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Accounting 405
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Exam of 32 pages for the course SAFe 5.1 Questions and Answers 2024 at SAFe 5.1 Questions and Answers 2024 (Accounting 405)
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Accounting 405Which of the following best describes the purpose of control activities? -
CORRECT ANSWER-the policies and procedures that help ensure that
necessary actions are taken to address risks to the achievement of the entity's
objectives
In performing tests concerning the granting of stock options, an auditor should: -
CORRECT ANSWER-Trace the authorization for the transaction to a vote of the
board of directors.
An auditor who wished to test for the existence or occurrence of inventory would
most likely select a sample of inventory items from the perpetual records and -
CORRECT ANSWER-vouch additions to receiving reports.
If acceptable audit risk is low, and inherent risk and control risk are both low, then
planned detection risk should be high. - CORRECT ANSWER-True
In a test of controls, auditors may trace receiving reports to vouchers recorded in
the voucher register. This is a test for - CORRECT ANSWER-Completeness
Report on the need for the states to consider reporting requirements for chemical
use data. - CORRECT ANSWER-operational audit; governmental auditor
Once the auditor detects a control deficiency, which of the following steps must
he or she take first? - CORRECT ANSWER-Evaluate the severity of the
deficiency on the auditor's control risk assessment for that assertion.
Which of the following actions should a CPA firm take to comply with the AICPA's
quality control standards? - CORRECT ANSWER-Establish policies to ensure
that the audit work meets applicable professional standards
Which of the following circumstances would most likely cause an audit team to
perform extended procedures? - CORRECT ANSWER-The client made several
large adjustments at or near year end
,Periodic sales total compared to same period accounts receivable postings -
CORRECT ANSWER-Use the same sales dollar batch totals for comparison to
separate total of accounts receivable subsidiary postings, if available.
Recorded investments represent investments actually owned at the
balance-sheet date. - CORRECT ANSWER-Rights and Obligations
Obtain positive confirmations as of the balance sheet date of investments held by
independent custodians
An audit team would most likely verify the interest earned on bond investments
by - CORRECT ANSWER-Recomputing the interest earned on the basis of face
amount, interest rate, and period held.
While performing their audit, the audit team uncovers fraud that is likely to have
an immaterial affect on the financial statements taken as whole. In this case the
auditors should: - CORRECT ANSWER-disclose the fraud to the appropriate
level of management or to the audit committee.
For the following audit procedure, identify the management assertion most
usefully audited by using each procedure. - CORRECT ANSWER-Existence or
Occurrence
Valuation
Subsequent to the issuance of an auditor's report, the auditor became aware of
facts existing at the report date that would have affected the report had the
auditor then been aware of such facts. After determining that the information is
reliable, the auditor should next: - CORRECT ANSWER-Determine whether
there are persons relying or likely to rely on the financial statements who would
attach importance to the information.
Ask the accounts payable clerk about procedures for verifying prices, quantities
and extensions on vendors' invoices. - CORRECT ANSWER-Injury
Valuation or Accuracy
Individual partners submit the nominations of those persons whom they wish to
be considered for partner. To become a partner, an individual must have
exhibited a high degree of technical competence; must possess integrity,
,motivation, and judgment; and must have a desire to help the firm progress
through the efficient dispatch of the job responsibilities to which he or she is
assigned. - CORRECT ANSWER-Human Resources
Which of the following substantive procedures would auditors be unlikely perform
to obtain evidence about the occurrence of subsequent events? - CORRECT
ANSWER-Recompute a sample of large-dollar transactions occurring after the
date of the financial statements for arithmetic accuracy.
Send confirmations to vendors with whom the client normally does business but
for which no balance in accounts payable is noted.
Confirm bank accounts established after the date of the financial statements.
The criteria used by an external auditor to evaluate published financial
statements are known as generally accepted auditing standards. - CORRECT
ANSWER-False
Control: Is there a timekeeping department (function) independent of the payroll
department? - CORRECT ANSWER-Preventive Control
Before a cash disbursement can be processed, a voucher package must be
submitted to the accounts payable department. - CORRECT ANSWER-Control
activities
In auditing a manufacturing entity, which of the following procedures would an
auditor least likely perform to determine whether slow-moving, defective, and
obsolete items included in inventory are properly identified? - CORRECT
ANSWER-Test the computation of standard overhead rates.
For each of the following instances of noncompliance, explain why they are
either: Direct-effect (D) or indirect-effect (I) noncompliance. - CORRECT
ANSWER-Indirect-effect
Which of the following statements relating to the competence of evidential matter
is always true? - CORRECT ANSWER-Evidence must be both reliable and
relevant to be considered appropriate.
, Which of the following is not a valid reason for an auditor deciding not to send
accounts receivable confirmations? - CORRECT ANSWER-The client requests
alternative procedures be performed instead.
In which of the following situations would an auditor ordinarily choose between
expressing a qualified opinion or an adverse opinion? - CORRECT
ANSWER-Conditions that cause the auditor to have substantial doubt about the
entity's ability to continue as a going concern are inadequately disclosed.
The primary purpose for obtaining an understanding of a nonpublic audit client's
internal control is to - CORRECT ANSWER-Determine the nature, timing, and
extent of further audit tests to be performed.
After considering management's plans, an auditor concludes that there is
substantial doubt about a client's ability to continue as a going concern for a
reasonable period of time. The auditor's responsibility includes - CORRECT
ANSWER-considering the adequacy of disclosure about the client's possible
inability to continue as a going concern.
Scan the accounts receivable file at year‑end for indications of material
receivables at both fixed and variable prices. Determine whether any
adjustments for interest revenue and or transportation fee reimbursement are
needed.
Would the audit procedure described above be effective in detecting potentially
unrecorded liabilities? - CORRECT ANSWER-No
An auditor suspects that certain client employees are ordering merchandise for
themselves over the Internet without recording the purchase or receipt of the
merchandise. When vendors' invoices arrive, one of the employees approves the
invoices for payment. After the invoices are paid, the employee destroys the
invoices and the related vouchers. In gathering evidence regarding the fraud, the
auditor most likely would select items for testing from the file of all: - CORRECT
ANSWER-Cash disbursements.
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