Archives: Quiz

1) Companies would normally recognize an account payable when the goods are received by the company. A) True B) False 2) The primary audit objectives to focus on when auditing debt are: A) accuracy and completeness B) accuracy and existence […]

1) Which of the following statements about the audit of fixed assets is the least correct? A) The primary accounting record for manufacturing equipment and other property, plant and equipment is generally a fixed asset master file B) Manufacturing equipment […]

1) When auditors evaluate sales returns and allowances, a primary emphasis is on the objective of occurrence. A) True B) False 2) The underlying reason for a code of professional conduct for any profession is: A) the need for public […]

1) The ________ is a contract between a carrier (e.g., a trucking company) and the seller of goods that dictates the details surrounding the shipment of goods. A) bill of lading B) sales invoice C) picking ticket D) remittance advice […]

1) An auditor needs to determine whether all customers of an electric utility company are being billed. The auditor should test from the: A) sales register to the accounts receivable ledger B) sales register to the meter department records C) […]

1) To succeed in an action against the auditor, the client must be able to show that: A) the auditor was fraudulent B) the auditor was grossly negligent C) there was a written contract D) there is a close causal […]

1) A company issued long-term notes payable for cash during the year under audit. To ascertain that this transaction was properly recorded, the auditor’s best course of action is to: A) trace the cash received from the issuance to the […]

1) For proper internal control, there should be adequate separation of duties. However, the extent of separation of duties considered “adequate” does not depend on the size of the organization. A) True B) False 2) For sales, the occurrence transaction-related […]

1) Which of the following accounts is not included in the acquisitions class of transactions? A) Inventory B) Prepaid expenses C) Purchase discounts D) Accounts payable 2) The trait that distinguishes auditors from accountants is the: A) auditor’s ability to […]

1) Which of the following is an advantage of systematic sample selection over random number sampling? A) It provides a stronger basis for statistical conclusions B) It enables the auditor to use the more efficient ‘sampling with replacement” tables C) […]

1) Which of the following groups establishes and maintains the company’s internal controls? A) Internal auditors B) Board of Directors C) Management D) Audit committee 2) Completeness and existence are the auditor’s primary objectives in auditing manufacturing equipment. A) True […]

1) In order to promote audit efficiency the auditor considers cost in selecting audit tests to perform. Which of the following audit tests would be the most costly? A) Analytical Procedures B) Risk Assessment Procedures C) Tests of Controls D) […]

1) When do most companies record sales returns and allowances? A) During the month in which the sale occurs B) During the accounting period in which the return occurs C) Whenever the customer contacts the company regarding the credit D) […]

1) Operational audits are often categorized as functional, organizational, or special assignments. A) True B) False 2) Procedures to obtain an understanding of internal control may suffice for tests of controls when the auditor is assessing automated controls. A) True […]

1) Expulsion from the A) True B) False 2) Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received? A) Count goods upon receipt in […]

1) As the acceptable level of detection risk increases, an auditor may change the: A) timing of substantive tests by performing them at an interim date rather than year end B) timing of the tests on controls by performing them […]

1) When internal controls over a given financial statement account are assessed as highly effective, the auditor need not obtain audit evidence for that account beyond testing the controls. A) True B) False 2) Given the audit procedures below, which […]

1) The preliminary judgment about materiality and the amount of audit evidence accumulated are ________ related. A) directly B) indirectly C) not D) inversely 2) The most common case in which conditions beyond the client’s and auditor’s control cause a […]

1) The auditor’s primary concern about authorization centers on shipment of goods to customers. A) True B) False 2) Independent registrars commonly disburse cash dividends to shareholders. A) True B) False Answer: B 3) When labor is a material factor […]

1) Section 10 and Rule 10b-5 of the Securities Exchange Act of 1934 are often referred to as: A) the antifraud provisions B) the new issues provisions C) the full-employment act for accountants D) the RICO provisions 2) A positive […]

1) The purpose of phase 3 in the “process for understanding internal control and assessing control risk” is to: A) design, perform and evaluate tests of controls B) obtain and document an understanding of internal control design an operation C) […]

1) Which of the following is the primary basis used to decide materiality for a for-profit entity? A) net sales B) net assets C) net income before tax D) all of the above 2) During the course of an audit, […]

1) The method used to measure the estimated total error amount in a population when there is both a recorded value and an audited value for each item in the sample is: A) difference estimation B) mean-per-unit estimation C) ratio […]

1) With whom should the auditor communicate whenever he or she determines that senior management fraud may be present, even if the matter might be considered inconsequential? A) PCAOB B) audit committee C) an appropriate level of management that is […]

1) The accountant’s report on the examination of prospective financial statements should include a caveat that the prospective results may not be achieved. A) True B) False 2) An auditor using nonstatistical sampling cannot: A) B) C) D) Answer: C […]

1) If a potential loss on a contingent liability is remote, the liability usually is: A) disclosed in footnotes, but not accrued B) neither accrued nor disclosed in footnotes C) accrued and indicated in the body of the financial statements […]

1) Many small/local accounting firms do not perform audits as their primary services to their clients include accounting and tax. A) True B) False 2) Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which […]

1) The least helpful common audit test to verify current period acquisitions of property, plant, and equipment is examining vendors’ invoices and receiving reports. A) True B) False 2) Which of the following statements regarding the letter of representation is […]

1) Information and idea exchange sessions by the audit team are required by SAS No. 99. A) True B) False 2) To test for proper sales cutoff, an auditor would obtain the number of the last bill of lading issued […]

1) Cost is never an adequate justification for omitting a necessary procedure or not gathering an adequate sample size. A) True B) False 2) Auditors follow a four step approach to reduce assessed control risk. Which of the following is […]

1) A substantive test for accounts payable that would be used to provide evidence regarding the occurrence assertion would be to: A) agree a sample of vouchers to authorized purchase orders B) recalculate the accuracy of the vouchers and the […]

1) If, when obtaining an understanding of control activities of a relatively small client, the auditor identified no control activities, the auditor would probably set a high assessment of control risk. A) True B) False 2) The primary accounting record […]

1) Footing the sales journal and tracing the totals to the general ledger are tests relating to the accuracy objective for sales. A) True B) False 2) The criterion that is most likely to be used as a framework in […]

1) What are the two major balance-related audit objectives in testing payroll liabilities? A) Accuracy and detail tie-in B) Completeness and valuation C) Completeness and rights and obligations D) Accuracy and cutoff 2) There is very little opportunity for confirmation […]

1) In a leading securities law and CPA liabilities case, the U.S. Supreme Court ruled in 1976 in Hochfelder v. Ernst & Ernst that before CPAs could be held liable for Rule 10b-5 of the Securities Exchange Act of 1934, […]

1) A company’s internal control procedures over the acquisition cycle should prevent the preparation of a voucher for goods that have not yet been received. Which of the following is the best procedure to assure vouchers are not prepared for […]

1) Transactions with related parties must be disclosed in the financial statements if they are deemed to be material. A) True B) False 2) The international standards for the professional practice of internal auditing include which two categories of standards? […]

1) When the auditor evaluates the effect of a change in accounting principle, the materiality of the change should be evaluated based on: A) the prior years presented B) the current year C) guidelines included in GAAS D) the effect […]

1) Granite Company issued $200,000 of 10 percent first mortgage bonds on January 1, 20X4, at 105. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Mortar Corporation purchased $140,000 of Granite’s bonds […]

1) Winner Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of First Corporation at underlying book value on January 1, 20X9. At that date, the fair value of the noncontrolling interest in First’s […]

1) The trial balance of WM Partnership is as follows: Wilfred and Mike decide to incorporate their partnership. The partnership’s books will be closed, and new books will be used for W & M Corporation. The following additional information is […]

1) Private Not-For-Profit (NFP) Entities. Select from this list of terms to answer the following questions. A. Fair value B. Unrestricted net assets C. GASB D. FASB E. Statement of Revenues, Expenditures, and Changes in Fund Balance F. Lower of […]

1) The general fund of Hatteras acquired a fire truck during the fiscal year ended June 30, 20X9. The purchase order for the fire truck was recorded on February 15, 20X9. Hatteras’ acquisition of the fire truck required which of […]

1) The main guidance on equity-method reporting, found in ASC 323 and 325 requires all of the following except: A.the investor’s share of the investee’s extraordinary items should be reported B.the investor’s share of the investee’s prior-period adjustments should be […]

1) Granite Company issued $200,000 of 10 percent first mortgage bonds on January 1, 20X4, at 105. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Mortar Corporation purchased $140,000 of Granite’s bonds […]

1) In the AD partnership, Allen’s capital is $140,000 and Daniel’s is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following question is independent of the others. […]

On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company’s common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two […]

1) On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation’s common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here: At the date of the business combination, Venus’s net assets and […]

1) On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000 and $100,000, respectively, common stock outstanding of $50,000, and retained earnings of $150,000. […]

1) Flyer Corporation holds 90 percent of Kite Company’s common shares but none of its preferred shares. On the date of acquisition, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Kite […]