Q&A Hero

Q: Each working paper should include enough information to fulfill the objectives for which it was designed. For example, if a working paper is designed to list the detail and show the verification of support of a balance sheet account such as prepaid insurance, it is essential that the detail on the working paper A) reconcile the change in costs from last year to this year. B) use analytical review to consider the reasonableness of the account. C) reconcile with the associated general ledger account. D) use observation to identify controls in place over the transactions.

Q: Renaldo compared shipping reports to sales documents, checking to see that the sales invoice date matched the shipping date, and that quantities invoiced matched quantities shipped. On his working paper, he said that he vouched invoices. What else should his working paper include with respect to the audit procedure conducted? A) details of tests conducted, with results B) results of analytical review procedures on the aging of accounts receivable C) employee number and wage rate of the employees he spoke to D) a statement that the information will be held confidential

Q: To facilitate the working paper preparation process, defaults can be established to automatically insert client name, period covered, and preparer. This can best be done using A) the junior staff assigned to the engagement. B) an old-fashioned rubber stamp on each printed page. C) cut and paste from word processing or spreadsheet software. D) automated working paper software.

Q: In addition to including on each working paper the name of the client, the period covered, the date of preparation and an index code, each working paper should clearly include A) the name of the preparer and a description of the contents. B) symbols used and a reconciliation to the general ledger balance. C) audit working paper steps that were completed. D) the nature of the transaction-based risk that is being audited.

Q: With the use of electronic working papers, each team member should have a unique access identification code and a password to access the working papers. Once a working paper is completed, what type of access should the staff auditor who prepared the working paper file have? A) edit capability B) update for current information C) read only D) change based upon review

Q: The audit of Simcoe Transports Inc. was completed three months ago so the PA firm proceeded to the file archive stage in accordance with Canadian Audit Standards. If the audit firm receives additional information related to the audit but the information does not affect the audit conclusions, the information should be A) disregarded as it the file archive was already done. B) added to the audit file in the section to which it pertains. C) separately identified and added at the front of the audit file. D) added to the audit file and request that the reviewing partner reviews the new information.

Q: The working papers contain data useful for evaluating the adequacy of the audit scope and the fairness of the financial statements. This data helps the auditor to conclude whether A) control risks were accurately identified and tested. B) inherent risks were set as low as possible. C) an unqualified audit report can be issued. D) the current files properly contain copies of client contracts and agreements.

Q: The audit working papers serve as a record of the evidence accumulated and the results of the audit tests. This helps to demonstrate that the audit was A) properly kept confidential; information was held secure. B) completed using Canadian generally accepted accounting principles. C) organized effectively with no mistakes in calculations. D) conducted in accordance with Canadian generally accepted auditing standards.

Q: The new Canadian Auditing Standards require the auditor to complete the audit working papers within how many days of the audit report date? A) 45 B) 60 C) 90 D) 183

Q: The working papers are A) the property of client. B) prepared by the client's internal auditors. C) the primary means of documenting that an adequate audit was conducted in accordance with GAAS. D) used primarily as a basis for the partners to review and reward the work of the managers, seniors, and staff.

Q: During the course of an audit engagement an auditor prepares and accumulates audit working papers. The primary purpose of the audit working papers is to A) aid the auditor in adequately planning the work. B) provide a point of reference for future audit engagements. C) support the underlying concepts included in the preparation of the basic financial statements. D) support the auditor's report.

Q: Anna performed a trend analysis of accounts receivable (AR) balances and computed the days to collect AR ratio. When she compared the results of her analysis with the industry averages, she found the results were unusually low compared to the industry norm. Anna can conclude that A) the accounts receivable balance is wrong. B) the accounts receivable has an increased risk of misstatement. C) the integrity of the company's management is questionable. D) she will not be able to rely on internal controls for accounts receivable for audit purposes.

Q: During discussion and inquiry with management, the auditor determined that the company has started a new line of business, requiring a substantial investment in manufacturing equipment. The company has also implemented wireless scanning for its warehouse and inventory. Which of the following techniques will the auditor likely use to corroborate these statements? A) further inquiry of the accounting personnel B) inspection of recent sales invoices for types of sales C) use of analytical procedures, comparing last year to this year D) observation during the plant tour

Q: White Top Telephones is the largest telephone distributor in the province, distributing wired and wireless phones, as well as cellular phones. Management always seems to be in a rush, and difficult to approach. Unfortunately, this attitude has permeated down to all of the staff, and everyone seems to be hurrying about, doing what needs to be done. Sometimes, it seems as if they don't even have time for the customers, moving on to the next task. Yet everything seems to get done. The company's web site has a lengthy privacy policy statement indicating that customers are number one, and that all data are kept secure. Required: Explain the importance of the control environment and corporate governance structure. During what phases of the risk assessment and planning process would the control environment and corporate governance structure be documented and assessed?

Q: A) One step in the planning phase of an audit is to obtain information about the client's legal obligations. Identify the types of legal documents and records that auditors examine to obtain this information. B) Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be aware of early in the audit.

Q: Your preliminary discussion with European Real Estate Management (EREM) Corporation indicated that the company was owned by three Swedish individuals who sold limited liability partnerships of shopping malls, office buildings and large residential apartment buildings to European investors. Often, a single shopping mall was broken up into several limited liability partnerships to make the ownership pieces small enough to sell easily. In some cases, these partnership units were sold to European companies, who diversified and bought units in several buildings. Other units were purchased by individuals. If a property looked particularly promising, the owners of EREM occasionally purchased units or advised their wives and family members to purchase units. Required: Explain why it is important for the auditor to identify related party transactions. Why are related party transactions a high risk area for the EREM audit?

Q: Juniper Berry is a private company, operating in the fruits and vegetable industry, located in the Niagara region. In its main St-Catharines plant, it receives the picked berries and proceeds to sort, package and also make some related products such as jams, cookies and pies. Your firm has recently been hired as the auditor of Juniper Berry. The partner in charge of the audit has asked you to write a memo explaining why it is important to gain understanding of the business operations and processes of Juniper Berry and also to list some suggested procedures to be performed in the process of understanding the business operations and processes. To assist you with your memo, the partner provided you with some notes he took at a recent meeting with the management of Juniper Berry. - Juniper Berry (JB) sells and manufactures a wide range of products. From fresh to frozen berries, to jam, cookies and pies. Fresh and Frozen berries make up most of the revenues of JB. - JB sells mostly to grocery stores directly. Its frozen berries however are packaged with the Mondo Grocers logo as they have an exclusive contract to sell all of their frozen berry production to Mondo. - In 2011, JB installed a high tech scale system where the berries received from the various farms are weighed when they are delivered and the amount to be paid to the farmer is calculated and recorded immediately. The system automatically records the inventory and the central system also issues an electronic payment for the amount calculated by the scale. JB is proud to be technologically advanced as it allowed the company to cut some jobs and be more cost efficient. - Given that most of the packaging and processing of berries into derived products is automated, capital assets represent a significant portion of the balance sheet and also required JB to obtain large bank loan in 2011 when the plant upgrade took place.

Q: Knowledge of the client's industry and external environment can be obtained in different ways. Discuss some of the ways that this knowledge can be obtained.

Q: Black Rock Limited is a marble and tile outlet that has a large outdoor area as well as an indoor showroom for a variety of rock, tile and marble. It is July and your firm has just been appointed auditors for the September year end audit. The previous firm of auditors had conducted review engagements. The company's bank has asked for audited financial statements for the current year end. Required: A) What is the purpose of obtaining knowledge of the client's industry and business environment? Identify at least three procedures that you could undertake in this area. B) What is the purpose of obtaining knowledge of the client's business? Identify at least three procedures that you could undertake in this area.

Q: What is the purpose of developing a client risk profile? List the steps involved in developing a client risk profile.

Q: The Canadian Auditing Standards state the the auditor must develop an audit plan. List and explain the components that must be included in the auditor's plan.

Q: The Sarbanes-Oxley Act requires management to certify that it has informed the auditor and audit committee of any A) related party transactions. B) significant deficiencies in business practices. C) significant deficiencies in internal controls. D) specific business or industry risk.

Q: Vanovo Ltd. is a company that has purchased several companies in the retail sector. Recently, Vanovo Ltd. purchased both a coffee and donut chain that also owned bakeries and a submarine sandwich chain. Unfortunately, the planned synergies between these two retail chains did not arise. What effect would this have on the financial statements of Vanovo Ltd., the parent company? A) the financial statements will be incorrectly calculated, and should be checked B) the fixed assets and goodwill recorded at acquisition could be impaired C) risk of material misstatement for payroll expenses will increase D) costs of goods sold will likely be overstated for both of the new chains

Q: Your client, Macilbink Ltd., manufactures calendars, books and magazines. The printing presses that they use are only three years old, yet new technology has been developed that would result in cuts in ink and electricity costs by over 20%, while simplifying the set up process (the new equipment can read in PDF files directly), making lower production runs more feasible. Macilbink Ltd. is facing lowered demand for its products, and will need to change direction or innovate to stay in business. The effect of the new printing technology has resulted in the following risk assessment changes by Macilbink Ltd.'s auditors: A) decrease control risk B) increase control risk C) decrease client business risk D) increase client business risk

Q: If management and salespeople are compensated on the basis of achieving high sales targets, there is increased incentive to record sales before they have been earned. In such a situation, the auditor will increase the extent of testing for which of the following transaction-related audit objectives for sales? A) cutoff and classification B) classification and occurrence C) occurrence and cutoff D) completeness and cutoff

Q: If the client has set unreasonable objectives or if the performance measurement system encourages aggressive accounting, the auditor will A) increase inherent risk of financial statement misstatements. B) lower inherent risk of financial statement misstatements. C) increase control risk of financial statement misstatements. D) lower control risk of financial statement misstatements.

Q: A client's performance measurement system includes key performance indicators that management uses to A) measure its profitability. B) compare its performance with prior periods. C) prepare the financial statements. D) measure progress toward its objectives.

Q: Organizations with a good control environment are able to document their positive "tone at the top" with a clear code of ethics. How would the auditor include the presence of such a code of ethics in the risk assessment process? A) increase inherent risks associated with violations of laws and regulations B) lower inherent risks associated with violations of laws and regulations C) increase control risks associated with violations of laws and regulations D) lower control risks associated with violations of laws and regulations

Q: In addition to direct impacts upon the financial statements, the auditor also needs to consider indirect effects. An assessment of client objectives and strategies can reveal issues that could lower income or cause contingent liabilities. Which of the following could cause lost sales, increases in warranty expenses and product liability claims? A) poor product quality B) excessive advertising C) ineffective projections D) inaccurate budgets

Q: It is important that the policies, procedures and key decisions of senior management, board of directors and audit committee be considered when developing a client risk profile because A) they have a pervasive effect on the company. B) they influence the most important decisions for the company. C) it is required by accounting and auditing standards. D) they have the effect of increasing client business risks.

Q: Frontenac Construction, your audit client, is a construction company. In the initial planning phase of the audit, you identified that it has many contracts with severe non-performance clauses if any of the current constructions are not completed on the dates set in the contracts over the next three years. As the auditor, you would set the inherent risk for sales and penalties as A) high. B) moderate. C) low. D) cannot be determined until more procedures are performed.

Q: When reading the corporate minutes, the auditor obtained information regarding the loans that were authorized for borrowing. What audit step would the auditor likely conduct with this information? A) trace the authorized amounts to the bank statements B) verify that notes payable have been recorded C) calculate interest payable as of the end of the year D) contact a credit rating agency to determine the rating of the lender

Q: When reading the corporate minutes, the auditor extracted the approved annual salary for the President, the Chief Executive Officer and other senior executives. What audit step would the auditor likely conduct with this information? A) trace the payroll amount to each individual officer's payroll record B) check that the payroll has been recorded into the correct bank account C) verify that payroll cheques have two signatures for all large amounts D) ensure that all overtime is approved and adequately documented

Q: The official record of the meetings of the board of directors and shareholders is contained in the corporate A) bylaws. B) charter. C) minutes. D) license.

Q: Which of the following is an important purpose of an organizational code of ethics and the associated processes to ensure adherence? A) make sure that there are no fraudulent or illegal transactions at the company B) train employees in acceptable conduct at the organization C) keep unethical employees from acting out unacceptable behaviour D) provide a powerful signal of acceptable organizational conduct

Q: A code of ethics is an important document for organizational conduct. In response to the Sarbanes-Oxley Act in the U.S., the SEC requires which of the following actions for organizations that have not adopted a code of ethics? A) explanation of why it has not done so B) disclosure of actions undertaken to prevent and detect fraud C) disclosure of all related parties in management and discussion documents D) a cost-benefit analysis for immediate implementation of one

Q: Which of the following would you expect to find in a corporation's bylaws? The A) kinds and amounts of capital stock authorized. B) date of incorporation. C) rules and procedures adopted by the shareholders of the corporation. D) types of business activities that the corporation is authorized to conduct.

Q: The auditor will obtain a copy of the client's articles of incorporation (if applicable) and retain a copy in the permanent file. Important information in the articles of incorporation includes A) the interest rates currently being paid for bonds that have been issued. B) voting rights of each class of shares issued by the company. C) which shares have been redeemed by the company in the current year. D) the interest rates that are being received on long term notes invested.

Q: An effective board of directors helps ensure that the company takes only appropriate risks. The audit committee can A) reduce the likelihood of fraud and financial statement errors through oversight of the entity level controls. B) reduce the likelihood of financial statement errors by helping management of the company with complex financial reporting issues. C) reduce the likelihood of financial statement errors by helping management in the preparation of the financial statements and related notes. D) reduce the likelihood of overly aggressive accounting through oversight of financial reporting.

Q: Michum Inc. has related parties with a company owned by the CEO's brother that comprise about $500,000. There are also related party transactions with the owner (about $250) and with two of the officers ($750 and $1,000) respectively. Which related parties should be identified and included in audit documentation? A) those with material transactions only B) those that had transactions in the current year only C) all related parties D) only those that could lead to a conflict of interest

Q: Brandon is working on the audit of Michum Inc. In accordance with CAS 550 (related parties), Brandon had obtained a management confirmation of all related-party transactions. When auditing the purchasing cycle of Michum, Brandon found that the company had purchased over $500,000 of merchandise from Elite Crust Inc., a company that is owned by the CEO's brother. The $500,000 purchase is a material amount and it was not included in the confirmation provided by Michum. Brandon should A) inform the audit committee. B) qualify the audit report. C) discuss this issue with the management of Michum. D) reduce materiality to increase the likelihood of discovering other undisclosed related party transactions.

Q: Jibbery Company has numerous transactions with related parties. For example, it has borrowed money from shareholders, purchases raw materials from a subsidiary company, and sells finished goods to its parent company. Which of the following describes one of the impacts upon risk assessment of these transactions? A) inherent risk would be set as low B) inherent risk would be set as high C) control risk would be set as low D) audit risk would be decreased

Q: Simon owns a clothing store, Simonello. Simonello recently purchased a material amount fabrics from Simonique Inc., a textile company also owned by Simon. With regards to this transaction, the auditors should A) request a confirmation from Simonique that the transaction took place. B) inspect the textile received in the warehouse to ensure that the amount sent equals the amount ordered. C) qualify the audit report as this puts into question management's integrity. D) verify that the business relationship is disclosed in the financial statements.

Q: Mario, the owner of Clayton's ice cream, is giving Steve, the manager of the audit, a private tour of the production facilities. By doing the tour, Steve will A) be better able to identify control risks. B) understand the client's business and operations better. C) be able to gather audit evidence on operational efficiencies. D) Steve should not be taking a tour alone with the owner as this could compromise his independence.

Q: The existence of advanced automated systems affects the audit process. Which of the following characteristics is an indicator of the presence of an advanced automated information system? A) electronic data interchange systems for purchase orders, sales invoices and payments B) use of packaged software to process sales both locally and across Canada C) use of customer relationship management systems to manage sales information D) numerically-controlled equipment used in the manufacturing process

Q: The existence of advanced automated systems affects the audit process. Which of the following characteristics is an indicator of the presence of an advanced automated information system? A) use of data communications (such as the Internet) to transfer transaction data B) use of packaged software to process sales both locally and across Canada C) use of customer relationship management systems to manage sales information D) numerically-controlled equipment used in the manufacturing process

Q: The existence of advanced automated systems affects the audit process. Which of the following characteristics is an indicator of the presence of an advanced automated information system? A) custom-designed operational or strategic information systems B) use of packaged software to process sales both locally and across Canada C) use of customer relationship management systems to manage sales information D) numerically-controlled equipment used in the manufacturing process

Q: There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit. What is the purpose of comparing prepaid expenses and related expense accounts with those of prior years? A) understand the client's industry and business B) assess going concern C) indicate possible misstatements D) reduce tests of controls

Q: There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit. What is the purpose of comparing the gross margin with those of prior years, looking for large fluctuations? A) understand the client's industry and business B) assess going concern C) indicate possible misstatements D) reduce detailed tests

Q: In order to assess if a company is a going concern, the auditor can calculate which of the following ratios during the audit planning and compare with previous years and successful companies in the industry? A) debt to equity ratio B) accounts receivable turnover ratio C) percent of interest expense to sales D) inventory turnover ratio

Q: There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit. What is the purpose of calculating key ratios for the client's business and comparing them with industry averages? A) understand the client's industry and business B) assess going concern C) indicate possible misstatements D) reduce detailed tests

Q: How is lack of understanding of a client's knowledge and industry linked to the auditor's business risk? A) sales and collection processes need to be carefully documented so that the auditor can assess the value of accounts receivable B) failure to fully understand the nature of the client's transactions could result in litigation should the client fail C) the auditor may not be adequately trained to understand the nature of the client's business, conducting a poor quality audit D) there may not be sufficient expertise assigned to the audit engagement, resulting in a lack of understanding of complex issues

Q: An important reason for auditors to obtain a good knowledge of a client's industry is that A) payroll processing functions could differ from client to client. B) control risks will vary from zero to 100% and can be better assessed in context. C) detection risk must be set in accordance with the needs of the industry as well as of the individual client. D) organizations like city governments have unique accounting requirements that could be complex.

Q: It is important for the auditor to obtain a good understanding of the industry of the client to develop a client risk profile. If the auditor is looking at a client in the fashion clothing industry, a risk specific to the industry would be A) the high risk of poor governance and management oversight. B) the high risk of defective products. C) the high risk of obsolescence of their inventory. D) the volatility in the stock market with regards to common stock.

Q: Risks associated with specific industries may affect the auditor's assessment of client business risk and acceptable audit risk, and even influence client acceptance decisions. Which of the following business would be the most risky for the auditor to accept as a new client? A client that A) is a small manufacturer of metal and plastic parts, with steady profits, in business for 15 years. B) is developing a computer game, expected to be ready in three years, and has no other products. C) has fifteen retail outlets in the clothing industry, with mid-range pricing, appealing to a large population sector. D) consists of a partnership of ten lawyers, operating out of three different cities in one province.

Q: A thorough understanding of the client's business and industry and knowledge about the company's operations are essential for doing an adequate audit. Why do auditors need greater knowledge about major customers and suppliers and related risks? A) information technology connects these organizations, so that they affect each other B) information technology provides rapid information about organizations C) there is increased importance of human capital and other intangible assets D) joint ventures and strategic alliances affect client business risks

Q: One of the purposes of developing a client risk profile is to assist the auditor in A) developing the pertinent audit procedures for tests of internal controls. B) assessing the client's business risk. C) locating related parties that need to be disclosed. D) deciding whether fraud or illegal acts have taken place.

Q: A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the A) inherent risk. B) audit risk. C) statistical risk. D) financial risk.

Q: An important reason for adequately planning the audit engagement is to A) help decide whether the engagement should be accepted. B) enable the auditor to obtain sufficient appropriate audit evidence. C) properly design the contents of the engagement letter. D) keep audit risk as low as possible.

Q: The audit plan includes the nature, timing and extent of audit procedures for the purposes of risk assessment, including those that are linked to the individual audit assertions, as well as any other audit procedures that are considered necessary. At what point in the audit process is the audit plan finalized? When A) the auditor has finished documenting internal controls. B) the client risk profile has been completed. C) risk assessments are complete. D) inherent risk information has been gathered.

Q: When the auditor has properly planned and performed the audit to reduce risk to an acceptably low level that is consistent with the objective of the audit, this means that the auditor has conducted enough work to A) reduce inherent risks to an acceptable level. B) increase detection risk to a satisfactory level. C) detect errors in internal controls so that control risk can be set higher. D) detect material misstatements to the targeted level of assurance.

Q: An effective audit is one that A) reduces the audit risk to the targeted level. B) ensures that there are no errors contained in the financial statements. C) does not contain errors of a dollar amount higher than 5% of the net income of the company. D) is completed on time and within budget.

Q: 6.1 Explain the importance of an adequate audit planning process

Q: Bratlett Company has purchased all of the shares of another company, but does not want to consolidate its financial statements. Management has drafted a rather long and confusing note to the financial statements that describes the transaction that took place briefly, and states that debt has been acquired in a foreign currency. In your view, the transaction, its effect on the company and the accounts have not properly been disclosed. Required: List the audit objectives about presentation and disclosure that have been affected and explain how they are affected.

Q: In the following table, there are listed common audit objectives for accounts payable or purchases. For each procedure, list the management assertion, and the related general audit objective. State whether the audit objective is transaction-related or balance-related. Accounts payable or purchases objectives Management assertion Audit objective Transaction-related? (Y/N) Balance- related? (Y/N) 1. Accounts payable in the accounts payable trial balance are for valid purchases. 2. Recorded acquisitions are for goods and services received, consistent with the best interests of the client. 3. All acquisition transactions are recorded. 4. Recorded acquisition transactions are recorded at the correct amount. 5. Acquisition transactions are correctly allocated between current and long-term. 6. Acquisition transactions are recorded on the correct dates. 7. Purchase transactions are properly included in the vendor and inventory master files, and are correctly posted to the general ledger. 8. The accounts payable recorded in liabilities are obligations of the company.

Q: Formamould Inc. sells plastic moulds to a variety of companies. Some moulds are custom made and cost thousands of dollars. To help customers finance these purchases, Formamould uses a variety of methods, such as payment terms stretched over three years, delayed payment, and pay-as-you-produce models tailored to the individual customer's needs. The outstanding balance is included in current accounts receivable. The general balance-related audit objective affected by this activity is A) completeness. B) accuracy. C) allocation to accounts. D) existence.

Q: Jane's employer purchased a new calculator this month. When Jane added up the sales for the day, she was a bit confused with the new calculator and made numerous adding errors. The daily sales total for the next week was incorrectly posted to the general ledger. The general balance-related audit objective affected by this activity is A) cutoff. B) accuracy (of allocation). C) classification. D) existence.

Q: To help improve the cash balance on the financial statements, the controller recorded several deposits from early January in the month of December. The general balance-related audit objective affected by this activity is A) allocation timing. B) accuracy. C) classification. D) existence.

Q: Radio Supplies Limited sells parts and components to organizations that repair radios and other forms of audio equipment. It has many parts on its inventory listing at cost that were purchased up to fifteen years ago. Some of these parts have not seen any movement in the last ten years. The general balance-related audit objective affected by this activity is A) completeness. B) accuracy. C) valuation. D) existence.

Q: The Big Insurance Company implemented a new computer system to track and record insurance premiums receivable. The program automatically prints invoices and sends them to customers when premiums are due. Due to a program error, a whole series of invoices were included in sales but not in accounts receivable. The general balance-related audit objective affected by this activity is A) completeness. B) accuracy. C) classification. D) existence.

Q: The sole shareholder of Jade Company had a contractor pave the parking lot at the company building, and also pave the driveway of his home. Both paving jobs were billed to the company on a single invoice. The general balance-related audit objective affected by this activity is A) existence. B) allocation. C) completeness. D) rights and obligations.

Q: Camilla is preparing the audit program for the inventory of Summers, a large department store. Camilla listed "select a sample of invoices from suppliers to verify that the risks and rewards of the inventory were transferred to Summers". Camilla is concerned that some of the inventory in the store might be on consignment. The account balance related objective that Camilla is concerned about is A) rights and obligation (ownership). B) accuracy. C) valuation. D) existence.

Q: Heavy Manufacturing Company is in the business of making steel plates, forming heavy metal slabs and drilling and scoring metals. Recently, it upgraded many of its forming machines. There were five machines purchased on four different invoices. Unfortunately, one of the invoices was recorded twice, resulting in five invoices being recorded. The general balance-related audit objective affected by this activity is A) completeness. B) accuracy. C) classification. D) existence.

Q: Balance-related audit objectives are applied to which types of general ledger accounts? A) balance sheet accounts only B) income statement accounts only C) balance sheet accounts and some income statement accounts D) accounts that affect the cash flow statement

Q: Heavy Manufacturing Company is in the business of making steel plates, forming heavy metal slabs and drilling and scoring metals. Recently, it upgraded many of its forming machines. Fortunately, the company was able to sell its old equipment at a reasonable price. The effect was that sales for the quarter are substantially improved over the same period in the prior year. The general transaction-related audit objective affected by this activity is A) timing. B) accuracy. C) occurrence. D) classification.

Q: In testing for cutoff, the objective is to determine A) whether all of the current period's transactions are recorded. B) that no transactions from the prior period are included in the current period's balances. C) that no transactions of the current period have been delayed and recorded in a future period. D) whether transactions are recorded in the proper period.

Q: Big Bank had a program failure occur on Sunday night due to a maintenance program error. Transaction posting was interrupted, with several errors occurring in posting to the master files. Although sales had been posted to the general ledger, individual accounts were not recorded until subsequent days. The general transaction-related audit objective affected by this activity is A) timing. B) accuracy. C) occurrence. D) classification.

Q: Flagpole Company Limited recently upgraded its accounting software due to changes in the payroll income tax rates. Unfortunately, there was an error in the software, and income tax was calculated incorrectly. The general transaction-related audit objective affected by these errors is A) occurrence. B) completeness. C) accuracy. D) posting and summarization.

Q: Georgina was working as the part time accountant for three small businesses. Whenever she could, she pocketed cash and neglected to record the sale in the sales system. The general transaction-related audit objective affected by her actions is A) occurrence. B) completeness. C) accuracy. D) posting and summarization.

Q: XYZ Brick Company decided to inflate sales by recording fictitious sales. Several non-existent clients were created and the sales were added into the sales journal throughout the year. The general transaction-related audit objective affected by these actions is A) occurrence. B) completeness. C) accuracy. D) posting and summarization.