Question details

ACC 403 Final Exam Part 2
$ 20.00

Question 1

The document that the accounting staff will use as the primary basis for recording sales transactions and updating the customer’s accounts receivable subsidiary ledger is the:

Answer

sales order.

bill of lading.

sales journal.

sales invoice.

Question 2

Which of the following is not one of the five classes of transactions included in the sales and collection cycle?

Answer

Sales returns and allowances

Write-off of uncollectible accounts

Bad debt expense

Interest Income

Question 3

The audit procedure referred to as proof of cash receipts is particularly useful to test:

Answer

time lags in making deposits.

whether all recorded cash receipts have been deposited in the bank.

whether there are cash receipts that have not been recorded in the journals.

the client’s reconciliation between cash receipts and bank deposits

Question 4

Who is generally responsible for opening receipts when a company uses a lockbox to speed the handling of cash receipts?

Answer

company personnel

temporary employees in the town where the lockbox is located

bank employees

company controller

Question 5

To determine that sales are accurately recorded, the unit prices on the duplicate sales invoices are normally compared with:

Answer

the original invoices.

an approved master price list.

the amounts recorded in the sales journal for that transaction.

the amounts posted to the customer’s account in the accounts receivable master file.

Question 6

Which one of the choices below is most correct regarding a cause of sampling risk?

Answer

ineffective use of audit procedures

testing less than the entire population

use of extensive tests of controls

the possibility that a properly-selected sample still may not be representative

Question 7

If the auditor decides to assess control risk at the moderate level in a private company audit, when in previous years the auditor set control risk at the maximum level, then tests of controls for the current year would be:

Answer

increased in number.

reduced in number.

not performed.

unchanged from prior planned settings

Question 8

Correspondence is established between the random number table and the population by:

Answer

identifying each item in the population with a unique number.

deciding the number of digits to use in the random number table and their association with the population numbering system.

defining which digits the auditor uses in a column and the method of reading the table.

selecting a random starting point on the table.

Question 9

The risk which the auditor is willing to take in accepting a control as being effective when the true population exception rate is greater than a tolerable rate is the:

Answer

finite correction factor.

tolerable exception rate.

acceptable risk of assessing control risk too low.

estimated population exception rate.

Question 10

The exception rate that the auditor will permit in the population and still be willing to use the preliminary control risk assessment is called the:

Answer

acceptable exception rate.

estimated population exception rate.

sample exception rate.

tolerable exception rate

Question 11

Testing the information on the aged trial balance for detail tie-in is a necessary audit procedure, which would normally include:

Answer

Test-footing the total column and the columns depicting the aging

 

Comparing the total of the aged trial balance with the general ledger accounts receivable account

Yes

Yes

No

No

Yes

No

No

Yes

Question 12

A type of positive confirmation known as a blank confirmation:

Answer

requests the recipient to fill in the amount of the balance.

is considered less reliable than the regular positive confirmation.

generates as high a response rate as the regular positive confirmation form.

is used when the auditor is confirming several small balances.

Question 13

A listing of the balances in the accounts receivable master file at the balance sheet date, by total balance outstanding and by the amount of time the component parts have been outstanding, is the:

Answer

customer list.

aged trial balance.

accounts receivable ledger.

schedule of accounts receivable

Question 14

Communication addressed to the debtor requesting him or her to confirm whether the balance as stated on the communication is correct or incorrect is a:

Answer

representation letter.

negative confirmation.

bank confirmation.

positive confirmation

Question 15

The net realizable value of accounts receivable is equal to:

Answer

gross accounts receivable less allowance for uncollectible accounts.

gross accounts receivable less bad debt expense.

gross accounts receivable less returns and allowances.

gross accounts receivable less sales discounts.

Question 16

Which of the following is not a type of statistical method that provides results in dollar terms?

Answer

Variables sampling

Attributes sampling

Monetary-unit sampling

Sampling with probability proportional to size

Question 17

Which of the following does not have to be considered in determining the initial sample size of a test of details?

Answer

tolerable misstatement

acceptable risk of incorrect rejection

estimate of misstatements in the population

acceptable audit risk

Question 18

When errors are found in a sample, auditors in practice generally make the assumption:

Answer

of a 100% assumption for all errors.

that the population errors are larger than the sample errors.

that the population errors are smaller than the sample errors.

that the actual sample errors are representative of the population errors

Question 19

The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:

Answer

the upper bound.

the tolerable risk.

the acceptable risk of incorrect acceptance.

the lower bound.

Question 20

The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is:

Answer

inverse.

direct.

proportional.

indeterminate

Question 21

There must be a periodic physical count by the client of the inventory items on hand:

Answer

only if the client uses the LIFO method.

only if the client uses a lower-of-cost-or-market method.

regardless of the client’s inventory valuation method.

only if the client uses either the LIFO or FIFO method.

Question 22

Master files, worksheets, and reports that accumulate material, labor, and overhead as the costs are incurred are:

Answer

accounting systems.

storeroom documents.

cost accounting records.

finished goods inventory records

Question 23

The main difference between job order and process costing systems is that:

Answer

one accumulates costs by materials issued and the other by labor incurred.

one accumulates costs by individual jobs and the other by particular processes.

one emphasizes costs accumulated in completed products and the other emphasizes costs associated with work-in-process.

one emphasizes costs adding value to the product and the other emphasizes costs incurred because of waste, scrap, and obsolescence

Question 24

Inventory is a complex area to audit for all but which of the following reasons?

Answer

Inventory is often in different locations.

There are several acceptable valuation methods and some entities use different methods for different types of inventory.

Inventory is often the largest account in working capital.

Inventory valuation includes few estimates

Question 25

________ accumulate costs by individual jobs as material is issued into production and labor costs are incurred.

Answer

Just-in-time production systems

Job order cost systems

Process cost systems

Manufacturing systems

Question 26

Refusal by a client to prepare and sign the representation letter would require the auditor to issue a:

Answer

qualified opinion or a disclaimer.

adverse opinion or a disclaimer.

qualified or an adverse opinion.

unqualified opinion with an explanatory paragraph.

Question 27

Inquiries of management regarding the possibility of unrecorded contingencies will be useful in uncovering:

Answer

Management’s intentional failure to disclose existing contingencies

When management does not comprehend accounting disclosure requirements

Yes

Yes

No

No

Yes

No

No

Yes

Question 28
An auditor has the responsibility to actively search for subsequent events that occur subsequent to the:

Answer

balance sheet date.

date of the auditor’s report.

balance sheet date, but prior to the audit report.

date of the management representation letter

Question 29

Auditors often integrate procedures for presentation and disclosure objectives with:

Answer

Tests for planning objectives

Tests for balance-related objectives

Yes

Yes

No

No

Yes

No

No

Yes

Question 30

Which type of subsequent event requires consideration by management and evaluation by the auditor?

Answer

Subsequent events that have a direct effect on the financial statements and require adjustment.

Subsequent events that have no direct effect on the financial statements but for which disclosure is considered.

 

Yes

Yes

No

No

Yes

No

No

Yes

 

 

 

Available solutions
  • ACC 403 Final Exam Part 2
    $20.00

    Question 1 The document that the accounting staff will use as the primary basis for recording sales transactions and updating the customer’s accounts receivable subsidiary ledger is the: Answer sales order. bill of lading. sales journal. sales invoice. Question 2 Which of the following is not one of the five classes of transactions included in the sales and collection cycle? Answer Sales returns and allowances Write-off of uncollectible accounts

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