FINAL EXAM - PRACTICE TEST Mac3701
QUESTIONS WITH CORRECT ANSWERS
WHEN CONFIRMING A/P, EMPHASIS SHOULD BE PUT ON WHAT KIND OF
ACCOUNT? - Answer-a. ACCOUNTS WITH SMALL OR ZERO BALANCES,
PARTICULARLY THOSE WITH A HISTORY OF SIGNIFICANT ACTIVITY.
b. All accounts should be equally emphasized.
c. Accounts with large balances.
d. Accounts listed in the A/P subsidiary.
AN AUDITOR TRACED A SAMPLE OF PURCHASE ORDERS AND THE RELATED
RECEIVING REPORTS TO THE PURCHASES JOURNAL. THE PURPOSE OF THIS
SUBSTANTIVE AUDIT PROCEDURE MOST LIKELY WAS TO: - Answer-a. Identify
usually large purchases that should be investigated further.
b. Verify that cash disbursements were for goods actually received.
c. DETERMINE THAT PURCHASES WERE PROPERLY RECORDED.
d. Test whether payments were for goods actually ordered.
WHICH OF THE FOLLOWING SITUATIONS INDICATES A POTENTIAL MATERIAL
WEAKNESS IN INTERNAL CONTROL OVER ACQUISITION AND EXPENDITURE? -
Answer-a. Purchase orders are not prepared for services acquired directly under
authorization of department heads.
b. THE SAME PERSON AUTHORIZES VOUCHER PACKAGES AND SIGNS CHECKS.
c. Unacceptable goods are not scheduled on receiving reports.
d. The same person signs checks and stamps vouchers PAID.
WHEN USING CONFIRMATIONS TO PROVIDE EVIDENCE ABOUT THE
COMPLETENESS ASSERTION FOR A/P, THE APPROPRIATE POPULATION MOST
LIKELY WOULD BE: - Answer-a. VENDORS WITH WHOM THE ENTITY HAS
PREVIOUSLY DONE BUSINESS.
b. Amounts recorded in the A/P subsidiary ledger.
c. Payees of checks drawn in the month after YE.
d. Invoices filed in the entity's open invoice file.
WHEN AUDITING PPE, THE AUDITOR'S APPROACH IS GENERALLY TO: - Answer-
a. Examine evidence supporting the amounts in the ending balance.
b. EXAMINE EVIDENCE SUPPORTING ADDITIONS AND DISPOSALS DURING THE
YEAR.
c. Follow a reliance strategy, testing I/C, and analytical procedures.
d. Concentrate on finding unrecorded assets.
FAILURE TO RECORD A LIABILITY GENERALLY RESULTS IN: - Answer-a. An
understatement of profit.
b. An understatement of current ratio.
, c. AN OVERSTATEMENT OF PROFIT.
d. An overstatement of assets.
IMPROPERLY CAPITALIZING AN EXPENSE ITEM RESULTS IN: - Answer-a.
Understatement of profit in the current year and overstatement in future years.
b. Understatement of profit in the current year and in future years.
c. OVERSTATEMENT OF PROFIT IN THE CURRENT YR AND UNDERSTATEMENT
IN FUTURE YEARS.
d. Overstatement of profit in the current year and in future years.
TO DETERMINE WHETHER A/P ARE COMPLETE, AUDITORS PERFORMA A TEST
TO VERIFY THAT ALL MERCHANDISE RECEIVED HAS BEEN RECORDED. THE
POPULATION FOR THIS TEST CONSISTS OF ALL: - Answer-a. Vendors' invoices.
b. POs
c. RECEIVING REPORTS.
d. Cancelled checks.
THE INHERENT RISK (IR) THAT A/P MAY BE OMITTED OR OTHERWISE
UNDERSTATED TYPICALLY IS: - Answer-a. Low
b. HIGH
c. Moderate
d. Indeterminate
AN AUDIT PLAN FOR A/P WOULD NOT INCLUDE WHICH OF THE FOLLOWING
PROCEDURES? - Answer-a. Obtaining a TB of recorded A/P.
b. Sending confirmation to accounts with zero balances.
c. REVIEWING CASH RECEIPTS FOR THE PERIOD AFTER YE.
d. Obtaining written client representations about related-party payables and pledges of
assets as collateral for liabilities.
WHICH OF THE FOLLOWING WOULD NOT TYPICALLY BE A SPECIFIC RELEVANT
ASSERTION ABOUT FIXED ASSET ACCOUNTS? - Answer-a. Fixed assets in the
accounts exist and are in productive use.
b. NET CARRYING BOOK VALUES IN THE ACCOUNTS ARE REFLECTED AT
CURRENT MARKET VALUES.
c. Depreciation has been calculated properly using accepted methods and reasonable
estimates of useful life and other factors.
d. Fixed assets are properly classified in the B/S under appropriate descriptive captions.
WHICH OF THE FOLLOWING IS NOT ONE OF THE AICPA PRINCIPLES OF
PROFESSIONAL CONDUCT? - Answer-a. Responsibilities.
b. RELIABILITY
c. Objectivity
d. Due care
QUESTIONS WITH CORRECT ANSWERS
WHEN CONFIRMING A/P, EMPHASIS SHOULD BE PUT ON WHAT KIND OF
ACCOUNT? - Answer-a. ACCOUNTS WITH SMALL OR ZERO BALANCES,
PARTICULARLY THOSE WITH A HISTORY OF SIGNIFICANT ACTIVITY.
b. All accounts should be equally emphasized.
c. Accounts with large balances.
d. Accounts listed in the A/P subsidiary.
AN AUDITOR TRACED A SAMPLE OF PURCHASE ORDERS AND THE RELATED
RECEIVING REPORTS TO THE PURCHASES JOURNAL. THE PURPOSE OF THIS
SUBSTANTIVE AUDIT PROCEDURE MOST LIKELY WAS TO: - Answer-a. Identify
usually large purchases that should be investigated further.
b. Verify that cash disbursements were for goods actually received.
c. DETERMINE THAT PURCHASES WERE PROPERLY RECORDED.
d. Test whether payments were for goods actually ordered.
WHICH OF THE FOLLOWING SITUATIONS INDICATES A POTENTIAL MATERIAL
WEAKNESS IN INTERNAL CONTROL OVER ACQUISITION AND EXPENDITURE? -
Answer-a. Purchase orders are not prepared for services acquired directly under
authorization of department heads.
b. THE SAME PERSON AUTHORIZES VOUCHER PACKAGES AND SIGNS CHECKS.
c. Unacceptable goods are not scheduled on receiving reports.
d. The same person signs checks and stamps vouchers PAID.
WHEN USING CONFIRMATIONS TO PROVIDE EVIDENCE ABOUT THE
COMPLETENESS ASSERTION FOR A/P, THE APPROPRIATE POPULATION MOST
LIKELY WOULD BE: - Answer-a. VENDORS WITH WHOM THE ENTITY HAS
PREVIOUSLY DONE BUSINESS.
b. Amounts recorded in the A/P subsidiary ledger.
c. Payees of checks drawn in the month after YE.
d. Invoices filed in the entity's open invoice file.
WHEN AUDITING PPE, THE AUDITOR'S APPROACH IS GENERALLY TO: - Answer-
a. Examine evidence supporting the amounts in the ending balance.
b. EXAMINE EVIDENCE SUPPORTING ADDITIONS AND DISPOSALS DURING THE
YEAR.
c. Follow a reliance strategy, testing I/C, and analytical procedures.
d. Concentrate on finding unrecorded assets.
FAILURE TO RECORD A LIABILITY GENERALLY RESULTS IN: - Answer-a. An
understatement of profit.
b. An understatement of current ratio.
, c. AN OVERSTATEMENT OF PROFIT.
d. An overstatement of assets.
IMPROPERLY CAPITALIZING AN EXPENSE ITEM RESULTS IN: - Answer-a.
Understatement of profit in the current year and overstatement in future years.
b. Understatement of profit in the current year and in future years.
c. OVERSTATEMENT OF PROFIT IN THE CURRENT YR AND UNDERSTATEMENT
IN FUTURE YEARS.
d. Overstatement of profit in the current year and in future years.
TO DETERMINE WHETHER A/P ARE COMPLETE, AUDITORS PERFORMA A TEST
TO VERIFY THAT ALL MERCHANDISE RECEIVED HAS BEEN RECORDED. THE
POPULATION FOR THIS TEST CONSISTS OF ALL: - Answer-a. Vendors' invoices.
b. POs
c. RECEIVING REPORTS.
d. Cancelled checks.
THE INHERENT RISK (IR) THAT A/P MAY BE OMITTED OR OTHERWISE
UNDERSTATED TYPICALLY IS: - Answer-a. Low
b. HIGH
c. Moderate
d. Indeterminate
AN AUDIT PLAN FOR A/P WOULD NOT INCLUDE WHICH OF THE FOLLOWING
PROCEDURES? - Answer-a. Obtaining a TB of recorded A/P.
b. Sending confirmation to accounts with zero balances.
c. REVIEWING CASH RECEIPTS FOR THE PERIOD AFTER YE.
d. Obtaining written client representations about related-party payables and pledges of
assets as collateral for liabilities.
WHICH OF THE FOLLOWING WOULD NOT TYPICALLY BE A SPECIFIC RELEVANT
ASSERTION ABOUT FIXED ASSET ACCOUNTS? - Answer-a. Fixed assets in the
accounts exist and are in productive use.
b. NET CARRYING BOOK VALUES IN THE ACCOUNTS ARE REFLECTED AT
CURRENT MARKET VALUES.
c. Depreciation has been calculated properly using accepted methods and reasonable
estimates of useful life and other factors.
d. Fixed assets are properly classified in the B/S under appropriate descriptive captions.
WHICH OF THE FOLLOWING IS NOT ONE OF THE AICPA PRINCIPLES OF
PROFESSIONAL CONDUCT? - Answer-a. Responsibilities.
b. RELIABILITY
c. Objectivity
d. Due care
