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1) Which of the following accounts in a merchandising company is affected by both the revenue cycle and another cycle? A

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1) Which of the following accounts in a merchandising company is affected by both the revenue cycle and another cycle?

A.  Sales

B.  Sales returns and allowances

C.  Inventory

D.  Accounts receivable

 

2) The auditor’s strategy in performing test counts during the inventory observation is to

A.  concentrate tests on high-dollar items and take a representative sample of other items

B.  test all high dollar items

C.  randomly select all test items

D.  concentrate tests in areas where employees seem to be disregarding the inventory instructions

 

3) Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?

A.  Inventory turnover

B.  Finished goods produced to raw material used

C.  Inventory growth to cost of sales growth

D.  Finished goods produced to direct labor

 

4) The control of all funds during the count of cash on hand is meant primarily to prevent

A.  transfers by the client

B.  any chance of double counting

C.  unauthorized disbursements

D.  client personnel from viewing the count procedure

 

5) Whether the entity maintains effective controls to provide reasonable assurance that private customer information obtained because of e-commerce is protected is defined as

A.  transaction integrity

B.  information protection

C.  risk assessment

D.  performance measurement

 

 

6) A lawyer’s refusal to respond to a letter of audit inquiry normally requires the auditor to

A.  issue a qualified opinion or a disclaimer of opinion

B.  issue an unqualified opinion with an explanatory paragraph

C.  issue a qualified or adverse opinion

D.  issue a standard three-paragraph unqualified opinion

 

7) Which of the following is a tort?

A.  Breach of contract

B.  A wrongful act that does not injure another person’s property, body, or reputation

C.  Gross negligence

D.  Unintentional error where appropriate degree of care was exercised and no one was injured