AC492 Final Examination Answers
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AC492 Final Examination Answers
- The specific audit objective that all purchases and
cash disbursements made during the period were recorded relates to:
existence or occurrence.
presentation and disclosure.
rights and obligations.
completeness.
- The use of the computer to compare production hours to
direct labor hours on daily production reports relates to the:
rights and obligations assertion.
completeness assertion.
existence or occurrence assertion.
valuation or allocation assertion.
- During the count of cash on hand, it is NOT necessary
for the auditor to:
insist on the presence of the
custodian of the cash throughout the count.
insist on the presence of an
internal auditor throughout the count.
obtain a signed receipt from the
custodian on return of the funds.
control both cash and non-cash
negotiable instruments held by the client.
- By definition, subsequent events occur between:
the report date and the date the
report is issued.
the interim and balance sheet date.
the balance sheet date and the
report date.
the balance sheet date and the date
the report is issued.
- The expenditure cycle would include:
payroll transactions.
payments by check.
the purchase of another entity’s
stocks.
the purchase of treasury stock.
- The specific account balance audit objective, plant
assets and related expenses are properly identified and classified in the
financial statements, relates to the:
presentation or disclosure
assertion.
existence or occurrence assertion.
rights and obligations assertion.
completeness assertion.
- The specific account balance audit objective, the
entity owns or has rights to all recorded plant assets at the balance
sheet date, relates to the:
rights and obligations assertion.
existence or occurrence assertion.
completeness assertion.
valuation or allocation assertion.
- When inventories are material and the auditor does not
observe the inventory at or near the year-end, professional standards
require the auditor to:
disclaim an opinion on the financial
statements.
observe some physical counts of the
inventory.
thoroughly test the accounting
records.
resign from the engagement.
- All sales, cash receipts, and sales adjustments are
accurately valued using GAPP and correctly journalized, summarized, and
posted. These actions are transaction objectives for:
completeness
accurancy
cutoff
occurance
- Section 18 liability is relatively narrow in scope
because it relates only to a false or misleading statement in documents
“filed” with the:
AICPA
SEC
IRS
FASB
- Which of the following functions is NOT part of the
production cycle?
acquisition of raw materials
maintaining the correctness of
inventory balances
processing goods in production
determining and recording
manufacturing costs
- The specific audit objective for the audit of
investments, investment balances are properly identified and classified in
the financial statements, relates to the:
presentation or disclosure
assertion.
rights and obligations assertion.
completeness assertion.
existence or occurrence assertion.
- The specific audit objective that the entity is liable
for the payables resulting from the recorded purchase transactions relates
to:
rights and obligations.
completeness.
presentation and disclosure.
existence or occurrence.
- The specific audit objective for the audit of
investments, investment revenues, and realized and unrealized gains and losses,
are reported at proper amounts, relates to the:
rights and obligations assertion.
completeness assertion.
valuation or allocation assertion.
existence or occurrence assertion.
- The control of all funds during the count of cash on
hand is meant primarily to prevent:
unauthorized disbursements.
transfers by the client.
any chance of double counting.
client personnel from viewing the
count procedure.
- 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:
secondary endorsements.
deposit balances.
loan balances.
loan interest rates.
- Which of the following is NOT a tort?
negligence
gross negligence
fraud
breach of contract
- Which of the following accounts in a merchandising
company is affected by both the revenue cycle and another cycle?
accounts receivable
sales returns and allowances
inventory
sales
- 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:
risk assessment.
information protection.
performance measurement.
transaction integrity.
- Which one of the following is NOT true of the
Principles in the AICPA’s Code of Professional Conduct?
They provide a framework for the
Rules.
They express the basic tenets of
ethical conduct.
They are expressions of ideals of
professional conduct.
They are set forth as enforceable
standards.
- The two main sections of the AICPA’s Code of
Professional Conduct are:
Principles and Rules of Conduct.
Interpretations of the Rules of
Conduct and Ethics Rulings.
Principles and Ethics Rulings.
Rules of Conduct and Interpretations
of the Rules of Conduct.
- The Principle of Integrity in the AICPA’s Code of
Professional Conduct would be violated in cases of:
subordination of judgment.
unintentional distortion of facts.
inadvertent error.
genuine differences in opinion.
- The audit objective, “The accounts receivable balance
represents gross claims on customers and agrees with the sum of the
accounts receivable subsidiary ledger” is derived from the assertion of:
existence or occurrence.
valuation or allocation.
rights and obligations.
completeness.
- The specific audit objective for the audit of
investments, all investments are included in the balance sheet investment
accounts, relates to the:
rights and obligations assertion.
completeness assertion.
valuation or allocation assertion.
existence or occurrence assertion.
- In performing an attest engagement, a CPA performs all
of the following EXCEPT:
gathers evidence to support the
assertions.
relies on management statements.
objectively assesses the
communications of the individual making the assertions.
objectively assesses the
measurements of assertions.
- The auditor’s strategy in performing test counts during
the inventory observation is to:
concentrate tests on high dollar
items and take a representative sample of other items.
test all high dollar items.
concentrate tests in areas where
employees seem to be disregarding the inventory instructions.
randomly select all test items.
- Which one of the following is an investing activity?
acquiring debt
issuing bonds
capital leases
selling land
- Whether the system is protected against unauthorized
physical and logical access defines:
system availability.
system verifiability.
system security.
system integrity.
- 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:
resign from the engagement.
take steps to prevent future reliance
on the audit report.
notify the SEC or other regulatory
agency.
notify the audit committee.
- The auditor’s special report on financial statements
prepared on an OCBOA should contain all of the following EXCEPT:
an introductory paragraph.
a scope paragraph.
an exclusion paragraph.
an explanatory paragraph.
- Which of the following is NOT among the characteristics
of the procedures performed in completing the audit?
They are optional since they have
only an indirect impact on the opinion to be expressed.
They are performed after the balance
sheet date.
They involve many subjective
judgments by the auditor.
They are usually performed by audit
managers or other senior members of the audit team who have extensive audit
experience with the client.
- Which of the following is NOT among the specific
auditing procedures the auditor performs to obtain additional audit
evidence?
reading minutes of meetings
making subsequent events review
reviewing evidence concerning
litigation, claims, and assessments
obtaining client representation
letter
- Gross negligence can best be defined as:
criminal fraud.
misrepresentation.
failure to exercise due care.
failure to exercise even slight
care.
- Whether the system processing is complete, accurate,
timely, and authorized defines:
system security.
system integrity.
system maintainability.
system availability.
- When statistical sampling methods are used by the
client in determining inventories, professional standards require that the
auditor ascertain the following EXCEPT that the:
sampling plan has statistical
validity.
appropriate tests of transactions
have been applied.
sampling plan has been properly
applied.
results in terms of reliability are
reasonable.
- 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:
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.
the wide diversity of inventory
items may present special problems in determining their quality and market
value.
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.
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