CPA Auditing and Attestation (AUD) : CPA Auditing and Attestation (AUD)
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #3 : Performing Further Procedures
Inquiries of warehouse personnel concerning possible obselete or slow moving inventory items provide assurance about management's assertion of:
Presentation
Existence
Completeness
Valuation
Valuation
Inquiries of warehouse personnel concerning possible obselete or slow moving inventory items provide assurance about management's assertion of valuation (has the inventory been properly valued and recorded.)
Example Question #4 : Performing Further Procedures
The warehouse manager is responsible for ensuring that high-end merchandise is in the locked section of the building. This is an example of
A reconciliation procedure
A physical control
An authorization procedure
A review procedure
A physical control
Physical control provides a physical barrier to the asset. They consist of policies such as insurance, or kinetic barriers such as locks, secure areas, etc.
Example Question #5 : Performing Further Procedures
An auditor generally tests the segregation of duties related to inventory by:
Test counts and cutoff procedures
Analytical procedures and invoice recomputation
Personal inquiry and observation
Document inspection and reconciliation
Personal inquiry and observation
The independent auditor's direct personal knowledge, based on personal inquiry and observation, are auditing procedures commonly used to test the segregation of duties.
Example Question #2 : Performing Further Procedures
Of the following duties included in the inventory cycle, which should be segregated to maintain proper internal controls?
Purchasing
Warehousing
Receiving
All of the answer choices are correct
All of the answer choices are correct
All of these duties, in addition to shipping, would need to be segregated in order to maintain proper internal controls.
Example Question #1 : Investment Cycle
The investment financing cycle refers to:
Fixed asset section of the balance sheet
Cash and cash equivalents
Firms portfolio of investment assets both current and long term
Firms operating fund
Firms portfolio of investment assets both current and long term
The investment financing cycle covers the firm’s portfolio of assets on both a long term and short-term basis. This cycle covers the management of excess assets to create a return.
Example Question #2 : Investment Cycle
In auditing the investment cycle the auditor would most likely
All of the answer choices are correct.
ensure that the investments were reasonably secure from loss
ensure that the investments were properly disclosed in the financial statements
ensure that the accounts were properly recorded
All of the answer choices are correct.
All of the above are necessary when auditing the investment cycle. Every cycle needs controls to determine transactions are properly recorded, measured, and disclosed.
Example Question #3 : Investment Cycle
An important review procedure for investments is to
Read the Wall Street Journal
Make sure the investment return is reasonable
None of the answer choices are correct.
Review detail records and compare to actual investment-related asset
Review detail records and compare to actual investment-related asset
The purpose of the review procedures is to ensure that the transaction recorded follows policies and has an audit trail. The auditor will ensure that the underlying detail supports the asset being recorded.
Example Question #4 : Investment Cycle
In auditing intangible assets, an auditor would most likely review or recompute and determine whether the amortization period is reasonable in support of management's financial statement assertion of:
Existence
Valuation and allocation
Rights and obligations
Completeness
Valuation and allocation
Assertions about valuation and allocation deal with whether assets, liabilities, and equity interests have been included in the financial statements at appropriate amounts. Recalculation of the amortization and review of the amortization period would test the valuation and allocation assertion.
Example Question #5 : Investment Cycle
In confirming with an outside agent such as a financial institution that the agent is holding securities in the client's name, the auditor most likely gathers evidence in support of management's financial statement assertions of existence and:
Completeness
Understandability and classification
Valuation and allocation
Rights and obligations
Rights and obligations
A confirmation from an outside agent indicating that securities are being held in the client's name provides evidence with respect to both the existence assertion and the rights and obligations assertion.
Example Question #11 : Performing Further Procedures
The investment cycle requires strong segregation of duties over all of the following except:
Custody of investments
Authorization of purchases and sales
These are all critical for proper segregation of duties
Record keeping
These are all critical for proper segregation of duties
In any business process or environment, record keeping should be separate from authorization which should be separate from custody.
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