Second Auditing Multiple Choice Questions

11.When obtaining an understanding of an entity's internal control procedures, an auditor should concentrate on the substance of the procedures rather than their form because
a.      The procedures may be operating effectively but may not be documented
b.      Management may implement procedures whose costs exceed their benefits
c.      The procedures may be so inappropriate that no reliance is contemplated by the auditor
d.      Management may establish appropriate procedures but not enforce compliance with them.

12.An auditor uses the knowledge provided by the understanding of internal control and the final assessed level of control risk primarily to determine the nature, timing, and extent of the
a.      Tests of controls
b.      Compliance tests
c.      Attribute tests
d.      Substantive tests

13.In planning an audit of certain accounts, an auditor may conclude that specific procedures used to obtain an understanding of an entity's internal control need not be included because of the auditor's judgments about materiality and assessments of
a.      Control risk
b.      Detection risk
c.      Sampling risk
d.      Inherent risk


14.An auditor may compensate for a weakness in internal control by increasing the
a.      Level of detection risk
b.      Extent of tests of controls
c.      Preliminary judgment about audit risk
d.      Extent of analytical procedures

     15.Tracing shipping documents to prenumbered sales invoices provides evidence that
a.      No duplicate shipments or billings occurred.
b.      Shipments to customers were properly invoiced.
c.      All goods ordered by customers were shipped.
d.      All prenumbered sales invoices were accounted for.

16.For effective internal control, the accounts payable department generally should
a.      Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed.
b.      Ascertain that each requisition is approved as to price, quantity, and quality by an authorized employee.
c.      Obliterate the quantity ordered on the receiving department copy of the purchase order.
d.      Establish the agreement of the vendor's invoice with the receiving report and purchase order.
      
17.To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is
a.      Supported by a vendor's invoice.
b.      Stamped "paid" by the check signer.
c.      Prenumbered and accounted for.
d.      Approved for authorized purchases.

18. An auditor generally tests the segregation of duties related to inventory by
a.      Personal inquiry and observation.
b.      Test counts and cutoff procedures.
c.      Analytical procedures and invoice re-computation.
d.      Document inspection and reconciliation.

19.Which of the following internal control procedures most likely would prevent direct labor hours from being charged to manufacturing overhead?
a.      Periodic independent counts of work in process for comparison to recorded amounts
b.      Comparison of daily journal entries with approved production orders
c.      Use of time tickets to record actual labor worked on production orders
d.      Reconciliation of work-in-process inventory with periodic cost budgets