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76.The authorization of sales returns requires that certain individuals within the company be assigned the authority for all of the following, except: A.Authorize Sales Returns B.Approve Credit Memos C.Develop Sales Return Policies D.Record the Credit Memos 77.The segregation of duties related to sales returns would ideally separate the function of performing the credit memo activity.
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- CHAPTER 8 - MULTIPLE CHOICE 46.In a large company, there are hundreds, possibly thousands, of sales transactions each day.  The company needs to have in place, systems and processes to: A.Capture the results of the sales transactions B.Record the proper and complete sales transactions C.Summarize and report the results of the transactions D.All of.
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163. There are several approaches to applying an SDLC methodology to IT system change.  Using an Internet search engine, search for these terms: SDLC, waterfall, JAD (Joint Application Development), RAD (Rapid Application Development), Build and Fix, and Spiral Model.  For example, you might try entering these search terms: SDLC waterfall.  Write.
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158. Describe how the matching of key information on supporting documents can help a company determine that its revenue transactions have not been duplicated.  159. Describe how the use of pre-numbered forms for receiving reports and credit memos can help a company determine that sales return transactions have not been omitted from.
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156. Identify four important aspects of administrative control in an IT environment. 157. Think about a place you have worked where computers were present. What are some physical and environmental controls that you have observed in the workplace? Provide at least two examples of each from your personal experience.  158. Batch.
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11.The remoteness of information, one of the causes of information risk, can relate to geographic distance or organizational layers. 12.The most common method for decision makers to reduce information risk is to rely on information that has been audited by an independent party. 13.Auditors have the primary responsibility to make sure that.
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- CHAPTER 7 – END OF CHAPTER QUESTIONS: 120.Which of the following types of audits is most likely to be conducted for the purpose of identifying areas for cost savings? A.Financial Statement Audits B.Operational Audits C.Regulatory Audits D.Compliance Audits 121.Financial statement audits are required to be performed by: A.Governmental Auditors B.CPAs C.Internal Auditors D.IT Auditors 122.Which of the following is not.
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– CHAPTER 8 – PROBLEMS 162. In 1956, Gussepi DeLucca opened a pizza restaurant that he named DeLucca’s in St. Louis, Missouri.  Over the years, he opened both company and franchise locations and grew the business to include over 40 restaurants that serve the three states around the St. Louis area.  In 1993,.
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146. Explain how an audit trail might get “lost” within a computerized system.  147. Explain how the presence of IT processes can improve the quality of information that management uses for decision making.  148. Distinguish among the focuses of the GAAS standards of fieldwork and standards of reporting. 149. Which professional standard-setting.
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106.This section of the common forms used as the standard format in EDI data transmission contains data about the file or transmission and identify the end of a particular transaction. A.Header and Trailer Data B.Labeling Interchanges C.Data Segments D.Footer Data 107.Because it can be expensive to develop and maintain a system that links two companies.
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21.Risk can be inherent in the client’s business, due to things such as the nature of operations, or may be caused by weak internal controls. 22.Auditors do not need to concern themselves with risks unless there is an indication that there is an internal control weakness. 23.The auditor’s understanding of internal controls.
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66.Which of the following is not one of the stated physical controls for inventory in a warehouse? A.Surveillance Cameras B.Alarm Systems C.Backup Copies D.Security Guards 67.In order to protect data files, production programs, and accounting records from unauthorized access, each of the following may be used, except: A.Passwords B.Physical controls (locked cabinets) C.Backup copies D.Surveillance cameras 68.Common types of independent.
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125.If a company does not prepare an aging of accounts receivable, which of the following accounts is most likely to be misstated? A.Sales revenues B.Accounts receivable C.Sales returns and allowances D.Allowance for uncollectible accounts 126.When a company sells items over the Internet, it is usually called e-commerce.  There are many IT risks related to Internet.
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41.The Sarbanes-Oxley Act has placed greater restrictions on CPAs by prohibiting certain types of services historically performed by CPAs for their audit clients. 42.The Sarbanes-Oxley Act decreased management’s responsibilities regarding the fair presentation of the financial statements. 43.The responsibility of the auditor to search for fraud is less than the responsibility to.
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11.The existence of good internal controls do not ensure high sales and profits. 12.Effective and efficient internal control often takes up valuable management time that could otherwise be spent on attention to revenue growth and cost controls. 13.Proper sales authorization control requires obtaining approval before processing an order and again before the.
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- CHAPTER 7 – SHORT ANSWER QUESTIONS 141. What are assurance services? What value do assurance services provide?  142. Differentiate between a compliance audit and an operational audit.  143. Which type of audit is most likely to be performed by government auditors? Which type of audit is most likely to be.
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67.The generally accepted auditing standards are divided into three groups.  Which of the following is not one of those groups? A.General Standards B.Basic Standards C.Standards of Fieldwork D.Standards of Reporting 68.GAAS, generally accepted auditing standards, provide a general framework for conducting quality audits, but the specific standards - or detailed guidance - are provided by.
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141. List the advantages of e-commerce systems.  142. Identify two of the biggest risks to companies who use e-commerce, along with controls to prevent these risks.  143. What controls should a company implement to ensure consistency of sales information between the front end and back end of its systems?  144. Why is.
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107.This is one of the computer-assisted audit techniques, related to processing controls, that involves processing client data through a controlled program designed to resemble the client’s application.  This test is run to find out whether the same results are achieved under different systems. A.Integrated Test Facility B.Embedded Audit Module C.Parallel Simulation D.Test Data Method 108.Regardless.
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– CHAPTER 8 – END OF CHAPTER QUESTIONS: 115.Within the revenue processes, a signed approval of a sales order indicates all of the following except: A.The date of delivery. B.The sale is to an accepted customer. C.The customer’s credit has been approved. D.The sales price is correct. 116.An example of an independent verification in the sale.
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160. Blutarch MultiMedia Stop is a regional retailer of consumer electronics with warehouses and stores located in several large cities in California.  The board and top management of Blutarch are considering updating their accounting, inventory, and retail sales software and hardware.  Their current systems are approximately 15 years old.  Assume that you.
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– CHAPTER 8 – SHORT ESSAY 154. Describe what is likely to occur if company personnel erroneously recorded a sales transaction for the wrong customer?  What if a cash receipt was applied to the wrong customer?  Identify internal controls that would detect or prevent this from occurring.  155. Debate the logic used in.
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31.Regardless of the results of the control testing, some level of substantive testing must take place. 32.The use of generalized audit software is especially useful when there are large volumes of data and when there is a need for accurate information. 33.All of the risks and audit procedures that apply to a.
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130.Which of the following audit procedures is most likely to be performed during the planning phase of the audit? A.Obtain an understanding of the client’s risk assessment process. B.Identify specific internal control activities that are designed to prevent fraud. C.Evaluate the reasonableness of the client’s accounting estimates. D.Test the timely cutoff of cash payments.
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– CHAPTER 8 – SHORT ANSWER QUESTIONS 131. Why is it important to establish and monitor credit limits for customers?  132. Distinguish between a pick list and a packing slip.  133. How can an effective system of internal controls lead to increased sales revenue?  134. Why should the person responsible for.
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97.  Related audit tests to review the existence and communication of company policies regarding important aspects of IT administrative control include all of the following, except: A.Personal accountability and segregation of incompatible responsibilities B.Job description and clear lines of authority C.Prevention of unauthorized access D.IT systems documentation 98.Controls meant to prevent the destruction of information.
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155. There are four methods of system conversion; parallel, direct cutover, pilot, and phase-in. Describe these four methods and how they differ.  156. Operation and maintenance is the longest and costliest part of the SDLC.  Describe why this would be true.  157. Describe how IT performance reports are important in IT Governance. .
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151. List the techniques used for gathering evidence.  152. During which phase of an audit would an auditor consider risk assessment and materiality? 153. What is the significance of Statement on Auditing Standards No. 94?  154. Distinguish between auditing through the computer and auditing with the computer.  155. Explain why it.
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161. Assume that you are the project team manager that is engaged in a Systems Analysis.  The company is a large, national retailer with several stores and warehouses located throughout the United States.  The corporate headquarters are in Atlanta, Georgia, and substantially all major accounting takes place at the corporate headquarters.  Describe how.
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178. Visit the AICPA website at www.aicpa.org and click on Becoming a CPA/Academic Resources. Use the Careers in Accounting tab to locate information on audit careers. 179. Visit the ISACA website at www.isaca.org and click the Students and Educators tab and then the IT Audit Basics tab to find articles.
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57.This type of audit is performed by independent auditors who are objective and neutral with respect to the company and the information being audited. A.Compliance Audit B.Operational Audit C.Internal Audit D.External Audit 58.The independence of a CPA could be impaired by: A.Having no knowledge of the company or the company management B.By owning stock of a similar.
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96.Application controls of the IT system would include: A.Availability B.Accuracy and Completeness C.Security D.Processing Integrity 97.This type of highly integrated IT system incorporates electronic processing of sales-related activities and, generally, the sales processes are transacted over the internet. A.E-commerce B.Virtual commerce C.Electronic data interchange D.Point of sale 98.This type of highly integrated IT system, inter-company, computer-to-computer, communicates sales documents electronically.
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- CHAPTER 7 - MULTIPLE CHOICE 47.Accounting services that improve the quality of information provided to the decision maker, an audit being the most common type of this service, is called: A.Compliance Services B.Assurance Services C.Substantive Services D.Operational Services 48.A type of assurance services that involves accumulating and analyzing support for the information provided by management.
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86.The internal control of cash receipts related to adequate records and documents would include which of the following? A.Cash receipts listings prepared on a daily basis and reconciled to supporting documentation from the bank deposit. B.Bank deposit receipts should be retained and filed chronologically. C.Detailed customer accounts should also be maintained and reconciled.
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31.Those who handle cash should not have access to the related accounting records. 32.At a minimum, cash receipts should be deposited on a weekly basis. 33.Detailed customer accounts should be maintained and reconciled with customer statements regularly. 34.Access to cash collections needs to limited to those who are expressly authorized to record the.
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56.Sales orders are calculated based on current selling prices of the items sold.  The source of these prices, which would include the entire set of preestablished and approved prices for each product, is referred to as a(n): A.Price list B.Purchase order C.Packing slip D.Pick list 57.The maximum dollar amount that a customer is allowed to.
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166. The following list presents various internal control strengths (S) or risks (R) that may be found in a company’s revenues and cash collection processes. __¬__ Credit is authorized by the credit manager. _¬¬¬___ Checks paid in excess of $5,000 require the signatures of two authorized members of management. (Although this is viewed.
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77.Although there a number of organizations that provide detailed guidance, it is still necessary for auditors to rely on other direction regarding the types of audit tests to use and the manner in which the conclusions are drawn.  These sources of information include: A.Industry Guidelines B.PCAOB C.ASB D.ASACA 78.Claims regarding the financial condition of the.
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- CHAPTER 7 – PROBLEMS 174. Match the standard-setting bodies with their purpose. 175. Identify whether the following audit tests are used to evaluate internal access controls (I), external access controls (E), or both (B): authenticity, penetration, vulnerability assessments, review of access logs, and review of policies concerning the issuance of passwords and security tokens. 176..
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- CHAPTER 8 - TRUE / FALSE 1.Because different companies conduct business in different manners, there tends to be few similarities in the way the related business processes are carried out. 2.Sales processes need supporting practices such as credit checks and stock authorization. 3.Even though most companies collect order data from customers, the.
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87.A large part of the work performed by an auditor in the audit planning process is the gathering of evidence about the company’s internal controls.  This can be completed in any of the following ways, except: A.Interviewing key members of the accounting and IT staff. B.Observing policies and procedures C.Review IT user manuals.
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