When auditing related party transactions, an auditor places primary emphasis on:
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2 .In performing a count of negotiable securities, an auditor records the details of the count on a security count worksheet. What other information is usually included on this worksheet?
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3 .A weakness in internal control over recording retirements of equipment may cause an auditor to:
A Select certain items of equipment from the accounting records and locate them in the plant. B Trace additions to the "other assets" account to search for equipment that is still on hand but no longer being used. C Review the subsidiary ledger to ascertain whether depreciation was taken on each ite...
4 .In determining the effectiveness of an entity's internal controls relating to the occurrence assertion for payroll transactions, an auditor most likely would inquire about and:
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5 .Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable?
A Are direct borrowings on notes payable authorized by the board of directors? B Are assets that collateralize notes payable critically needed for the entity's continued existence? C Are the proceeds from notes payable used for the purchase of noncurrent assets? D Are two or more authorized signatur...
7 .Which of the following procedures most likely would assist an auditor in determining whether management has identified all accounting estimates that could be material to the financial statements?
A Determine whether accounting estimates deviate from historical patterns. B Confirm inventories at locations outside the entity. C Inquire about the existence of related party transactions. D Review the lawyer's letter for information about litigation.
8 .The refusal of a client's attorney to provide information requested in an inquiry letter generally is considered:
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9 .Which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity's financial statements?
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10 .An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This may indicate that:
A Fictitious credit sales have been recorded during the year. B The client recently tightened its credit-granting policies. C Employees have stolen inventory just before the year-end. D An employee has been lapping receivables in both years.
