1. Which of the following constitutes a weakness in the internal control for accounts receivable?
An aged trial balance of accounts receivable is prepared monthly.
Statements are mailed to customers monthly.
All credit memos are prepared by the cashier.
Subsidiary accounts receivable ledgers are balanced to the general ledger on a weekly basis.
2. Purchase cutoff procedures should be designed to test that:
Inventory purchased and received just before the balance sheet date is recorded in the year under audit.
The inventory year end balance is shown at the lower of cost or market.
The inventory that is in the possession of the company is owned by the company.
Adjustments for inventory obsolescence have been made.
3. Under which of the following set of circumstances might the auditors disclaim an opinion?
The financial statements contain a departure from generally accepted accounting principles, the effect of which is material.No longer considered appropriate.
The group auditors decide to make reference to the report of component auditor who audited a subsidiary.
There has been a material change between periods in the method of application of accounting principles.
There are significant scope limitations on the audit.
4. Which of the following best describes the auditor's responsibility in considering if a client is a going concern?
The auditor performs analytical reviews to determine if bankruptcy is imminent.
The auditor determines that related party transactions are properly disclosed.
Based on audit procedures performed, the auditor assesses whether there is substantial doubt about the entity's ability to continue as a going concern.
The auditor performs confirmation of accounts receivable and observation of inventory to obtain evidence regarding the entity's ability to continue as a going concern.