Question

Part Two: Multiple Choice Questions: (2.5 marks/ question) 1. To test the existence assertion for recorded receivables, an auditor would select a sample from the A) Sales orders file. B) Customer purchase orders C) Accounts receivable subsidiary ledger D) Shipping documents (bill of lading) file. 2. When control risk for the existence assertion is assessed at a high level, which of the Gallerine is a likely effect with respect to the auditors' confirmation of receivables? A) The account balances as of year-end will generally be confirmed. Bo The ditors will in general use blank rather than positive confirmation requests c) The auditors will be required to confirm accounts as of an interim date during the year under wait) and as of year-end. D) Confirmation will not in general be used as the auditor will rely primarily upon support such as vendors invoices, purchase orders and receiving reports. 3. Which of the following is mor typically considered to be an alternate procedure forhandling noreplies to accounts receivable confirmation requests? A) Examine sales invoices B) Trace the balances from accounts receivable leder to the billing statements C) Examine correspondence. D) Examinc any subsequent cash receipts. 4. Which of the following is a likely procedure to test the adequacy of the allowance for doubtful account? A) Examine cash receipts received after year-end. B) Confirm receivables. C) Excamine dates of purchase orders. D) Foot the receivables lead schedule. 5. Which of the following procedures is least likely to help witors to assess the adequacy of management's accounting estimate of the allowance for doubtful account? A) Investigate confirmation exceptions for indication of amounts in dispute B) Review accounts which have been written off as collectible prior to year-end C) Investigate credit ratings for large accounts receivable D) Discuss with the credit manager the current status of doubtful account 6. Which of the following is true about the auditors'observation of the client's physical inventory? A) The count must be made wyear-end. B) The does should supervise the client's personne C) The auditors'observation addresses the existence assertion D) The Radio should justify any of the heation in the audit report

auditing

Answer 1

Ans.1. (d) Shipping Documents (Bill of Lading)

Ans.2. (b) The auditor will in general use blank rather than positive confirmation request

Ans.3. (c) Examine correspondence

Ans.4. (d) Foot the receivables Lead schedule

Ans.5. (a) Investigate confirmation exceptions for indications of amount in dispute

Ans.6. (c) The auditor's observation addresses the existence assertion

Ans.14. (d) Interest Payable

Ans.15. (c) Sales and Bad-debt Expenses

Ans.16. (a) Issue an unmodified opinion, but disclose elsewhere in the report this departure from customary procedure.

Ans.17. (b) Withdraw from engagement

Ans.18. (d) Weakness in a control activity