| |apply gross profit tests to ascertain the reasonableness of the physical counts. |

| | |

| | |

| |[pic]C. |

| |increase the extent of tests of controls of the inventory cycle. |

| | |

| | |

| |[pic]D. |

| |request the client to schedule the physical inventory count at the end of the year. |

| | |

|7. |The primary objective of a CPA's observation of a client's physical inventory count is to |

| |[pic]A. |

| |discover whether a client has counted a particular inventory item or group of items. |

| | |

| | |

| |[pic]B. |

| |obtain direct knowledge that the inventory exists and has been properly counted. |

| | |

| | |

| |[pic]C. |

| |provide an appraisal of the quality of the merchandise on hand on the day of the physical count. |

| | |

| | |

| |[pic]D. |

| |allow the auditor to supervise the conduct of the count to obtain assurance that inventory quantities are reasonably |

| |accurate. |

| | |

|8. |Which one of the following procedures would NOT be appropriate for an auditor in discharging his or her responsibilities |

| |concerning the client's physical inventories? |

| |[pic]A. |

| |confirmation of goods in the hands of public warehouses |

| | |

| | |

| |[pic]B. |

| |supervising the taking of the annual physical inventory |

| | |

| | |

| |[pic]C. |

| |carrying out physical inventory procedures at an interim date |

| | |

| | |

| |[pic]D. |

| |obtaining written representation from the client as to the existence, quality, and dollar amount of the inventory |

| | |

|9. |Assume that the auditor has observed the physical inventory and concluded that all inventory quantities are valid. Which of |

| |the following procedure represents the best test of the valuation of inventory at FIFO? |

| |[pic]A. |

| |The auditor randomly selects vendor's invoices for tracing prices from vendor's invoices at the beginning of the year to |

| |prices on the extended inventory listing. |

| | |

| | |

| |[pic]B. |

| |The auditor focuses primarily on prices that have changed by more than 10% since the last year end, and on the pricing of all|

| |new products in inventory, and vouches prices on the extended inventory listing back to vendor's invoices near year-end. |

| | |

| | |

| |[pic]C. |

| |The auditor randomly selects items from the inventory list for vouching prices on an extended inventory listing back to prior|

| |year's working papers. |

| | |

| | |

| |[pic]D. |

| |The auditor randomly selects vendor's invoices for tracing prices from vendor's invoices near the end of the year to prices |

| |on the extended inventory listing. |

| | |

|10. |If a client has a strong perpetual inventory system, the auditor is likely to plan: |

| |[pic]A. |

| |inventory observations at an interim date. |

| | |

| | |

| |[pic]B. |

| |inventory price testing at year-end. |

| | |

| | |

| |[pic]C. |

| |inventory tests of the lower of cost or market at an interim date. |

| | |

| | |

| |[pic]D. |

| |direct confirmations of inventory pledged as collateral for loans. |

| | |

|11. |In the audit of inventory, selecting inventory items from a perpetual master file, going to the location, and obtaining test|

| |counts is intended to produce evidence for which audit objective? |

| |[pic]A. |

| |the transaction objectives that all transactions occurred |

| | |

| | |

| |[pic]B. |

| |the balance objective that inventory exists |

| | |

| | |

| |[pic]C. |

| |the balance objective that all inventory is recorded |

| | |

| | |

| |[pic]D. |

| |the balance objective that the client has rights to the inventory |

| | |

|12. |Which of the following would represent the best evidence for testing the net realizable value of inventory? |

| |[pic]A. |

| |Investigate sale prices on sales of inventory made after year-end. |

| | |

| | |

| |[pic]B. |

| |Vouch inventory prices to vendor invoices at an interim date. |

| | |

| | |

| |[pic]C. |

| |Vouch inventory prices to the perpetual inventory. |

| | |

| | |

| |[pic]D. |

| |Investigate all prices that have decreased by more than 5% during the year. |

| | |

|13. |Which of the following is NOT a significant concern about fraud in the payroll cycle? |

| |[pic]A. |

| |Employees involved in preparing and paying the payroll may process data for fictitious employees and then divert the |

| |paychecks to their own use. |

| | |

| | |

| |[pic]B. |

| |When there is frequent turnover of personnel in a company, there is the risk that a terminated employee is continued on the |

| |payroll. |

| | |

| | |

| |[pic]C. |

| |Management may overstate payroll costs as part of earning management. |

| | |

| | |

| |[pic]D. |

| |Management may overtly misclassify or “pad” labor cost in government contract work to defraud the agency. |

| | |

|14. |A client just read about a business paying employees extraordinary sums of money to a variety of employees. Explain how the |

| |client company would use programmed controls to prevent this type of valuation problem. |

| |[pic]A. |

| |Test a check digit embedded in the employee number. |

| | |

| | |

| |[pic]B. |

| |Perform a limit test related to the class of employee. |

| | |

| | |

| |[pic]C. |

| |Check the employee number against the master payroll file. |

| | |

| | |

| |[pic]D. |

| |Compare the total number of payroll disbursements with a predetermined batch total. |

| | |

|15. |If a programmed control over valuation of individual payroll items is going to be effective, which of the following controls|

| |must also be effective? |

| |[pic]A. |

| |controls over the completeness of payroll time cards |

| | |

| | |

| |[pic]B. |

| |controls over access to payroll reports |

| | |

| | |

| |[pic]C. |

| |controls over the processing of payroll taxes |

| | |

| | |

| |[pic]D. |

| |controls over access to the employee master file |

| | |

|16. |In a computerized payroll system environment, an auditor would be most effective at finding weaknesses in internal controls |

| |over the occurrence of payroll transactions by submitting test data: |

| |[pic]A. |

| |incorrect hash totals. |

| | |

| | |

| |[pic]B. |

| |with total payroll that exceeds a predetermined limit. |

| | |

| | |

| |[pic]C. |

| |with an account number that does not match account numbers on job tickets. |

| | |

| | |

| |[pic]D. |

| |incorrect employee numbers that do not contain appropriate check digits. |

| | |

|17. |The lower assessed level of control risk approach may be used by the external auditor in the personnel services cycle |

| |because, among other factors: |

| |[pic]A. |

| |the chance of employee fraud is remote. |

| | |

| | |

| |[pic]B. |

| |outside governmental auditors spend considerable time investigating the payroll area in most companies. |

| | |

| | |

| |[pic]C. |

| |audit risk in the area relates primarily to the hiring of competent personnel. |

| | |

| | |

| |[pic]D. |

| |payroll transactions are generally routine and processed in a high volume. |

| | |

|18. |Which of the following audit objectives is LEAST LIKELY to be accomplished by vouching payroll transactions to supporting |

| |documentation (e.g., time cards and employee contracts)? |

| |[pic]A. |

| |the occurrence of payroll transactions |

| | |

| | |

| |[pic]B. |

| |the completeness of payroll transactions |

| | |

| | |

| |[pic]C. |

| |the accuracy of payroll transactions |

| | |

| | |

| |[pic]D. |

| |proper cutoff related to payroll transactions |

| | |

JAWABAN LATIHAN BAB 11- 16

|NO |CH 11 |CH 12 |CH 13 |CH 14 |CH 15 |CH 16 |

|1 |D |A |B |B |B |C |

|2 |B |B |B |B |A |D |

|3 |A |C |A |D |C |A |

|4 |C |D |C |C |C |B |

|5 |A |C |C |D |A |A |

|6 |D |C |A |B |B |C |

|7 |C |D |B |D |B |B |

|8 |D |D |D |C |D |C |

|9 |B |C |A |A |C |C |

|10 |B |D |D |B |C |A |

|11 |C |A |B |B |C |B |

|12 |C |A |C |D |C |A |

|13 |D |B |B |A |D |C |

|14 |B |C |C |A |B |B |

|15 |B |A |C |C |B |D |

|16 |A |B |A |A |C |D |

|17 |D |B |A |D | |D |

|18 |B |A |C |B | |B |

|19 | |C |B |C | | |

|20 | | |C | | | |

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