Which of the following would the auditor likely do to obtain assurance that all inventory items in a clients inventory listing are valid?
On receiving a client's bank cut-off statement, an auditor most likely would trace
Prior-year checks listed in the cut-off statement to the year-end outstanding checklist.A cut-off bank statement is a regular bank statement that is prepared by the bank for a shorter period than normal. It is sent directly to (or picked up by) the auditors. The cut-off bank statement is used by the auditors to verify the components of the client's bank reconciliation. The correct answer is A-the auditor would trace the prior year checks clearing in the cut-off statement to the outstanding check list in the bank reconciliation as a means of verifying the completeness and accuracy of the outstanding check list.
Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipients?
"If you do not report any differences within 15 days, it will be assumed that this statement is correct."
Two assertions for which confirmation of accounts receivable balances provides primary evidence are
Rights and obligations and existence.
When an auditor does not receive replies to positive requests for year-end accounts receivable confirmations, the auditor most likely would
Ask the client to contact the customers to request that the confirmations be returned.
In confirming a client's accounts receivable in prior years, an auditor discovered many differences between recorded account balances and confirmation replies. These differences were resolved and were not misstatements. In defining the sampling unit for the current year's audit, the auditor most likely would choose
Individual invoices.
Tracing bills of lading to sales invoices provides evidence that
Shipments to customers were invoiced.
While performing interim audit procedures of accounts receivable, numerous unexpected errors are found resulting in a change of risk assessment. Which of the following audit responses would be most appropriate?
Use more experienced audit team members to perform year-end testing.
To gain assurance that all inventory items in a client's inventory listing schedule are valid, an auditor most likely would trace
Items listed in the inventory listing schedule to inventory tags and the auditor's recorded count sheets.
Which of the following procedures would be most appropriate for testing the completeness assertion as it applies to inventory?
Performing cut-off procedures for shipping and receiving.
Which of the following auditing procedures most likely would provide assurance about a manufacturing entity's inventory valuation?
Testing the entity's computation of standard overhead rates.
An auditor testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the
Completeness of recorded investment income.
To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would
Examine the audited financial statements of the investee company.
When auditing prepaid insurance, an auditor discovers that the original insurance policy on plant equipment is not available for inspection.The policy's absence most likely indicates the possibility of a(n)
Lien on the plant equipment.
Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.
When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be
Vendors with whom the entity has previously done business.
An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to
Determine that purchases were properly recorded.
Which of the following procedures would an auditor least likely perform before the balance sheet date?
Confirmation of accounts payable.
In auditing long-term bonds payable, an auditor most likely would
Compare interest expense with the bond payable amount for reasonableness.
An auditor reviews the reconciliation of payroll tax forms that a client is responsible for filing in order to
Identify potential liabilities for unpaid payroll taxes.
In auditing payroll, an auditor most likely would
Compare payroll costs with entity standards or budgets.
Which of the following would be a consideration in planning a sample for a test of subsequent cash receipts?
Preliminary judgments about materiality levels.
Inquiries of warehouse personnel concerning possible obsolete or slow-moving inventory items provide assurance about management's assertion of
Valuation.
An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to
Determine that purchases were properly recorded.
An auditor's program to examine long-term debt most likely would include steps that require
Correlating interest expense recorded for the period with outstanding debt.
When control risk is assessed as low for assertions related to payroll, substantive tests of payroll balances most likely would be limited to applying analytical procedures and
Recalculating payroll accruals. |