Auditing Exam

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ACC 476/726 – AUDITING
Sample Exam #2
Prof. Elder

Name Dee Falcation

This exam contains 12 pages; please check to make sure you have the entire exam. You will have one hour and twenty-five minutes to complete the exam. Total points available on the exam are as follows:

| |Points Possible |Points Earned | |Question | | | |Multiple choice - 20 at 3 pts. each |60 | | | | | | |Type of test and objective |12 | | |Risk model |7 | | |Materiality |8 | | |Relation of concepts |7 | | |Internal control - sales and cash receipts |6 | | | | | | | Total points |100 | |

If you are unsure as to the nature of any question, please ask. Written responses should be as complete as possible to ensure partial credit.

Good luck!

Multiple Choice -- 3 Points Each. Choose the one best response that you believe is most appropriate. Write your response in the margin next to the question.

1.An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the objective of

a.Accuracy.
b.Occurrence.
c.Completeness.
d.Control.

2.Inherent risk and control risk differ from detection risk in that they:

a.Arise from the misapplication of auditing procedures. b.May be assessed in either quantitative or nonquantitative terms. c.Exist independently of the financial statement audit. d.Can be changed at the auditor's discretion.

3.Which of the following internal control procedures most likely would assure that all billed sales are correctly posted to the accounts receivable ledger?

a.Daily sales summaries are compared to daily postings to the accounts receivable ledger. b.Each sales invoice is supported by a prenumbered shipping document. c.The accounts receivable ledger is reconciled daily to the control account in the general ledger. d.Each shipment on credit is supported by a prenumbered sales invoice.

4.When a customer fails to include a remittance advice with a payment, it is common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees:

a.Credit manager.
b.Sales manager.
c.Accounts receivable clerk.
d.Receptionist.

5.An auditor tests an entity's policy of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of:

a.Valuation or allocation.
b.Completeness.
c.Existence or occurrence.
d.Rights and obligations.

6.Tests of controls are most likely to be performed when:

a.An account balance reflects few transactions.
b.Control risk is assessed at less than the maximum.
c.The understanding of the control structure indicates that controls are not effective. d.The auditor wishes to decrease the acceptable level of detection risk.

7.In deciding whether...
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