ACC 492 Entire Course Audit Guide

ACC 492 Entire Course (2019 Syllabus)
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ACC 492 Final Exam (All Possible Questions) (2019 Syllabus)
ACC 492 Week 1 Current Issue Summary
ACC 492 Week 1 Current Issue Summary Behind the Numbers Insights
into Large Audit Firm Sampling Policies
(2019 Syllabus)
ACC 492 Week 2 Team Assignment
ACC 492 Week 2 Team Assignment (Amazon)
ACC 492 Week 2 Textbook Problem 23-20, 14-20, 14-26 (New
Syllabus 2019)
ACC 492 Week 2 Current Issue Summary Auditing Cash, Financial
Instruments, Sales, or Receivables
ACC 492 Week 2 Current Issue Summary Failing to Find Fraud When
Auditing Cash (2019 Syllabus)
ACC 492 Week 3 Current Issue Summary Auditing Inventory,
Warehouse, or Payroll Cycles

ACC 492 Week 3 Current Issue Summary Keep Ghosts off the Payroll
(2019 Syllabus)
ACC 492 Week 3 textbook assignment 20-20, 21-21
ACC 492 Week 3 Team Assignment Inventory, Warehousing, and
Payroll accounts and cycles (Walmart, 2000 Words)
ACC 492 Week 3 Team Assignment Inventory, Warehousing, and
Payroll accounts and cycles (Amazon)
ACC 492 Week 4 Textbook Problem 18-26
ACC 492 Week 4 Current Issue Summary auditing acquisitions,
payments, property plant and equipment
ACC 492 Week 4 Current Issue Summary Management’s Report on
Internal Control over Financial Reporting (2019 Syllabus)
ACC 492 Week 4 Team Assignment Acquisition, Payment, Property
Plant, and Equipment Notes Payable and Owner’s Equity and cycles
(Walmart)
ACC 492 Week 4 Team Assignment Acquisition, Payment, Property
Plant, and Equipment Notes Payable and Owner’s Equity and cycles
(Amazon)
ACC 492 Week 5 Assignment importance of considering contingent
liabilities, letters from client lawyers (Walmart)
ACC 492 Week 5 Assignment importance of considering contingent
liabilities, letters from client lawyers (Amazon)
ACC 492 Week 5 Final Audit Paper (Walmart)

ACC 492 Week 5 Final Audit Paper (Amazon)
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ACC 492 Final Exam (All Possible Questions)
(2019 Syllabus)
1. Which of the following tests are typically not necessary when auditing
a client’s schedule of recorded disposals?
Footing the schedule.
Tracing schedule totals to the general ledger.
Tracing cost and accumulated depreciation of the disposals to the
property master file.
All of the above are necessary.
2. _______accumulate costs by individual jobs as material is issued into
production and labor costs are incurred.
Just-in-time production systems
Job order cost systems
Process cost systems
Manufacturing systems
3. The introductory paragraph of the standard audit report for a non-
public company performs which functions?
I. It states the CPA has performed an audit.
II. It lists the financial statements being audited.
III. It states the financial statements are the responsibility of the
auditor.
I and II

I and III
II and III
I, II and III
4. Auditors are especially concerned with three aspects of internal
control for the sales and collection cycle. Which of the following is not
one of their major concerns?
Controls related to the allowance for uncollectible accounts
Controls that prevent or detect embezzlements
Controls over sales discounts
Controls over cutoff
5. Which of the following accounts is not associated with the acquisition
and payment cycle?
Accrued property taxes
Income tax expense
Common stock
Property, plant and equipment
6. For audit evidence to be compelling to the auditor it must be sufficient
and appropriate. Which statement below is not correct regarding the
appropriateness of audit evidence?
Evidence obtained from independent sources outside the entity is
generally more reliable than evidence secured solely within the entity.
An auditor’s opinion, to be economically useful and profitable to the
auditing firm needs to be formed within a reasonable time and based on
evidence obtained that assures profits for the auditing firm.
The independent auditor’s direct personal knowledge, obtained through
inquiry, observation and inspection, is generally more persuasive than
information obtained indirectly.
The more effective the internal control system, the more assurance it
provides the auditor about the reliability of financial reporting by the
client.
7. A document used by organizations to establish a formal means of
recording and controlling acquisitions which usually contains a package
of documents about the acquisition is the:
voucher.
purchase requisition.

purchase order.
receiving report.
8. You are auditing Manufacturing Company and testing the audit
related objective of completeness for the equipment accounts. Which of
the following audit procedures is most likely to achieve your objective?
Trace individual acquisitions to the fixed asset master file.
Physically examine assets.
Examine vendor invoices and receiving reports.
Examine vendor invoices of closely related accounts such as repairs and
maintenance.
9. A sample in which the characteristics of the sample are the same as
those of the population is a(n):
random sample.
attributes sample.
variables sample.
representative sample.
10. Which of the following business functions is not considered to be
part of the acquisitions class of transactions?
Recognizing liabilities
Processing purchase orders
Processing cash disbursements
Recognizing liabilities
11. Which of the following is not explicitly stated in the standard
unqualified audit report?
The auditors believe that the audit evidence provides a reasonable basis
for their opinion.
The audit was conducted in accordance with generally accepted
accounting principles.
An audit includes assessing the accounting estimates used.
The financial statements are the responsibility of management.
12. When the auditor decides to select less than 100 percent of the
population for testing, the auditor is said to use:
audit sampling.
poor judgment.
estimation sampling.

representative sampling.
13. The ________ is a contract between a carrier (e.g., a trucking
company) and the seller of goods that dictates the details surrounding the
shipment of goods.
sales invoice
remittance advice
picking ticket
bill of lading
14. Which of the following is a correct statement regarding audit
evidence?
A large sample of evidence provided by an independent party is always
considered persuasive evidence.
A small sample of only one or two pieces of highly appropriate evidence
is always considered persuasive evidence.
The auditor must obtain a sufficient amount of relevant and reliable
evidence to form an opinion on the fairness of the financial statements.
Evidence is usually more reliable for balance sheet accounts when it is
obtained within six months of the balance sheet date.
15. Which of the following statements is not correct?
The decision of how many items to test must be made by the auditor for
each audit procedure.
The decision of how many items to test should not be influenced by the
increased costs of performing the additional tests.
The sample size for any given procedure is likely to vary from audit to
audit.
It is possible to vary the sample size from one unit to 100% of the items
in the population.
16. Which of the following is not one of the business functions for the
payroll and personnel cycle?
Payment of payroll
Reconciliation of payroll account
Timekeeping and payroll preparation
Human resources and employment

17. One unique characteristic of the capital acquisition and repayment
cycle is that relatively few transactions affect the account balances, but
each transaction is often highly material in amount.
True
False
18. The audit procedure that requires an auditor to “foot the acquisition
schedule” relates to which balance-related audit objective?
Classification
Detail tie-in
Existence
Cut-off
19. Which of the following does not have to be considered in
determining the initial sample size of a test of details?
Acceptable risk of incorrect rejection
Tolerable misstatement
Acceptable audit risk
Estimate of misstatements in the population
20. Because cash is the most desirable asset for people to steal, it has a
higher:
liquidity risk.
detection risk.
control risk.
inherent risk.
21. The two primary classes of transactions in the sales and collection
cycle are:
sales and cash receipts.
sales and sales returns.
sales and accounts receivable.
sales and sales discounts.
22. Master files, spreadsheets, and reports that accumulate material,
labor, and overhead as the costs are incurred are:
accounting systems
storeroom documents
cost accounting records
finished goods inventory records.

23. Which of the following expenses is not typically evaluated as part of
the audit of the acquisition and payment cycle?
Depreciation expense
Insurance expense
Bad debts expense
Property tax expense.
24. Smaller privately held companies may not maintain an accounts
payable master file by vendor. These companies pay on the basis of:
Vendor’s monthly statements
Individual vendor’s invoices
The account payable account in the general ledger
During letters
25. The word below that best explains the relationship between required
sample size and the acceptable risk of incorrect acceptance is:
Inverse.
Direct.
Proportional.
Indeterminate.
26. Which of the following balance-related audit objectives typically is
assessed as having high inherent risk for cash?
Existence
Cutoff
Detail tie-in
Presentation and disclosure
27. The final step in the evaluation of the audit results is the decision to:
project the point estimate.
determine sampling error and calculate the estimated total population
error.
determine the error in each sample.
accept the population as fairly stated or to require further action.
28. The computer file used for recording payroll transactions for each
employee and maintaining total wages paid for the year to date is the:
payroll transaction file.
payroll master file.
payroll bank account reconciliation.

payroll tax returns.
29. The computer-generated file which records acquisitions,
disbursements and allowances for each vendor is the:
Cash disbursements file.
Accounts payable master file.
Purchase approval file.
Acquisitions transaction file.
30. Which of the following groups has the responsibility for identifying
and deciding the appropriate accounting treatment for recording or
disclosing contingent liabilities?
Management and the auditors
Management
Legal counsel
Auditors
31. The standard unqualified audit report for a non-public entity must:
Have a report title that includes the word "CPA."
Be addressed to the company's stockholders and creditors.
Be dated.
Include an explanatory paragraph
32. The appropriate and sufficient evidence to be obtained from tests of
details must be decided on an:
Efficiency basis.
Effectiveness basis.
Audit objectives basis.
None of the above
33. You are auditing Rodgers and Company. You are aware of a
potential loss due to non-compliance with environmental regulations.
Management has assessed that there is a 40% chance that a $10M
payment could result from the non-compliance. The appropriate
financial statement treatment is to:
Accrue a $4 million liability.
Disclose a liability and provide a range of outcomes.
Since there is less than a 50% chance of occurrence, ignore.
Since there is greater that a remote chance of occurrence, accrue the $10
million

33. To determine if a sample is truly representative of the population, an
auditor would be required to:
conduct multiple samples of the same population.
never use sampling because of the expense involved.
audit the entire population.
use systematic sample selection
34. Auditors seldom learn about the capital acquisition and repayment
cycle when gaining an understanding of the client’s business and
industry.
True
False
35. The total of the individual employee earnings in the payroll master
file should equal the total:
of the checks drawn to employees for payroll.
balance of gross payroll in general ledger accounts.
gross pay for the current week’s payroll.
gross payroll plus the total contributed by the employer for payroll taxes.
36. When auditing the capital acquisition and repayment cycle, it is
common to verify each transaction taking place in the cycle for the
entire year as a part of verifying the balance sheet accounts.
True
False
37. In most manufacturing companies, the inventory and warehousing
cycle begins with the:
acquisition of raw materials for production of an order.
initiation of production of a customer’s order.
receipt of a customer’s order.
completion of production of a customer’s order.
38. Some companies have customers send payments directly to an
address maintained by a bank. This is called a(n) ________ system.
direct deposit
funds transfer
lockbox
interbank transfer
39. A commitment is best described as:

an agreement to commit the firm to a set of fixed conditions in the
future.
a potential future obligation to an outside party for an as yet to be
determined amount.
an agreement to commit the firm to a set of fixed conditions in the future
that depends on current market conditions.
an agreement to commit the firm to a set of fixed conditions in the future
that depends on company profitability.
40. The management’s responsibility section of the standard audit report
for a non-public company states that the financial statements are:
none of the above.
the responsibility of management.
the responsibility of the auditor.
the joint responsibility of management and the auditor.
41. Which of the following is an analytical procedure to determine if
there is idle equipment or equipment that was disposed of but not written
off?
Compare annual repairs and maintenance accounts with previous years.
Compare gross manufacturing cost divided by some measure of
production with previous years.
Compare accumulated depreciation divided by gross equipment cost
with previous years.
Compare depreciation expense divided by gross equipment cost with
previous years.
42. Accrued payroll taxes are normally considered to be associated with
the acquisition and payment cycle.
True
False
43. Which of the following is a business function related to sales returns
and allowances?
Processing customer orders
Writing off uncollectible accounts
Processing and recording credit memos
Granting credit

44. In addition to confirming bank balances of your audit client, a bank
confirmation would normally contain:
the client’s bank loans with due date, interest rate, and collateral
requested.
the client’s business prospects.
the client’s credit history as regards to paying back loans.
the client’s managements bank account information.
45. Which of the following audit procedures would be the most correct
in determining the audit objective of existence for the equipment
account in the fixed asset master file?
Examine vendor invoices and receiving reports.
Examine vendor invoices for correct accounting treatment.
Recalculate vendor invoices.
Review transactions near the balance sheet date.
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Behind the Numbers Insights into Large Audit
Firm Sampling Policies (2019 Syllabus)
Write a 175- to 350-word summary.
Research a recent article on sampling as it relates to financial statement
auditing.
Apply what you learn to your future or current job.

Click the Assignment Files tab to submit your assignment in a
Microsoft® Word document
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Research a recent article on sampling as it relates to financial statement
auditing.
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ACC 492 Week 1 DQ 1

What account balances are included in a revenue and collection cycle?
What specific control procedures should be in place and operating in
internal control governing revenue recognition and cash accounting?
What assertions are made about classes of transactions and events in the
revenue and collection cycle?
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ACC 492 Week 1 DQ 2
Why is it important to place emphasis on the existence and rights
(ownership) assertions when auditing accounts receivable? Which audit
procedures are usually the most useful for auditing the existence and
rights assertions? What analytical procedures might be informative
regarding the existence assertion?
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Auditing Cash, Financial Instruments, Sales, or
Receivables
Research a recent article on auditing cash, financial instruments, sales,
or receivables.
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Failing to Find Fraud When Auditing Cash
(2019 Syllabus)

Research a recent article on auditing cash, financial instruments, sales,
or receivables.
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ACC 492 Week 2 DQ 1
How might a purchasing manager use his or her position to defraud the
company? What can be done to prevent it? Where could an auditor look
to find evidence of losses on purchase commitments and unrecorded
liabilities to vendors?
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ACC 492 Week 2 DQ 2
Why does the auditor examine travel and entertainment expenses? What
would poor controls regarding executive reimbursements say about the
tone at the top for purposes of evaluating and reporting on internal
control? How might the auditor effectively use analytical procedures in
the audit of various expense accounts, such as miscellaneous expenses?
Provide an example of how analytical procedures might be used in the
audit of such accounts
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ACC 492 Week 2 Team Assignment (Amazon)

Learning Team assignments build upon each other from Weeks 2-5.
The first step is to go to the website of a publically-traded US company
and select the most recent 10-K Form (legally-required document
publicly-traded companies must submit to the Securities and Exchange
Commission [SEC] on an annual basis. Among other things, this
document contains the opinion of the CPA firm regarding the company’s
financial statements and adherence to Generally Accepted Accounting
Principles [GAAP]. The contents of this form will be the basis of the
team assignments in throughout the course.
Consider and discuss the specific risks and nature of the company you
will be auditing.
Create comprehensive audit programs for the cash, financial
instruments, sale, and receivables accounts and cycles.
Submit a 1,400- to 1,750-word document that includes:
 Audit steps for tests of controls, balances, transactions, analytical
procedures, etc. as well as other considerations such as sample size
and sample methodology.
 A brief summary page should be included in this document, 350 to
700 words for each of the audit programs. Include in this summary
specific financial information gleaned from the current Form 10-K
used to perform an analysis of work program steps. For example, if
the team noted significant swings in the Receivables balance year-
over-year, identify these swings and how you address them in your
work program (this is in essence an audit procedure – analytical
review).
Microsoft® Word document.
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ACC 492 Week 2 Textbook Problem 23-20, 14-
20, 14-26 (New Syllabus 2019)

23-20 (Objectives 23-3, 23-4) The following are misstatements that
might be found in the client's year-end cash balance (assume that the
balance sheet date is June 30):
 1.The outstanding checks on the June 30 bank reconciliation were
underfooted by $2,000.
 2.A loan from the bank on June 26 was credited directly to the
client's bank account. The loan was not entered as of June 30.
 3.A check was omitted from the outstanding check list on the June
30 bank reconciliation. It cleared the bank July 7.
 4.A check was omitted from the outstanding check list on the bank
reconciliation. It cleared the bank September 6.
 5.Cash receipts collected on accounts receivable from July 1 to
July 5 were included as June 29 and 30 cash receipts.
 6.A bank transfer recorded in the accounting records on July 1 was
included as a deposit in transit on June 30.
 7.A check that was dated June 26 and disbursed in June was not
recorded in the cash disbursements journal, but it was included as
an outstanding check on June 30.
Required
 a.Assuming that each of these misstatements was intentional
(fraud), state the most likely motivation of the person responsible.
 b.What control can be instituted for each fraud to reduce the
likelihood of occurrence?
 c.List an audit procedure that can be used to discover each fraud.

14-23 (Objectives 14-1, 14-3) The following questions deal with audit
evidence for the sales and collection cycle. Choose the best response.
a. An auditor is performing substantive tests of transactions for
sales. One step is to trace a sample of debit entries from the accounts
receivable master file back to the supporting duplicate sales invoices.
What will the auditor intend to establish by this step?
b. Which audit procedure is most effective in testing credit sales for
overstatement?
.
c. To determine whether internal control relative to the revenue
cycle of a wholesaling entity is operating effectively in minimizing the
failure to prepare sales invoices, an auditor would most likely select a
sample of transactions from the population represented by the
14-26 (Objectives 14-3, 14-4, 14-5) The following are commonly
performed tests of controls and substantive tests of transactions audit
procedures in the sales and collection cycle:
1. Account for a sequence of shipping documents and examine each one
to make sure that a duplicate sales invoice is attached.
2. Account for a sequence of sales invoices and examine each one to
make sure that a duplicate copy of the shipping document is attached.
3. Compare the quantity and description of items on shipping documents
with the related duplicate sales invoices.
4. Trace recorded sales in the sales journal to the related accounts
receivable master file and compare the customer name, date, and amount
for each one.
5. Examine sales returns for approval by an authorized official.
6. Review the prelisting of cash receipts to determine whether cash is
prelisted daily.
7. Reconcile the recorded cash receipts on the prelisting with the cash
receipts journal and the bank statement for a 1-month period.

Required
a. Identify whether each audit procedure is a test of control or a
substantive test of transactions.
b. State which of the six transaction-related audit objectives each of the
audit procedures fulfills.
c. Identify the type of evidence used for each audit procedure, such as
inspection and observation.
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Auditing Inventory, Warehouse, or Payroll
Cycles
ACC 492 Week 3 Current Issue Summary Auditing Inventory,
Warehouse, or Payroll Cycles
Research a recent article on auditing inventory, warehousing, or payroll.
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ACC 492 Week 3 Current Issue Summary Keep
Ghosts off the Payroll (2019 Syllabus)
Research a recent article on auditing inventory, warehousing, or payroll.
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ACC 492 Week 3 DQ 1

What internal control components are common among long-term assets,
liabilities, and equity accounts? What components are unique to each?
How can an auditor assess these controls
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ACC 492 Week 3 DQ 2
What are the key management assertions related to equity? What are the
most important assertions related equity? How will auditors test these
assertions
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ACC 492 Week 3 Team Assignment Inventory,
Warehousing, and Payroll accounts and cycles
(Amazon)
Inventory, Warehousing, and Payroll accounts and cycles

will be auditing and create comprehensive work programs for the
Inventory, Warehousing, and Payroll accounts and cycles.
Submit a 700- to 1,050-word document that includes the following:
700 words, for each of the work programs. Include in this
summary specific financial information gleaned from the current
Form 10-K used to perform an analysis of work program steps. For
example, if the team noted significant swings in the Inventory
balance year-over-year, identify these swings and how you address
them in your work program (this is in essence an audit procedure –
analytical review).
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ACC 492 Week 3 Team Assignment Inventory,
Warehousing, and Payroll accounts and cycles
(Walmart, 2000 Words)
Inventory, Warehousing, and Payroll accounts and cycles

Inventory, Warehousing, and Payroll accounts and cycles.
• Audit steps for tests of controls, balances, transactions, analytical
procedures, etc. as well as other considerations such as sample size and
sample methodology.
• A brief summary page should be included in this document, 525 to 700
words, for each of the work programs. Include in this summary specific
financial information gleaned from the current Form 10-K used to
perform an analysis of work program steps. For example, if the team
noted significant swings in the Inventory balance year-over-year,
identify these swings and how you address them in your work program
(this is in essence an audit procedure – analytical review).
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ACC 492 Week 3 textbook assignment 20-20,
21-21
ACC 492 Week 3 textbook assignment

20-20 (Objectives 20-2, 20-3) Following are some of the tests of
controls and substantive tests of transactions procedures often performed
in the payroll and personnel cycle. (Each procedure is to be done on a
sample basis or using audit software.)
1. Reconcile the monthly payroll total for direct manufacturing labor
with the labor cost distribution.
2. Examine the time card for the approval of a foreman.
3. Recompute hours on the time card and compare the total with the total
hours for which the employee has been paid.
4. Perform a surprise payroll payoff and observe employees picking up
and signing for their checks.
5. Compare the employee name, date, check number, and amounts on
cancelled checks with the payroll journal.
6. Trace the hours from the employee time cards to job tickets to make
sure that the total reconciles, and trace each job ticket to the job-cost
record.
7. Use audit software to account for the sequence of payroll checks in
the payroll journal.
Required
a. Identify whether each of the procedures is primarily a test of control
or a substantive test of transactions.
b. Identify the transaction-related audit objective(s) of each of the
procedures.
21-21 (Objectives 21-1, 21-3, 21-5, 21-6, 21-7) The Frist Corporation
has the following internal controls related to inventory:
1. Only authorized inventory warehousing personnel are allowed in
inventory storage areas.
2. All inventory products are stored in warehousing areas that are
segregated from other storage areas used to house equipment and
supplies.
3. All inventory held on consignment at Frist Corporation is stored in a
separate area of the warehouse.
4. The inventory purchasing system only allows purchases from pre-
approved vendors.

5. The perpetual inventory system tracks the average number of days
each inventory product number has been in the warehouse.
6. Microchips are embedded in each product and when inventory items
are removed from the warehouse to shipping, radio-frequencies signal a
deduction of inventory to the perpetual inventory system.
7. On a weekly basis, inventory accounting personnel take samples of
inventory products selected from the perpetual inventory system and
verify that the inventory is on-hand in the warehouse and that the
quantities in the listing are correct.
8. On a weekly basis, inventory accounting personnel select inventory
items on hand in the warehouse and verify that the item is included in
the perpetual inventory listing at the correct amount.
9. The perpetual inventory system subtotals the quantity of inventory in
the system and interfaces with the general ledger system on a daily basis
to ensure quantities agree.
10. The perpetual inventory system will not accept inventory additions
without the recording on a valid receiving report.
For each of the internal controls:
Required
a. Identify the related transaction-related audit objective(s) affected by
the control.
b. Describe risks the control is designed to mitigate.
c. Design a test of control to determine if the control is operating
effectively.
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auditing acquisitions, payments, property plant
and equipment

Research a recent article on auditing acquisitions, payments, property
plant and equipment (fixed assets), notes payable, or owner’s equity.
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Management’s Report on Internal Control over
Financial Reporting (2019 Syllabus)
Research a recent article on auditing acquisitions, payments, property
plant and equipment (fixed assets), notes payable, or owner’s equity.

ACC 492 Week 4 DQ 1
www.indigohelp.com
What are the steps that are required for an auditor to finalize the audit?
Which steps are the most crucial to the outcome of the audit? How will
these steps affect the final audit decision?
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ACC 492 Week 4 DQ 2
www.indigohelp.com
What types of opinions does an auditor issue other than unqualified?
How does an opinion other than unqualified affect the client? In your
opinion, which is the worst? What are the circumstances that warrant
each type of opinion?
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ACC 492 Week 4 Team Assignment Acquisition,
Payment, Property Plant, and Equipment Notes
Payable and Owner’s Equity and cycles
(Amazon)
Acquisition, Payment, Property Plant, and Equipment (Fixed Assets),
Notes Payable and Owner’s Equity accounts and cycles.
700 words, for each of the audit programs. Include in this summary
specific financial information gleaned from the current Form 10-K
used to perform an analysis of work program steps. For example, if
the team noted significant swings in the Fixed Assets balance year-
over-year, identify these swings, and how you address them in
your work program (this is in essence an audit procedure –
analytical review).
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Acquisition, Payment, Property Plant, and
Equipment Notes Payable and Owner’s Equity
and cycles (Walmart)
Acquisition, Payment, Property Plant, and Equipment (Fixed Assets),
Notes Payable and Owner’s Equity accounts and cycles.
• Audit steps for tests of controls, balances, transactions, analytical
procedures, etc. as well as other considerations such as sample size and
sample methodology.
• A brief summary page should be included in this document, 525 to 700
words, for each of the audit programs. Include in this summary specific
financial information gleaned from the current Form 10-K used to
perform an analysis of work program steps. For example, if the team
noted significant swings in the Fixed Assets balance year-over-year,
identify these swings, and how you address them in your work program
(this is in essence an audit procedure – analytical review).

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ACC 492 Week 4 Textbook Problem 18-26
18-26 (Objectives 18-3, 18-4) In testing cash disbursements for the Jay
Klein Company, you obtained an understanding of internal control. The
controls are reasonably good, and no unusual audit problems arose in
previous years.
Although there are not many individuals in the accounting department,
there is a reasonable separation of duties in the organization. There is a
separate purchasing agent who is responsible for ordering goods and a
separate receiving department that counts the goods when they are
received and prepares receiving reports. There is a separation of duties
between recording acquisitions and cash disbursements, and all
information is recorded in the two journals independently. The controller
reviews all supporting documents before signing the checks, and he
immediately mails the checks to the vendors. Check copies are used for
subsequent recording.
All aspects of internal control seem satisfactory to you, and you perform
minimum tests of 25 transactions as a means of assessing control risk. In
your tests, you discover the following exceptions:

1. One invoice was paid twice. The second payment was supported by a
duplicate copy the invoice. Both copies of the invoice were marked
“paid.”
2. Two items in the acquisitions journal were misclassified.
3. Three invoices were not initialed by the controller, but there were no
dollar misstatements evident in the transactions.
4. Five receiving reports were recorded in the acquisitions journal at
least 2 weeks later than their date on the receiving report.
5. Two receiving reports for vendors’ invoices were missing from the
transaction packets. One vendor’s invoice had an extension error, and
the invoice was initialed that the amount had been checked.
6. One check amount in the cash disbursements journal was for $100
less than the amount stated on the vendor’s invoice.
7. One voided check was missing.
Required
a. Identify whether each of 1 through 7 is a control test deviation, a
monetary misstatement, or both.
b. For each exception, identify which transaction-related audit objective
was not met.
c. What is the audit importance of each of these exceptions?
d. What follow-up procedures would you use to determine more about
the nature of each exception?
e. How would each of these exceptions affect rest of your audit? Be
specific.
f. Identify internal controls that should have prevented each
misstatement.
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ACC 492 Week 4 Week 4 Quiz

For more classes visit
ACC 492 WEEK 4 Week 4 Quiz
1. Budd, the purchasing agent of Lake Hardware Wholesalers, has a
relative who owns a retail hardware store. Budd arranged for
hardware to be delivered by manufacturers to the relative’s retail
store on a COD basis, thereby enabling his relative to buy at
Lake’s wholesale prices. Budd was probably able to accomplish
this because of Lake’s poor internal control over
1. purchase requisitions.
2. purchase orders.
3. cash receipts.
4. perpetual inventory records.
2. Which of the following is an internal control that will prevent paid
cash disbursement documents from being presented for payment a
second time?
1. The date on cash disbursement documents must be within a few
days of the date that the document is presented for payment.
2. The official signing the check compares the check with the
documents and should deface the documents.

3. Unsigned checks are prepared by individuals who are responsible
for signing checks.
4. Cash disbursement documents are approved by at least two
responsible management officials.
3. Which of the following questions would be best to include in an
internal control questionnaire concerning the completeness
assertion for purchases?
1. Is an authorized purchase order required before the receiving
department can accept a shipment or the vouchers payable
department can record a voucher?
2. Are purchase requisitions prenumbered and independently
matched with vendor invoices?
3. Is the unpaid voucher file periodically reconciled with inventory
records by an employee who does not have access to purchase
requisitions?
4. Are purchase orders, receiving reports, and vouchers
prenumbered and periodically accounted for?
4. The authority to accept incoming goods in receiving should be
based on a(n)
1. vendor’s invoice.
2. bill of lading.
3. purchase requisition.

4. approved purchase order.
5. In testing for unrecorded disposals of equipment, an auditor most
likely will
1. select items of equipment from the accounting records and then
locate them during the plant tour.
2. compare depreciation journal entries with similar prior-year
entries in search of fully depreciated equipment.
3. inspect items of equipment observed during the plant tour and then
trace them to the equipment master file.
4. scan the general journal for unusual equipment additions and
excessive debits to repairs and maintenance expense.
6. When there are numerous property and equipment transactions
during the year, an auditor who plans to assess control risk at a
low level usually performs
1. analytical procedures for property and equipment balances at the
end of the year.
2. analytical procedures for current year property and equipment
transactions.
3. tests of controls and limited tests of current year property and
equipment transactions.
4. tests of controls and extensive tests of property and equipment
balances at the end of the year.

7. In connection with the audit of the prepaid insurance account,
which of the following procedures is usually not performed by the
auditor?
1. Recompute the portion of the premium that expired during the
year.
2. Prepare excerpts of the insurance policies for audit
documentation.
3. Confirm premium rates with an independent insurance broker.
4. Examine support for premium payments.
8. Which of the following questions would an auditor likely include
on an internal control questionnaire for notes payable?
1. Are assets that collateralize notes payable critically needed for the
entity’s continued existence?
2. Are two or more authorized signatures required on checks that
repay notes payable?
3. Are the proceeds from notes payable used for the purchase of
noncurrent assets?
4. Are direct borrowings on notes payable authorized by the board of
directors?

9. When an auditor observes that the recorded interest expense seems
to be excessive in relation to the balance in the bonds payable
account, the auditor might suspect that
1. discount on bonds payable is understated.
2. bonds payable are understated.
3. bonds payable are overstated.
4. premium on bonds payable is overstated.
10. In the audit of notes payable, which balance-related audit
objective is generally one of the most important for the auditor to
verify**************************************
11.
ACC 492 Week 5 Assignment importance of
considering contingent liabilities, letters from
client lawyers (Amazon)
ACC 492 Week 5 Learning Team Assignment

You and your team have completed your fieldwork and have a handful
of other considerations before you complete the audit and issue your
report. These activities are designed to ensure nothing significant has
occurred between the completion of your fieldwork and the issuing of
the audit report. You are assigned as a senior on the staff, in line to be
promoted to manager, to instruct the other staff on the importance of
considering contingent liabilities, letters from client lawyers, and
subsequent events.
Create a 10- to 12-slide presentation for the staff.
Explain the importance of reviewing for contingent liabilities and
subsequent events.
Describe the requirements for reviewing for contingent liabilities and
subsequent events.
Click the Assignment Files tab to submit your assignment.
**************************************

ACC 492 Entire Course Audit Guide

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