Question

QUESTION 56

1. In performing analytical procedure over debt interest, the auditor finds company reported interest expense is materially higher than the auditor’s expectations. The most likely conclusion for the auditor would be that the company has not

   	a.	recorded interest bearing debt in its records.
   	b.	recorded paid or accrued all interest expense.
   	c.	properly accounted for the discount of bonds payable account.
   	d.	properly recorded interest income.

2 points   

QUESTION 57

1. Which of the following balance-related audit objectives is not applicable to the audit of notes payable?

   	a.	realizable value
   	b.	detail tie-in
   	c.	cutoff
   	d.	classification

2 points   

QUESTION 58

1. Which of the following are financial misstatement risks within the acquisition and repayment cycle and associated accounts.

   	a.	Misstatement of dividends declared on balance sheet or payment to the wrong people which could result in a liability.
   	b.	Illegal payments of cash and issue of shares.
   	c.	Misstatement of owners’ equity and earnings per share.
   	d.	All of the above

2 points   

QUESTION 59

1. An auditor has been assigned the objective to determine if there were any shares issued or retired during the year, or if certificates are missing. What specific misstatement would this audit objective uncover?

   	a.	Unrecorded or unauthorized transactions, or transactions not handled in a legal manner.
   	b.	The issuance or retirement of stock without proper authorization, improper valuation, or incorrect dividend calculations.
   	c.	Incorrect earnings per share computation.
   	d.	All of the above

2 points   

QUESTION 60

1. The regular reconciliation of bank accounts by an independent person is an important internal control over cash balances because it provides an opportunity for ______________

   	a.	verification of the cash receipts and cash disbursements transactions.
   	b.	investigation of reconciling items.
   	c.	verification of the ending cash balance.
   	d.	All of the above

2 points   

QUESTION 61

1. Auditors frequently design audit procedures to detect existence of fraud in cash cycle. Which of the following is an example of fraud detection audit procedure?

   	a.	surprise count of the cash and customers checks on hand to detect lapping fraud.
   	b.	testing internal controls for proper preparation and review of cash.
   	c.	obtain bank confirmations to detect kiting.
   	d.	detail review of the bank reconciliations, specifically focusing on reconciling items to detect misappropriation.

Answer 1

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Let me help you with Audit Related MCQs....please note that i have highlighted the correct solution and also mentioned the same. Along with correct solution, i have mentioned the explanation of correct MCQ which will help you to understand the solution in better way.

QUESTION 56
	In performing analytical procedure over debt interest, the auditor finds company reported interest expense is materially higher than the auditor’s expectations. The most likely conclusion for the auditor would be that the company has not
a.	recorded interest bearing debt in its records.
b.	recorded paid or accrued all interest expense.
c.	properly accounted for the discount of bonds payable account.
d.	properly recorded interest income.
	Correct Answer - B
	Since Interest expense reported by the company is materially higher than what has been determined by the auditor, it means that the company has not recorded paid or accrued all interest expense.
QUESTION 57
	Which of the following balance-related audit objectives is not applicable to the audit of notes payable?
a.	realizable value
b.	detail tie-in
c.	cutoff
d.	classification
	Correct Answer - A
	In case of audit of notes payable, objective of realisable value will not be applicable. Since its not our receivable that can be realised. It’s a liability that needs to be paid off.
QUESTION 58
	Which of the following are financial misstatement risks within the acquisition and repayment cycle and associated accounts.
a.	Misstatement of dividends declared on balance sheet or payment to the wrong people which could result in a liability.
b.	Illegal payments of cash and issue of shares.
c.	Misstatement of owners’ equity and earnings per share.
d.	All of the above
	Correct Answer - D All of the above are financial misstatements in relation to associated accounts.
QUESTION 59
	An auditor has been assigned the objective to determine if there were any shares issued or retired during the year, or if certificates are missing. What specific misstatement would this audit objective uncover?
a.	Unrecorded or unauthorized transactions, or transactions not handled in a legal manner.
b.	The issuance or retirement of stock without proper authorization, improper valuation, or incorrect dividend calculations.
c.	Incorrect earnings per share computation.
d.	All of the above
	Correct Answer - D All of the above are financial misstatements in relation to shares issued or retired.
QUESTION 60
	The regular reconciliation of bank accounts by an independent person is an important internal control over cash balances because it provides an opportunity for ______________
a.	verification of the cash receipts and cash disbursements transactions.
b.	investigation of reconciling items.
c.	verification of the ending cash balance.
d.	All of the above
	Correct Answer - D All the above objectives arw achieved while exercising regular bank reconciliations. Verification of cash reciepts and payments, checking of reconciling items, ending cash balance verification etc can be checked during Bank Reconciliation
QUESTION 61
	Auditors frequently design audit procedures to detect existence of fraud in cash cycle. Which of the following is an example of fraud detection audit procedure?
a.	surprise count of the cash and customers checks on hand to detect lapping fraud.
b.	testing internal controls for proper preparation and review of cash.
c.	obtain bank confirmations to detect kiting.
d.	detail review of the bank reconciliations, specifically focusing on reconciling items to detect misappropriation.
	Correct Answer - A
	To detect existence of Fraud in cash cycle, surprise count of cash and customers checks in hand is the most appropriate method.

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