SOLVED

16) Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash disbursements, it is common in this audit area to use: A) block sampling. B) variables sampling. C) attributes sampling. D) probability proportional to size sampling. 17) Which of the following tests of controls is least useful in assessing the transaction-related audit objective related to occurrence? A) Examine documents in voucher package for occurrence. B) Examine supporting documents for indication of approval. C) Account for sequence of vouchers. D) Attempt to input transactions with valid and invalid vendors. 18) You are performing the audit of Jenkins and Company. Your tests of controls and tests of transactions for accounts payable demonstrate that the controls are operating effectively. This would normally allow you to: A) eliminate the need for substantive testing of balances for accounts payable. B) reduce the need for substantive testing of balances for accounts payable. C) reduce control tests in other transactions cycles. D) increase the need for substantive testing of balances for accounts payable. 19) An auditor is using audit sampling to test transactions in the acquisition and payment cycle. She would normally set the tolerable exception rate at what level? A) low B) medium C) high D) indeterminate 20) 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 storeroom. B) Match purchase order, receiving report, and vendor’s invoice for each voucher in accounts payable department. C) Compare goods received with goods requisitioned in receiving department. D) Verify vouchers for accuracy and approval in internal audit department. 21) Which of the following should sign checks under conditions of effective internal control? A) Treasurer B) Purchasing agent C) Accounts payable clerk D) Person preparing the checks 22) In an examination of vendor statements or vendor confirmations when doing substantive tests of balances the auditor needs to perform the following: A) reconciliation with the accounts payable master file. B) reconciliation with vendor invoices. C) reconciliation with purchase orders. D) reconciliation with receiving reports. 23) Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that: A) acquisitions are correctly valued. B) existing acquisitions are recorded. C) acquisitions are correctly classified. D) recorded acquisitions are for goods and services received. 24) A company failed to record an acquisition of merchandise and its related liability, but the merchandise was included in ending inventory. The effect on the financial statements was to: A) understate both assets and liabilities. B) understate net income and owners’ equity. C) understate assets and owners’ equity. D) understate liabilities, and overstate both net income and owners’ equity. 25) The test of transactions which requires one to “reconcile recorded cash disbursements with the cash disbursements on the bank statement” satisfies the objective of: A) occurrence. B) completeness. C) accuracy. D) posting and summarization.