Tests of controls Both A and B are correct Question 4. Question : (TCO 6) Which of the following represents an incorrect pairing of a type of audit test and evidence? Procedures to obtain an understanding of internal controls—documentation Analytical procedures—ratio analysis Substantive tests of transactions—confirmation Tests of details of balances—physical examination Question 5. Question : (TCO 6) In the context of an audit of financial statements, substantive tests are audit procedures that may be eliminated under certain conditions. are designed to discover significant subsequent events. may be either tests of transactions, tests of balances, or analytical tests. will increase proportionately with the auditor's reliance on internal control. Question 6. Question : (TCO 9) The use of prenumbered sales invoices is meant to prevent the failure to bill or record sales. duplicate billings and recording of sales. both A and B are correct. neither A nor B is correct. Question 7. Question : (TCO 9) The auditor is concerned with authorization of sales transactions at three key points. Which of the following is not one of those points? Credit authorization Shipment of inventory to customers Sales commission calculation Sales prices Question 8. Question : (TCO 9) To achieve good internal control, which department should perform the activities of matching shipping documents with sales orders and preparing daily sales summaries? Billing Shipping Credit Payables Question 9. Question : (TCO 9) An auditor needs to determine whether all customers of an electric utility company are being billed. The auditor should test from the sales register to the accounts receivable ledger. sales register to the meter department records. accounts receivable ledger to the sales ledger. meter department records to the sales register.
Question 10. Question : (TCO 9) A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that cash receipts recorded in the cash receipts journal are reasonable. cash receipts are properly classified. recorded cash receipts result from legitimate transactions. existing cash receipts are recorded. ACCT 444 DeVry Week 6 Quiz Latest Question 1. Question : (TCO 9) The exception rate the auditor will permit in the population and still be willing to reduce the assessed level of control risk is called the tolerable exception rate. estimated population exception rate. acceptable risk of overreliance. sample exception rate. Question 2. Question : (TCO 9) A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a random sample. statistical sample. judgment sample. representative sample. Question 3. Question : (TCO 9) To determine if a sample is truly representative, an auditor must conduct multiple samples of the same population. never use sampling because of the expense involved. audit the entire population. perform none of the above. Question 4. Question : (TCO 9) Cutoff misstatements can occur for sales. sales returns and allowances. cash collections. any of the above. Question 5. Question : (TCO 9) Auditing standards require auditors to confirm accounts receivable with some exceptions. Which of the following is not one of the exceptions allowed by auditing standards? The accounts receivable balance is comprised of several very large customer balances. Accounts receivable are immaterial. Response rates are likely to be very low. The combined level of inherent risk and control risk are low and other substantive evidence can be obtained.