AEC211: ACCOUNTING INFORMATION SYSTEM

AUDIT PROCEDURES: REVENUE ACCOUNTING CYCLE | MCQ

b. Review collections for the year being
1. When scheduling the work to be performed on an
examined
audit, the auditor should consider confirming accounts
c. Extend tests of controls for assertions related to
receivable balances at an interim date if which of the
receivables
following situations exist?
d. Increase the balance in the accounts
a. Subsequent collections are to be reviewed receivable allowance (contra) account
b. Internal controls over receivables are good
c. Negative confirmations are to be used 6. To verify that all sales transactions have been
d. A simultaneous audit of cash and accounts recorded, a test of transactions should be completed
receivable will occur on a representative sample drawn from which of the
following?
2. An auditor is testing sales transactions. One step is to
a. Entries in the sales journal
trace a sample of debit entries from the account
b. The billing clerk’s file of sales orders
receivable subsidiary ledger back to the supporting
c. A file of duplicate copies of sales invoices for
sales invoices. What would the auditor intend to
which all prenumbered forms in the series have
establish by this step?
been accounted for
a. The sales invoices represent bona fide sales d. The shipping clerk’s file of duplicate copies of
b. All sales have been recorded bills of lading
c. All sales invoices have been properly posted to
customer accounts 7. During the process of confirming receivables as of
d. Debit entries in the accounts receivable December 31, 2022, a positive confirmation was
subsidiary ledger are properly supported by returned indicating the ‘balance owed as of
sales invoices December 31 was paid on January 9, 2023. The auditor
most likely would
3. When determining the adequacy of the allowance
a. Determine whether any changes in the
for uncollectible accounts, the least reliance should be
account occurred between January 1 and
placed upon which of the following?
January 31, 2023
a. The credit manager’s opinion b. Determine whether the customer took a
b. An aging schedule of past-due accounts customary trade discount
c. Collection experience of the client’s collection c. Reconfirm the zero balance as of January 10,
agency 2023
d. Ratios calculated showing the past relationship d. Verify that the amount was received
of the valuation allowance to net credit sales
8. Which of the following is not a primary objective of
4. Which of the following procedures ordinarily would the auditor in the audit of accounts receivable?
be expected to best reveal unrecorded sales at the
a. To determine the approximate realizable value
balance sheet date?
b. To establish existence of the receivables
a. Compare shipping documents with sales c. To determine the approximate time of
records collectibility of the receivables
b. Apply gross margin rates to inventory disposed d. To determine that receivables are from trade
of during the period customers, not officers or employees
c. Trace payments received subsequent to the
balance sheet date 9. For the confirmation of accounts receivable, the
d. Send accounts receivable confirmation auditor most likely would
requests
a. Request confirmation of a sample of the
inactive accounts
5. Customers having substantial year-end past-due
b. Seek positive confirmation for at least 50% of
balances fail to reply after second request confirmation
the total peso amount of receivables
forms have been mailed directly to them. Which of the
c. Require confirmation of all receivables from
following is the most appropriate audit procedure?
government agencies
a. Examine shipping documents d. Send confirmation requests within one month
of the fiscal year-end
AEC211: ACCOUNTING INFORMATION SYSTEM
AUDIT PROCEDURES: EXPENDITURE CYCLE (ACQUISITION & PAYMENT) | MCQ
10. Which of the following sets of duties would be b. Accrued liability balances are less material
considered an improper segregation of duties in the than accounts payable balances
expenditure cycle? c. Evidence supporting accrued liabilities is
a. Receiving, counting, and inspecting goods and nonexistent, whereas evidence supporting
also preparing the receiving report accounts payable is readily available
b. Preparing, approving, and issuing purchase d. Accrued liabilities at year-end will become
orders and also following up on unfilled orders accounts payable during the following year
c. Approving vouchers for payment and also
preparing and signing checks 14. Under which of the following circumstances would
d. Comparing vendor invoices with purchase be advisable for the auditor to confirm accounts
orders, requisitions, and receiving reports and payable with creditors?
also approving vouchers for payment a. Internal controls for accounts payable are
adequate and sufficient evidence is on hand
11. FULFILL Products, Inc., requires that an approved to minimize the risk of a material misstatement
receiving report be prepared before an entry is made b. Confirmation response is expected to be
in the voucher register to record a purchase and favorable, and accounts payable balances
related account payable. To test the effectiveness of are of immaterial amounts
this control, the auditor compares the date on the c. Creditor statements are not available, and
receiving report with the date of the entry in the internal control over accounts payable is
voucher register. The auditor would be most likely to unsatisfactory
question the effectiveness of this control when the test d. The majority of accounts payable balances are
of controls reveals that with associated companies
a. Voucher register entries are dated on or after
the corresponding receiving report dates 15. Which of the following audit procedures is least likely
b. Receiving reports are dated on or before the to detect an unrecorded liability?
corresponding voucher register entry dates a. Analysis and recomputation of interest expense
c. Receiving reports are dated after the b. Analysis and recomputation of depreciation
corresponding voucher register entry dates expense
d. Voucher register entries are dated after the c. Mailing standard bank confirmation forms
corresponding receiving report dates d. Reading the minutes of board of directors
meetings
12. Which of the following internal controls would least
likely prevent or detect a misstatement of the existence 16. Which of the following internal controls would be
or occurrence assertion for cash payments caused by least effective in preventing the accumulation of
the duplicate payment of a voucher? obsolete or slow-moving inventory?
a. Cancelling documentation supporting the a. Using perpetual inventory records
voucher immediately after the voucher is paid b. Using secured storage areas for inventory
b. Reconciling monthly vendor statements with c. Using sales forecasts
the accounts payable subsidiary ledger d. Using authorized production orders
c. Individuals responsible for signing checks also
preparing and approving vouchers 17. LOVE Manufacturing Corporation mass-produces 12
d. Attaching a check copy to the voucher different products. The controller interested in
immediately after the voucher is paid strengthening internal control for the existence assertion
for finished inventory would be most likely to implement
13. Why do the audit procedures used to verify which of the following?
accrued liabilities differ from those employed for the a. A separation of duties among production
verification of accounts payable? personnel
a. Accrued liabilities usually pertain to services of b. The use of sales forecasts
a continuing nature, whereas accounts c. A job-order cost accounting system
payable are the result of completed d. A perpetual inventory system
transactions
AEC211: ACCOUNTING INFORMATION SYSTEM
18. Holly, Inc., uses time clocks and time cards to help
ensure that employee work time is accurately
recorded. Which internal control would be most
effective for determining whether production
employees are properly recording their time on the
payroll time cards at a time clock station?
a. The production supervisor should approve daily
time charged to job orders and compare that
time with hours recorded on the time cards
b. Payroll checks should be distributed by the
internal auditing department
c. Hours recorded on the time cards should be
compared to payroll computations by an
independent employee
d. The duties of hiring, payroll computation, and
paying employees should be segregated

19. Purchase cutoff procedures should be designed to

test whether merchandise is included in the client
company’s inventory if the company
a. Has paid for the merchandise
b. Has physical possession of the merchandise
c. Holds legal title to the merchandise
d. Holds the shipping documents for the
merchandise issued in the company’s name

20. The physical count of a retailer’s inventory was

higher than shown by the perpetual records. Which of
the following could explain the difference?
a. Inventory items had been counted, but the
tags placed on the items had not been taken
off the items and added to the inventory
accumulation sheets
b. Credit memos for several items customers
returned had not been recorded
c. No journal entry had been made on the
retailer’s books for several items returned to its
suppliers
d. An item purchased F.O.B. shipping point had
not arrived at the date of the inventory count
and had not been reflected in the perpetual
records