24.2 During their interim audit the auditors discover that there is often a delay between goods being delivered to customers and the subsequent raising of a sales invoice.Which test is most likely to establish the extent of any understatement of receivables at the year end?
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1 .23.2 In order for a continuous inventory counting system to provide satisfactory evidence of yearend inventory levels it is essential that management maintains adequate inventory records and investigates and corrects all material differences between the inventory records and the physical counts.How often must the inventory be counted?
A All items at least once during the year B All items more than once during the year with the auditor in attendance C All items at the same time at least once during the year D All high value items at the year end
2 .23.3 What is the primary assertion tested by the auditor when he attends an inventory count?
A Existence B Rights and obligations C Valuation
3 .23.4 An auditor analysing inventory turnover rates would NOT obtain evidence about which of the following management assertions?
A Existence B Rights and obligations C Completeness D Valuation and allocation
4 .23.5 An audit objective is stated as “to ensure that all inventory on hand is reflected in the inventory balance at the reporting date”.Which of the following management assertions should the auditor test?
A Rights and obligations B Valuation and allocation C Completeness D Existence
5 .24.1 In order to gather sufficient, appropriate evidence, the auditor may make use of external confirmations. These may take the form of being a positive or negative request.A positive confirmation request for trade receivables always asks respondents to reply to the auditor indicating whether or not they agree with the information provided.Is this statement true or false?
A True B False
7 .24.4 How would an auditor trace transactions if the objective of the auditor’s tests of details is to detect possible understatement of sales?
A From purchase order to shipping documents B From cash receipts to sales invoices C From shipping documents to sales invoices
8 .24.3 The auditor of Lydney Co reviews the receivables ledger at the planning stage for the year end audit and determines that it comprises a large number of small balances, with a few larger balances, which are settled, on average, in two months. As in previous years, the reporting deadline is one month after the year end. Internal controls are considered to be effective and the error rate is expected to be low.What is likely to be the most effective substantive audit procedure to assist in the verification of year end receivables?
A Request a sample of customers to confirm the balance on their account at an interim date and review movements to the year end B Request a sample of customers to confirm the balance on their account at the year end C Trace a sample of invoices and cash receipts through the system to the customers...
9 .24.5 The managing director of a client company has refused to allow the auditor to write to a major customer who is on the list of receivables selected for direct confirmation, as the customer is a close personal friend who may be offended by the request.In these circumstances the auditor’s next step would be to
A Indicate that his refusal constitutes a restriction of scope which will lead to a modification of the audit opinion B Perform the circularisation as planned since the auditor’s responsibility is to the members and not the directors C Perform the circularisation substituting another receivable wi...
10 .25.2 What is a key source of audit evidence for the issue of ordinary shares?
A Numbered share certificates B Issuing agent’s records C Minutes of the board of directors (1 mark)
