Question 1

Which of the following are steps in an account analysis?

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The answer of Which of the following are steps in...

Question 2

Substantive analytical procedures:

Accepted Answer

Substantive analytical procedures are used to obtain audit evidence and can complement, but not replace, detailed testing of balances or transactions.

Question 3

Account analyses are performed for:

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Question 4

SFAC 6 addresses which assertion:

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The answer of SFAC 6 addresses which assertion:
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Question 5

An account that is particularly difficult to audit in the automotive industry is:

Accepted Answer

Warranty liability is a particularly difficult account to audit in the automotive industry because it involves estimates of future repairs and replacements, which can be subjective and difficult to verify. Additionally, the timing of when warranty claims are made and processed can affect the accuracy of the account balance.

Question 6

The search for unrecorded liabilities consists of:

Accepted Answer

The search for unrecorded liabilities involves reviewing unmatched invoices and receiving reports, as well as entries in the accounts payable subsidiary ledger. Therefore, options A and B alone are not sufficient, and option C alone is also not sufficient since it does not include the matching process. Option D is the best choice as it includes all the necessary steps for the search for unrecorded liabilities.

Question 7

The auditor assesses a client's handles possible impairment: TYPO - what is the question?

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The answer of The auditor assesses a client's handles possible...

Question 8

The ICFR for the procurement process is:

Accepted Answer

The ICFR (Internal Control over Financial Reporting) is crucial across various industries, especially those with significant procurement needs such as manufacturing, automotive, and any industry with a high degree of production, due to the substantial impact procurement has on financial reporting and operational efficiency.

Question 9

Account analyses are:

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The answer of Account analyses are:
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Question 10

An accrual is different from a payable in that:

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Question 11

Auditors normally test accounts payable balances by:

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Question 12

Purchase commitments:

Accepted Answer

Purchase commitments must be disclosed in the financial statements, but they are not necessarily required to be recorded or audited prior to recording.

Question 13

Accounts payable confirmations:

Accepted Answer

Accounts payable confirmations can address multiple assertions: completeness (ensuring all liabilities are recorded), cut-off (liabilities are recorded in the correct accounting period), and valuation (liabilities are recorded at the correct amount).

Question 14

The auditor reviews subsequent payments made to suppliers in order to detect: TYPO

Accepted Answer

The auditor reviews subsequent payments made to suppliers in order to detect any unrecorded liabilities, which refer to expenses that have been incurred but not yet recorded in the company's books. Reviewing subsequent payments can help identify any payments that were not recorded in the correct period, or any invoices that were not recorded at all. This is an important control procedure to ensure the completeness and accuracy of the financial statements. Errors in postings and errors in the bank reconciliation are also important considerations for the auditor, but detecting unrecorded liabilities is the primary objective of this review.

Question 15

Comparing the balance per the accounts payable subsidiary ledger with the general ledger:

Accepted Answer

Comparing the balance per the accounts payable subsidiary ledger with the general ledger primarily achieves the completeness assertion, ensuring that all transactions have been recorded.

Question 16

Substantive audit procedures:

Accepted Answer

Substantive audit procedures can support direct audit tests for expenses and also can detect unusual relationships between accounts, so both options (a) and (b) are correct. Therefore, the best choice is C, both a and b. Option D is incorrect because substantive audit procedures are essential in conducting an effective audit.

Question 17

Accounts payable confirmations are sent to:

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Question 18

Calculating the inventory turnover ratio:

Accepted Answer

The inventory turnover ratio is a measure of how efficiently a company manages its inventory and sales. It helps auditors assess whether inventory accounts are properly stated by indicating how quickly inventory is sold. It also indirectly helps in evaluating the accuracy of sales accounts, as higher turnover rates generally correlate with higher sales. Thus, both inventory and sales account statements can be scrutinized using this ratio.

Question 19

An auditor requests a tour of the production facilities prior to observing inventory. The reason for this is:

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Question 20

Which of the following tests are appropriate for intangible assets? TYPO

Accepted Answer

Intangible assets are not physical assets, so tests of cash disbursements are not appropriate. Tests of details and substantive analytical procedures are both appropriate for intangible assets.

Quiz 12: The Acquisition and Payments Cycle and Related Accounts: Purchases, Cash Disbursements and Other Related Activities in the Automotive Industry