AC492 Final Examination Answers
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AC492 Final Examination Answers
1.
The specific audit
objective that all purchases and cash disbursements made during the period were
recorded relates to:
existence or occurrence.
presentation and disclosure.
rights and obligations.
completeness.
2.
The use of the
computer to compare production hours to direct labor hours on daily production
reports relates to the:
rights and obligations assertion.
completeness assertion.
existence or occurrence assertion.
valuation or allocation assertion.
3.
During the count of
cash on hand, it is NOT necessary for the auditor to:
insist on the presence of the custodian of the cash throughout
the count.
insist on the presence of an internal auditor throughout the
count.
obtain a signed receipt from the custodian on return of the
funds.
control both cash and non-cash negotiable instruments held by
the client.
4. By definition, subsequent events occur
between:
the report date and the date the report is issued.
the interim and balance sheet date.
the balance sheet date and the report date.
the balance sheet date and the date the report is issued.
5.
The expenditure cycle
would include:
payroll transactions.
payments by check.
the purchase of another entity’s stocks.
the purchase of treasury stock.
6. The specific account balance audit objective,
plant assets and related expenses are properly identified and classified in the
financial statements, relates to the:
presentation or disclosure assertion.
existence or occurrence assertion.
rights and obligations assertion.
completeness assertion.
7.
The specific account
balance audit objective, the entity owns or has rights to all recorded plant
assets at the balance sheet date, relates to the:
rights and obligations assertion.
existence or occurrence assertion.
completeness assertion.
valuation or allocation assertion.
8.
When inventories are
material and the auditor does not observe the inventory at or near the
year-end, professional standards require the auditor to:
disclaim an opinion on the financial statements.
observe some physical counts of the inventory.
thoroughly test the accounting records.
resign from the engagement.
9.
All sales, cash
receipts, and sales adjustments are accurately valued using GAPP and correctly
journalized, summarized, and posted. These actions are transaction objectives
for:
completeness
accurancy
cutoff
occurance
10. Section 18 liability is relatively narrow in
scope because it relates only to a false or misleading statement in documents
“filed” with the:
AICPA
SEC
IRS
FASB
11. Which of the following functions is NOT part
of the production cycle?
acquisition of raw materials
maintaining the correctness of inventory balances
processing goods in production
determining and recording manufacturing costs
12. The specific audit objective for the audit of
investments, investment balances are properly identified and classified in the
financial statements, relates to the:
presentation or disclosure assertion.
rights and obligations assertion.
completeness assertion.
existence or occurrence assertion.
13. The specific audit objective that the entity
is liable for the payables resulting from the recorded purchase transactions
relates to:
rights and obligations.
completeness.
presentation and disclosure.
existence or occurrence.
14. The specific audit objective for the audit of
investments, investment revenues, and realized and unrealized gains and losses,
are reported at proper amounts, relates to the:
rights and obligations assertion.
completeness assertion.
valuation or allocation assertion.
existence or occurrence assertion.
15. The control of all funds during the count of
cash on hand is meant primarily to prevent:
unauthorized disbursements.
transfers by the client.
any chance of double counting.
client personnel from viewing the count procedure.
16. The standard bank confirmation, developed jointly
by the AICPA, the American Bankers Association, and the Bank Administration
Institute, requests information about all of the following EXCEPT:
secondary endorsements.
deposit balances.
loan balances.
loan interest rates.
17. Which of the following is NOT a tort?
negligence
gross negligence
fraud
breach of contract
18. Which of the following accounts in a
merchandising company is affected by both the revenue cycle and another cycle?
accounts receivable
sales returns and allowances
inventory
sales
19. Whether the entity maintains effective
controls to provide reasonable assurance that private customer information
obtained as a result of e-commerce is protected from uses not related to the
entity’s business defines:
risk assessment.
information protection.
performance measurement.
transaction integrity.
20. Which one of the following is NOT true of the
Principles in the AICPA’s Code of Professional Conduct?
They provide a framework for the Rules.
They express the basic tenets of ethical conduct.
They are expressions of ideals of professional conduct.
They are set forth as enforceable standards.
21. The two main sections of the AICPA’s Code of
Professional Conduct are:
Principles and Rules of Conduct.
Interpretations of the Rules of Conduct and Ethics Rulings.
Principles and Ethics Rulings.
Rules of Conduct and Interpretations of the Rules of Conduct.
22. The Principle of Integrity in the AICPA’s Code
of Professional Conduct would be violated in cases of:
subordination of judgment.
unintentional distortion of facts.
inadvertent error.
genuine differences in opinion.
23. The audit objective, “The accounts receivable
balance represents gross claims on customers and agrees with the sum of the
accounts receivable subsidiary ledger” is derived from the assertion of:
existence or occurrence.
valuation or allocation.
rights and obligations.
completeness.
24. The specific audit objective for the audit of
investments, all investments are included in the balance sheet investment
accounts, relates to the:
rights and obligations assertion.
completeness assertion.
valuation or allocation assertion.
existence or occurrence assertion.
25. In performing an attest engagement, a CPA
performs all of the following EXCEPT:
gathers evidence to support the assertions.
relies on management statements.
objectively assesses the communications of the individual making
the assertions.
objectively assesses the measurements of assertions.
26. The auditor’s strategy in performing test
counts during the inventory observation is to:
concentrate tests on high dollar items and take a representative
sample of other items.
test all high dollar items.
concentrate tests in areas where employees seem to be
disregarding the inventory instructions.
randomly select all test items.
27. Which one of the following is an investing
activity?
acquiring debt
issuing bonds
capital leases
selling land
28. Whether the system is protected against
unauthorized physical and logical access defines:
system availability.
system verifiability.
system security.
system integrity.
29. When an investigation of the discovery of
facts existing at the report date confirms the existence of the fact and the
auditor believes the information is important to those relying or likely to
rely on the financial statements, the auditor should immediately:
resign from the engagement.
take steps to prevent future reliance on the audit report.
notify the SEC or other regulatory agency.
notify the audit committee.
30. The auditor’s special report on financial
statements prepared on an OCBOA should contain all of the following EXCEPT:
an introductory paragraph.
a scope paragraph.
an exclusion paragraph.
an explanatory paragraph.
31. Which of the following is NOT among the
characteristics of the procedures performed in completing the audit?
They are optional since they have only an indirect impact on the
opinion to be expressed.
They are performed after the balance sheet date.
They involve many subjective judgments by the auditor.
They are usually performed by audit managers or other senior
members of the audit team who have extensive audit experience with the client.
32. Which of the following is NOT among the
specific auditing procedures the auditor performs to obtain additional audit
evidence?
reading minutes of meetings
making subsequent events review
reviewing evidence concerning litigation, claims, and
assessments
obtaining client representation letter
33. Gross negligence can best be defined as:
criminal fraud.
misrepresentation.
failure to exercise due care.
failure to exercise even slight care.
34. Whether the system processing is complete,
accurate, timely, and authorized defines:
system security.
system integrity.
system maintainability.
system availability.
35. When statistical sampling methods are used by
the client in determining inventories, professional standards require that the
auditor ascertain the following EXCEPT that the:
sampling plan has statistical validity.
appropriate tests of transactions have been applied.
sampling plan has been properly applied.
results in terms of reliability are reasonable.
36. With a manufacturer, wholesaler, or retailer,
however, inherent risk for inventory may be assessed at or near the maximum
level for all of the following reasons EXCEPT:
inventories are vulnerable to spoilage, obsolescence, and other
factors such as general economic conditions that may affect demand and
salability, and thus the proper valuation of the inventories.
the wide diversity of inventory items may present special
problems in determining their quality and market value.
inventories are often stored at multiple sites, adding to the
difficulties associated with maintaining physical controls over theft and
damages, and properly accounting for goods in transit between sites.
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