ACC 492 Final Exam Solution
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ACC 492 Final Exam Solution
) The bonding of employees will
normally be expected to:
A. “weed out” dishonest employees already hired.
B. serve as a deterrent to dishonesty.
C. guarantee that all employee fraud will be prevented.
D. eliminate the need for separation of duties in the cash receipts
area.
2) All sales, cash receipts,
and sales adjustments are accurately valued using GAPP and correctly
journalized, summarized, and posted. These actions are transaction objectives
for:
A. occurance
B. cutoff
C. accurancy
D. completeness
3) Disclosure objectives
include all of the following EXCEPT:
A. occurrence and rights and obligations
B. classification and understandability
C. completeness
D. cutoff
4) The extent of the auditor’s
inventory test count would LEAST depend on which of the following?
A. The nature and composition of the inventory.
B. The existence of inventory at multiple locations.
C. The effectiveness of controls pertaining to maintenance of
perpetual records.
D. The care exercised by client employees in taking the inventory.
5) When statistical sampling
methods are used by the client in determining inventories, professional
standards require that the auditor ascertain the following EXCEPT that the:
A. sampling plan has statistical validity.
B. appropriate tests of transactions have been applied.
C. results in terms of reliability are reasonable.
D. sampling plan has been properly applied.
6) The auditor’s strategy in
performing test counts during the inventory observation is to:
A. concentrate tests on high dollar items and take a representative
sample of other items.
B. concentrate tests in areas where employees seem to be
disregarding the inventory instructions.
C. randomly select all test items.
D. test all high dollar items.
7) Observation of inventories
is a required audit procedure whenever:
A. inventories are material.
B. the auditor considers it to be necessary.
C. it is practicable and reasonable.
D. inventories are material and it is practicable and reasonable.
8) 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:
A. 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.
B. the volume of purchases, manufacturing, and sales transactions
that affects these accounts is generally high, decreasing the opportunities for
misstatements to occur.
C. 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.
D. the wide diversity of inventory items may present special
problems in determining their quality and market value.
9) During the observation of
the inventory, the auditor has NO responsibility to:
A. observe the taking of the inventory by client personnel.
B. make inquiries of the client concerning the inventories.
C. supervise the taking of the inventory.
D. make some test counts of inventory quantities.
10) The specific audit
objective that all purchase transactions and cash disbursements are valued
using GAAP and correctly journalized, summarized, and posted relates to:
A. rights and obligations.
B. completeness.
C. valuation or allocation.
D. existence or occurrence.
11) The specific audit
objective that recorded purchases represent goods, services, and productive
assets received during the period relates to:
A. rights and obligations.
B. completeness.
C. presentation and disclosure.
D. existence or occurrence.
12) The specific audit
objective that all purchases and cash disbursements made during the period were
recorded relates to:
A. rights and obligations.
B. completeness.
C. presentation and disclosure.
D. existence or occurrence.
13) The specific audit
objective for the audit of investments, investment balances are properly
identified and classified in the financial statements, relates to the:
A. existence or occurrence assertion.
B. completeness assertion.
C. presentation or disclosure assertion.
D. rights and obligations assertion.
14) The specific audit
objective for the audit of investments, all recorded investments are owned by
the reporting entity, relates to the:
A. existence or occurrence assertion.
B. completeness assertion.
C. valuation or allocation assertion.
D. rights and obligations assertion.
15) The specific audit
objective for the audit of investments, all investments are included in the
balance sheet investment accounts, relates to the:
A. existence or occurrence assertion.
B. completeness assertion.
C. valuation or allocation assertion.
D. rights and obligations assertion.
16) The specific account
balance audit objective, plant assets and related expenses are properly
identified and classified in the financial statements, relates to the:
A. rights and obligations assertion.
B. completeness assertion.
C. presentation or disclosure assertion.
D. existence or occurrence assertion.
17) The audit significance of
the financial ratio, fixed asset turnover, is:
A. this financial ratio provides a reasonableness test of the
entity’s proportion of equity that may be compared with prior years’ experience
or industry data.
B. an unexpected increase or decrease in the depreciation expense
as a percent of depreciable assets may indicate an error in calculating
depreciation.
C. this financial ratio provides a test of the entity’s ability to
generate earnings to cover the cost of service debt.
D. an unexpected increase in this financial ratio may indicate the
failure to record or capitalize depreciable assets.
18) The substantive test of
calculating fixed asset turnover is categorized under:
A. initial procedures.
B. analytical procedures.
C. tests of details of balances.
D. tests of details of transactions.
19) In confirming bank
deposits, the auditor need NOT:
A. send two copies of the standard confirmation to the bank.
B. send requests for accounts with zero balances at the end of the
year.
C. personally mail the requests.
D. have the bank return the original to the client.
20) 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:
A. loan interest rates.
B. loan balances.
C. deposit balances.
D. secondary endorsements.
21) The control of all funds during
the count of cash on hand is meant primarily to prevent:
A. any chance of double counting.
B. unauthorized disbursements.
C. transfers by the client.
D. client personnel from viewing the count procedure.
22) 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:
A. information protection.
B. risk assessment.
C. transaction integrity.
D. performance measurement.
23) Best practices in
approaching risk management include the following steps EXCEPT:
A. calculate revenue losses from risks.
B. analyze and assess risks.
C. identify risks.
D. design strategies for managing risk.
24) In performing an attest
engagement, a CPA performs all of the following EXCEPT:
A. gathers evidence to support the assertions.
B. objectively assesses the measurements of assertions.
C. relies on management statements.
D. objectively assesses the communications of the individual making
the assertions.
25) Which of the following is
NOT among the characteristics of the procedures performed in completing the
audit?
A. They involve many subjective judgments by the auditor.
B. They are performed after the balance sheet date.
C. They are optional since they have only an indirect impact on the
opinion to be expressed.
D. They are usually performed by audit managers or other senior members
of the audit team who have extensive audit experience with the client.
26) The auditor relies on the
client representation letter to:
A. document the continuing materiality of client representations.
B. guarantee the absence of management fraud.
C. confirm written representations given to the auditor.
D. reduce the possibility of misunderstanding concerning
management’s representations.
27) In performing an attest
engagement, a CPA performs all of the following EXCEPT:
A. gathers evidence to support the assertions.
B. objectively assesses the measurements of assertions.
C. relies on management statements.
D. objectively assesses the communications of the individual making
the assertions.
28) Which of the following is
NOT among the specific auditing procedures the auditor performs to obtain
additional audit evidence?
A. reading minutes of meetings
B. reviewing evidence concerning litigation, claims, and
assessments
C. making subsequent events review
D. obtaining client representation letter
29) In regard to identifying
and evaluating subsequent events, AU 560.12 specifies that the auditor inquires
of management having responsibility for financial and accounting matters as to
all of the following EXCEPT:
A. any significant changes in capital stock, long-term debt, or
working capital to the date of inquiry.
B. the minutes of meetings of directors, stockholders, and other
appropriate committees.
C. any substantial contingent liabilities or commitments existing
at the balance sheet date or date of inquiry.
D. the current status of items previously accounted for on the
basis of tentative, preliminary, or inconclusive data.
30) 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:
A. notify the SEC or other regulatory agency.
B. notify the audit committee.
C. take steps to prevent future reliance on the audit report.
D. resign from the engagement.
31) The two main sections of
the AICPA’s Code of Professional Conduct are:
A. Rules of Conduct and Interpretations of the Rules of Conduct.
B. Principles and Ethics Rulings.
C. Principles and Rules of Conduct.
D. Interpretations of the Rules of Conduct and Ethics Rulings.
32) In general, except when
explicitly stated otherwise, the Rules of Conduct in the AICPA’s Code of
Professional Conduct are applicable to:
A. all professional services.
B. all members and all professional services.
C. all members.
D. all members in public practice.
33) Which one of the following
is NOT true of the Principles in the AICPA’s Code of Professional Conduct?
A. They are set forth as enforceable standards.
B. They are expressions of ideals of professional conduct.
C. They provide a framework for the Rules.
D. They express the basic tenets of ethical conduct.
34) Gross negligence can best
be defined as:
A. misrepresentation.
B. criminal fraud.
C. failure to exercise due care.
D. failure to exercise even slight care.
35) Anyone identified to the
auditor by name prior to the audit who is to be the principal recipient of the
auditor’s report is a
A. foreseen beneficiary.
B. foreseeable party.
C. third party.
D. primary beneficiary.
36) The Fund of Funds case
illustrated that auditors could be found liable for failure to report
wrong-doings discovered:
A. on any type of engagement for a particular client.
B. even on engagements for other clients.
C. only on audit engagements for a particular client.
D. only on special fraud audits conducted under separate contract.
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