Question

QUESTION 44

1. An auditor traces a sample of electronic time cards before and after the bi-weekly payroll report and then traces to the payroll master file to determine that payroll transactions are reported in the correct period. The auditor is gathering evidence for which audit objective?

   	a.	completeness
   	b.	existence
   	c.	cut-off
   	d.	accuracy

2 points   

QUESTION 45

1. In evaluating appropriateness of accrual balances for sick pay, vacation and other payments, an effective data point to analyze would be?

   	a.	expenses incurred in relation to accruals for the period.
   	b.	consistent accrual of liabilities relative to those of preceding periods.
   	c.	amount expenses in the current period.
   	d.	all data points above should be analyzed.

2 points   

QUESTION 46

1. In the flow of inventory and costs, when finished goods is debited, ________ is (are) credited.

   	a.	raw materials
   	b.	cost of goods sold
   	c.	finished goods
   	d.	Work-in-process

2 points   

QUESTION 47

1. True of False - Handling the receipt of ordered goods is a part of the acquisition and payment cycle.

   	a.	True
   	b.	False

2 points   

QUESTION 48

1. A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the

   	a.	direct labor costs.
   	b.	raw material costs.
   	c.	manufacturing overhead costs.
   	d.	period costs.

2 points   

QUESTION 49

1. An Auditor wants to verify that all manufacturing company's finished goods merchandise was included in ending inventory balance. The best audit procedure would be for the auditor to test the

   	a.	terms of non-closed purchase orders.
   	b.	cutoff procedures over purchases.
   	c.	contractual commitments made by the purchasing department.
   	d.	year-end purchase invoices received.

Answer 1

Question - 44

Answer: D Accuracy

In this question an auditor traces a sample of electronic time cards before and after the bi-weekly payroll report and then traces to the payroll master file to determine that payroll transactions are reported in the correct period i.e to determine the accuracy which means amounts and other data related to recorded transactions and events have been recorded appropriately.

Whereas completeness means recording all transactions, existence means that all assets and liabilities occur and cut off means that transactions and events have been recorded in correct accounting period.

Question - 45

Answer: A expenses incurred in relation to accruals for the period.

We know that , Appropriateness is a measure of the quality of audit evidence i.e its relevance, and its reliability in providing support for the conclusions on which the auditors opinion is based. The reliability of audit evidence is influenced by its source and its nature, and is dependent on the individual circumstances on which it is based.

Question - 46

Answer: D Work in Progress

In the flow of inventory and costs, when finished goods is debited and  Work in Progress is credited. The income statement shows both beginning finished goods and ending finished goods only if cost of goods sold is calculated. When goods that were in process are completed, the entry is to debit finished goods and credit work-inprocess. When merchandise is sold, the entry is to debit cost of goods sold and credit finished goods. The difference between the sales and cost of goods sold is the gross profit.

Question - 47

Answer: B True

The Acquisition and Payment Cycle (also referred to as the PPP Cycle for Purchases, Payables, and Payments) is mainly comprised of two classes of transactions. The first class is the acquisition class. The typical journal entry for this class of transactions is a debit to inventory or an expense and a credit to accounts payable. The classification assertion is highly important in this scenario because there are many possible debits that can fulfill the journal entry.

The second class of transactions in the acquisition and payment cycle is the cash disbursements class. The typical journal entry for this class is simply a debit to accounts payable and a credit to cash. All in all, this cycle is mainly about incurring payables and paying off those payables with cash.

Question - 48

Answer: B raw material costs

The auditor find a major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the raw material per unit cost.

Question - 49

Answer: B cut off procedures over purchases

To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditors should review and test the: Purchase cutoff procedures. Purchase cutoff procedures should be designed to test whether all inventory: Owned by the company was recorded.