Homework answers / question archive / University of Tasmania BFA 713 CHAPTER 9 1)The primary difference between an audit of the statement of financial position and an audit of the income statement lies in the fact that the audit of the income statement deals with the verification of:  ‘dual-purpose tests’ involve: To test for unsupported entries in the ledger, the direction of audit testing should be from the: The auditor will most likely perform extensive tests for possible understatement of In auditing accounts payable, an auditor’s procedures most likely would focus primarily on management’s assertion of: Which of the following is not a primary objective of the auditor in undertaking substantive testing of current assets? An auditor most likely would make enquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management’s account balance assertion of: Tests designed to detect goods that arrived at the warehouse just before year-end and for which the audit client took ownership that have not been recorded in the perpetual inventory records until the subsequent year would most likely provide evidence about management’s assertion of:

University of Tasmania BFA 713 CHAPTER 9 1)The primary difference between an audit of the statement of financial position and an audit of the income statement lies in the fact that the audit of the income statement deals with the verification of:  ‘dual-purpose tests’ involve: To test for unsupported entries in the ledger, the direction of audit testing should be from the: The auditor will most likely perform extensive tests for possible understatement of In auditing accounts payable, an auditor’s procedures most likely would focus primarily on management’s assertion of: Which of the following is not a primary objective of the auditor in undertaking substantive testing of current assets? An auditor most likely would make enquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management’s account balance assertion of: Tests designed to detect goods that arrived at the warehouse just before year-end and for which the audit client took ownership that have not been recorded in the perpetual inventory records until the subsequent year would most likely provide evidence about management’s assertion of:

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10. You are auditing the bank account of Calcutta ltd (calcutta). You decide to send a standard bank confirmation request to the financial institutions with which Calcutta has done business during the year. A primary purpose of this test is to:
11. Two months before year-end the bookkeeper erroneously recorded the receipt of a long-term bank loan by a debit to cash and a credit to sales. Which of the following is the most effective procedure for detecting this type of misstatement?
12. An auditor is testing sales transactions. One step is to trace a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. What would the auditor intend to establish by this step?
13. To verify that all sales transactions have been recorded (the completeness assertion), a test of transactions should be completed on a representative sample drawn from:
14. During the process of confirming receivables as of 30 june 2015, a positive confirmation was returned indicating the ‘balance owed as of 30 june was paid on 9 july 2015’. The auditor would most likely:
15. An auditor should perform alternative procedures to substantiate the existence of an account receivable when:
16. Once an auditor has determined that accounts receivable at year-end have increased due to slow collections in a ‘tight money’ environment, the auditor would be likely to:
17. An aged trial balance of accounts receivable is usually used by the auditor to:
18. Which of following is the best argument against the use of negative accounts receivable confirmations?
19. An auditor reviews the credit ratings of customers with overdue outstanding accounts receivable balances. The auditor’s most likely purpose is to obtain evidence concerning management’s assertions about:
20. The audit working papers often include a client-prepared, aged trial balance of accounts receivable as at balance date. This ageing is best used by the auditor to:
21. In auditing accounts receivable the negative form of confirmation request most likely would be used when:
22. An auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control account, as at 30 june 2015. By this procedure, the auditor would be most likely to learn of which of the following?

23. Hoang is engaged in the audit of a power company that supplies power to a residential community. All accounts receivable balances are small and the internal control structure is effective. Customers are billed twice monthly. In order to obtain evidence with regards the valuation and allocation assertion of the accounts receivable balances as at balance date, Hoang would most likely:

24. In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon which of the following?
25. During the current financial year, the client company began dealing with certain distributors on a consignment basis (goods were delivered to the distributor but not deemed sold until the distributor had on-sold them). Which of the following audit procedures is least likely to bring this new fact to the auditor’s attention
26. When evaluating the risk of material misstatement with regards to defalcations involving receivables (a credit entry to accounts receivable for amounts not received), the auditor would expect an experienced bookkeeper to most likely debit which of the following accounts?
27. An auditor, having accounted for a sequence of inventory tags, traces information on a representative number of tags to the physical inventory sheets. The purpose of this procedure is to obtain assurance tha.
28. Procedures related to the purchases cut-off assertion should be designed to test whether or not all inventory:
29. Your client sells a high-technology product which is subject to frequent technological improvements and design changes in order to keep current with the market. Based on this information, for the inventory account, the assertion upon which you should concentrate your audit procedures is
30. During a client’s stocktake you select a sample of items from the floor, count them and trace the quantities to the inventory summary sheet. Which financial report assertion is this audit procedure related to
31. An auditor will usually trace the details of the test counts of inventory items selected from the factory floor while observing the inventory stocktake through to a final inventory schedule. This audit procedure is undertaken to provide evidence of which assertion(s)?
32. An auditor would be most likely to learn of slow-moving inventory through:
33. When perpetual inventory records are maintained, and control risk for inventory is high, the auditor would probably:
34. Tests designed to detect purchases made just before year-end that have been recorded in the subsequent year would provide assurance about management’s assertion of:
35. An auditor selected items that are on the store floor for test counts while observing a client’s physical inventory. The auditor then traced the test counts to the client’s inventory listing. This procedure most likely obtained evidence concerning management’s assertion of:
36. Which of the following auditing procedures most likely would provide assurance about a manufacturing entity’s assertion of valuation and allocation of inventory?
37. Which of the following procedures would best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10, and a few items selling for hundreds of dollars?
38. From the auditor’s point of view, inventory counts are more acceptable prior to the year-end when:
39. A client’s physical count of inventory was higher than the inventory per the perpetual records. This situation could be the result of the failure to record:
40. When outside firms of non-accountants specialising in the taking of physical inventories are used to count, list, price and subsequently compute the total dollar amount of inventory on hand at the date of the physical count, the auditor will ordinarily:
41. An auditor usually examines receiving reports to support entries in the:
42. When auditing Steel ltd, a large manufacturer of building supplies, which one of the following audit procedures would give the least assurance with regards to the valuation and allocation assertion for inventory?
43. A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably:
44. Which assertion for ending inventory is most likely at risk of material misstatement if the gross profit percentage is much greater than last year?
45. The physical count of inventory of Clyers pty ltd, a medium-sized retailer, was higher than shown by the perpetual records. Which of the following could explain the difference?
46. While auditing James ltd, you find that their inventory turnover has decreased from 7.8 times to 5.4 times during the year. Based on this decrease, which financial report assertion would you be least concerned with?
47. The auditor will most likely perform extensive tests for possible understatement of:
48. To determine whether accounts payable are complete, an auditor commonly performs sampling procedures to test whether all merchandise received is recorded. The population of documents for this test consists of all:
49. In order to efficiently test the purchases/accounts payable cut-off, an auditor will be most likely to:
50. Which of the following is the best audit procedure for determining the completeness of the accrued liabilities listing?
51. All of the following can assist the auditor in testing the existence assertion for investment securities except:
52. A normal audit procedure is to analyse the current year’s repairs and maintenance accounts to provide evidence in support of the audit proposition that:.
53. In auditing intangible assets, an auditor would determine whether the amortisation amount is reasonable in support of management’s financial statement assertion of
54. The auditor may conclude that depreciation charges are insufficient by noting:
55. The auditor is least likely to learn of retirements of equipment through which of the following?
56. Which of the following is one of the auditor’s primary objectives when externally confirming holdings of marketable securities?
57. All of the following evidence-gathering procedures can assist the auditor in testing the existence assertion for investment securities except:.
58. Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?
59. In violation of company policy, Morley ltd (Morley) erroneously capitalised the cost of painting its warehouse. The auditor examining Morley’s financial report would most likely detect this when:

60. An auditor would be least likely to use external confirmation procedures in connection with the examination of:
61. In the audit of Cassie ltd, a medium-sized manufacturing company, which one of the following areas would be expected to require the least amount of audit time?
62. One of the primary reasons for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense presented in the financial report is to:

63. When a client company does not maintain its own share records, the auditor should obtain written confirmation from the share registrar concerning:
64. Reviewing interest expense to identify payments to debt-holders not listed on the debt analysis schedule is a procedure that can be used to provide evidence for which audit assertion for loans payable:
65. Substantive testing is typically used to audit shareholders’ equity because:
66. Which of the following audit procedures is least likely to detect an unrecorded liability?
67. Which of the following is the most effective audit procedure for verification of dividends earned on investments in marketable equity securities?
68. An auditor analyses the repairs and maintenance expense account primarily to obtain evidence that:
69. Which of the following analytical procedures should be applied to the income statement?
70. The auditor is most likely to verify the liability account ‘accrued comissions payable’ in conjunction with the
71. Which of the following pairs of accounts would an auditor most likely analyse on the same working paper?
72. Auditors often make use of computer programs that perform routine processing functions such as sorting and merging. These programs are made available by IT companies and others and are specifically referred to as:.
73. Which of the following is an exception report that the auditor would generate using generalised audit software in order to test the valuation and allocation assertion for accounts receivable?
74. The auditor is least likely to use generalised audit software to:
75. Which of the following audit procedures would an auditor be least likely to perform using generalised audit software?
76. For which of the following tests would the auditor use generalised audit software to test the completeness assertion of inventory?
77. Which of the following is necessary to audit balances in an online it system in an environment where updated information is written over existing information?
78. The auditor is least likely to use generalised audit software to:
79. An auditor using audit software would probably be least interested in which of the following fields in a computerised perpetual inventory file?
80. While undertaking the audit of the debtors’ balance, you use your audit software to extract from the accounts receivable master file a report that shows those debtors with a positive balance owing that is overdue by more than 30 days. At which of the following account balance assertions is this report aimed?