AUDITING: CHAPTERS 15 - 21

 

1. Which of the following would be the best protection for a company that wishes to prevent the lapping of trade accounts receivable?

a. Have customers send payments directly to the company's depository bank.

b. Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail.

c. Request that customers' payment checks be made payable to the company and addressed to the treasurer.

d. Segregate duties so that no employee has access to both checks from customers and currency from daily cash receipts.

2. Which of the following statements regarding proper disclosure of accounts receivable is not correct?

a. Receivables from officers must be segregated from accounts receivable from customers if the amounts are material.

b. Under SEC requirements, it is necessary to disclose sales and assets for different business segments separately.

c. Proper aggregation of general ledger balances in the financial statements also requires combining account balances that are not relevant for external users.

d. All accounts included in the general ledger must be disclosed separately on the financial statements.

3. The primary purpose of accounts receivable confirmation is to satisfy the

a. existence objective.

b. existence and cutoff objectives.

c. accuracy and cutoff objectives.

d. existence, accuracy, and cutoff objectives.

4. The most reliable evidence from confirmations is obtained when they are sent

a. as close to the balance sheet date as possible.

b. at various times throughout the year to different sections of the sample, so that the entire sample is representative of account balances scattered throughout the year.

c. several months before the year-end, so the auditor will have adequate time to perform alternate procedures if they are required.

d. at various times throughout the year to the same group in the sample, so that the sample will not have a time bias.

5. Which of the following is not an important consideration in determining the sample size of confirmations?

a. Total annual credit sales.

b. Tolerable misstatement.

c. The types of confirmations being sent; that is, positive or negative.

d. The results of related analytical procedures.

6. The following statements relate to the process of selecting items to include in the confirmation sample. Which of the following is not a true statement?

a. With most confirmations, some type of stratification is desirable.

b. In most audits, the emphasis should be on sampling equally throughout the population.

c. It is important that the auditor have complete independence in choosing the accounts to be confirmed.

d. It is important to sample some items from every material stratum of the population.

7. Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide evidence concerning the

a. collectibility of the balances confirmed.

b. ownership of the balances confirmed.

c. existence of the balances confirmed.

d. internal control over balances confirmed.

8. A positive confirmation is more reliable evidence than a negative confirmation because

a. fewer confirmations can be sent out.

b. the auditor has a document which can be used in court.

c. the debtor's lack of response indicates agreement with the stated balance.

d. follow-up procedures can be performed if a response is not received from the debtor.

9. The criterion used by most clients for determining when a sale takes place is when

a. title passes.

b. the goods are shipped.

c. cash is exchanged.

d. the costs are incurred.

10. Communication addressed to the debtor requesting him or her to confirm whether the balance as stated on the communication is correct or incorrect is a

a. dunning letter.

b. negative confirmation.

c. bank confirmation.

d. positive confirmation.

11. Generally accepted accounting principles require that material sales returns and allowances

a. be recorded in the period when the merchandise is returned.

b. be recorded in the period when the credit memo is issued.

c. be matched with related sales.

d. be recorded as a debit to the sales account.

12. If accounts receivable accounts with credit balances are significant, they should be

a. written off.

b. moved to the debit side.

c. reclassified as accounts payable.

d. corrected by making adjusting entries.

13. An unqualified report may be issued even when accounts receivable have not been confirmed, provided that

a. accounts receivable are immaterial.

b. the auditor considers confirmations ineffective evidence because response rates will likely be inadequate or unreliable.

c. the combined level of inherent risk and control risk is low and other substantive evidence can be accumulated to provide sufficient evidence.

d. any one of the above three is present.

14. Kuttler, an independent auditor, was engaged to perform an examination of the financial statements of Whetten Incorporated one month after its fiscal year had ended. Although the inventory count was not observed by Kuttler, and accounts receivable were not confirmed by direct communication with creditors, Kuttler was able to gain satisfaction by applying alternative auditing procedures. Kuttler's audit report will probably contain

a. a qualified opinion.

b. a standard unqualified opinion.

c. either a qualified opinion or a disclaimer of opinion.

d. an unqualified opinion and an explanatory middle paragraph.

15. Cutoff misstatements occur when

a. the auditor mistakenly asks the bank for the end-of-year bank statement instead of the statement which would include the two succeeding weeks.

b. subsequent period transactions are recorded in the current period.

c. current period transactions are recorded in the subsequent period.

d. both b and c above, but not a.

16. The most important test of details of balances to determine the existence of recorded accounts receivable is

a. tracing sales entries to shipping documents.

b. tracing the credits in accounts receivable to bank deposits.

c. tracing sales returns entries to credit memos issued and receiving room reports.

d. the confirmation of customers' balances.

17. Two major audit procedures which were formally required by the AICPA as a result of the McKesson & Robbins case are

a. reconciliation of cash and confirmation of receivables.

b. reconciliation of cash and physical examination of inventory.

c. confirmation of receivables and physical examination of inventory.

d. confirmation of receivables and communication with client's external lawyer.

18. An auditor should perform alternative procedures to substantiate the existence of accounts receivable when

a. no reply to a positive confirmation request is received.

b. no reply to a negative confirmation request is received.

c. collectibility of the receivables is in doubt.

d. pledging of the receivables is probable.

19. The use of the positive (as opposed to the negative) form of receivables confirmation is preferred when

a. internal control surrounding accounts receivable is considered to be effective.

b. there is reason to believe that a substantial number of accounts may be in dispute.

c. a large number of small balances are involved.

d. there is reason to believe a significant portion of the requests will be made.

 

20. As part of the auditor's tests of the presentation and disclosure objective, the auditor evaluates the adequacy of the footnotes. This evaluation is

a. required by GAAP.

b. required by GAAS.

c. suggested by the SEC.

d. suggested by the AICPA.

21. Most tests of accounts receivable and the allowance for uncollectible accounts are based on

a. the general ledger balance of each account.

b. the results of analytical procedures.

c. the results of confirmations.

d. the aged trial balance.

22. When customers do not respond to confirmation requests, auditors

a. cannot express an unqualified opinion.

b. must rely on inquiry of client.

c. must examine supporting documents.

d. cannot complete the engagement and must issue a disclaimer.

23. Testing the information on the aged trial balance for detail tie-in is a necessary audit procedure, which would normally include

a. test footing the total column and the columns depicting the aging.

b. comparing the total of the trial balance with the general ledger accounts receivable account.

c. tracing a sample of individual balances to supporting documents.

d. all of the above.

24. The most important test of details of balances for accounts receivable is

a. confirmations.

b. recalculation of the aged receivables and uncollectible accounts.

c. tracing credit memos for returned merchandise to receiving room reports.

d. tracing from shipping documents to journals to the accounts receivable ledger.

25. This year is the first time that, as a normal practice in client's business, accounts receivable may be pledged, assigned, factored, or sold at discount. The audit procedure which would not disclose these practices would be

a. a review of the minutes of the board of directors' meetings.

b. discussions with the client.

c. confirmation of receivables.

d. examination of correspondence files.

26. Which of the following most likely would be detected by an auditor's review of a client's sales cutoff?

a. Excessive sales discounts.

b. Unrecorded sales for the year.

c. Unauthorized goods returned for credit.

d. Lapping of year-end accounts receivable.

27. It is easy to test for a cash receipts cutoff error by

a. reconciling the bank statement.

b. performing a four-column proof-of-cash.

c. observing the counting of cash at the balance sheet date.

d. tracing recorded cash receipts to bank deposits on the bank statement of a different period.

28. When positive confirmations have been used, it is normally desirable to account for unconfirmed balances with alternative procedures,

a. even if the amounts are small.

b. only if the amounts are large.

c. only if the amounts are material.

d. if it does not increase the audit firm's costs.

29. The client's estimate of the total amount of uncollectible receivables is represented by

a. the allowance for uncollectible accounts.

b. footnote disclosure in the financial statements.

c. the bad debts expense account on the income statement.

d. the accounts with credit balances in the accounts receivable subsidiary ledger.

30. Tests of details of balances are directed to

a. balance sheet accounts for all cycles.

b. income statement accounts for all cycles.

c. balance sheet accounts for some cycles and income statement accounts for other cycles.

d. all general ledger accounts for all cycles.

 

31. A listing of the balances in the accounts receivable master file at the balance sheet date, by total balance outstanding and by the time the component parts have been outstanding, is the

a. customer list.

b. aged trial balance.

c. accounts receivable ledger.

d. schedule of accounts receivable.

32. Which of the following types of receivables would not deserve the special attention of the auditor?

a. Accounts with credit balances.

b. Accounts that have been outstanding for a long time.

c. Receivables from affiliated companies.

d. Accounts where no reply was received to a negative confirmation request.

33. Analytical procedures are substantive tests and, if the results of the analytical procedures are favorable, they will

a. reduce the extent of tests of details of balances.

b. reduce the extent of tests of controls.

c. reduce the tests of transactions.

d. reduce all of the other tests.

34. A customer mails and records a check to a client for payment of an unpaid account on December 30. The client receives and records the amount on January 2. The records of the two organizations will be different on December 31.

a. This is a cutoff misstatement.

b. This is a timing difference.

c. Both a and b.

d. Neither a nor b.

35. When positive confirmations are used, SAS No. 67 requires follow-up procedures for confirmations not returned by the customer. In such a situation, which of the following would not be classified as an alternative procedure?

a. Send a second confirmation request.

b. Examine subsequent cash receipts to determine if the receivable has been paid.

c. Examine shipping documents to verify that the merchandise was shipped.

d. Examine customer's purchase order and the duplicate sales invoice to determine that the merchandise was ordered.

36. You are reviewing sales to discover cutoff problems. If the client's policy is to record sales when title to the merchandise passes to the buyer, then the books and records would contain errors if the December 31 entries were for sales recorded

a. before the merchandise was shipped.

b. at the time the merchandise was shipped.

c. several days subsequent to shipment.

d. at a time other than the point at which title passed.

37. Which of the following internal control procedures will most likely prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable?

a. Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected.

b. Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.

c. Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.

d. Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

38. The audit working papers often include a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. This aging is best used by the auditor to

a. evaluate internal control over credit sales.

b. test the accuracy of recorded charge sales.

c. estimate credit losses.

d. verify the validity of the recorded receivables.

39. Returns of positive-confirmation requests for accounts receivable were very poor. As an alternative procedure, the auditor decided to check subsequent collections. The auditor had satisfied himself that the client satisfactorily listed the customer name next to each check listed on the deposit slip; hence, he decided that for each customer for which a confirmation was not received that he would add all amounts shown for that customer on each validated deposit slip for the two months following the balance-sheet date. The major fallacy in the auditor's procedure is that

a. checking of subsequent collections is not an accepted alternative auditing procedure for confirmation of accounts receivable.

b. by looking only at the deposit slip the auditor would not know if the payment was for the receivable at the balance-sheet date or a subsequent transaction.

c. the deposit slip would not be received directly by the auditor as a confirmation would be.

d. a customer may not have made a payment during the two-month period.

40. For effective internal control, employees maintaining the accounts receivable subsidiary ledger should not also approve

a. employee overtime wages.

b. credit granted to customers.

c. write-offs of customer accounts.

d. cash disbursements.

41. The CPA learns that collections of accounts receivable during the first ten days of January were entered as debits to cash and credits to accounts receivable as of December 31. The effect generally will be to

a. overstate the current ratio with no effect on working capital at December 31.

b. overstate both working capital and the current ratio at December 31.

c. overstate working capital with no effect on the current ratio at December 31.

d. leave both working capital and the current ratio unchanged at December 31.

42. Which of the following is not a primary objective of the auditor in the examination of accounts receivable?

a. Determine the approximate realizable value.

b. Determine the adequacy of internal controls.

c. Establish existence of the receivables.

d. Determine the approximate time of collectibility of the receivables.

43. The advantage of using the negative form of confirmations is that

a. larger sample sizes can be used without increasing the costs above what would have been required for positive confirmations.

b. customer's silence proves that the balance is correct.

c. follow-up procedures are scheduled automatically.

d. it is appropriate in all circumstances.

44. When the client's internal control is adequate, the cutoff objective can usually be tested by

a. client's representation letter.

b. inquiries of the controller.

c. obtaining the last shipping document number of the year and comparing it with current and subsequent period recorded sales.

d. confirmation of the receivable for the last recorded sale.

45. Tests of details of balances focus on

a. balance sheet accounts.

b. income statement accounts.

c. income and cash flow statement accounts.

d. all of the above.

46. A type of positive confirmation known as a blank confirmation

a. requests the recipient to fill in the amount of the balance.

b. is considered more reliable than the regular positive confirmation.

c. does not generate as high a response rate as the regular positive confirmation form.

d. has all of the attributes of a, b, and c above.

47. The two primary classes of transactions in the sales and collection cycle are

a. sales and sales discounts.

b. sales and cash receipts.

c. sales and sales returns.

d. sales and accounts receivable.

48. Which of the audit objectives is performed first when doing the tests of details of balances for accounts receivable?

a. Recorded accounts receivable exist.

b. Accounts receivable in the aged trial balance agree with related master file amounts, and the total is correctly added and agrees with the general ledger.

c. Accounts receivable are owned.

d. Existing accounts receivable are included.

49. An auditor discovers that the client records sales returns and allowances in the accounting period in which they occur, under the assumption of approximately equal offsetting errors at the beginning and end of each period.

a. This is acceptable.

b. This is not acceptable.

c. This is acceptable as long as the amounts are not significant.

d. This is not acceptable as long as the amounts are not significant.

50. Which one of the following circumstances would indicate that negative confirmations should not be used on this engagement?

a. A significant portion of the total accounts receivable balance is represented by a small number of accounts with large balances.

b. The internal control over receivables is good.

c. The recipients are mostly businesses rather than individuals.

d. The auditor is unaware of disputed or inaccurate accounts.

51. The understatement of sales and accounts receivable is best uncovered by

a. confirming receivables.

b. reviewing the aged trial balance.

c. test of transactions for shipments made but not recorded.

d. reconciling the accounts receivable general ledger account with the schedule of accounts receivable.

52. Which of the following would not be a part of the approach used in determining the reasonableness of cutoff?

a. Decide on the appropriate criteria for cutoff.

b. Evaluate whether the client has established adequate procedures to ensure a reasonable cutoff.

c. Test whether a reasonable cutoff was obtained.

d. Review client's December 31 and January 2 entries for cutoff problems.

53. After items to be confirmed have been selected, the auditor must maintain control of the confirmations until

a. the responses are received by the auditor from the customer.

b. the responses are received by the client with the return mail.

c. the names are provided to the client's personnel to type the envelopes.

d. the sealed envelopes are provided to client's personnel to be mailed.

54. If the client's internal control for recording sales returns and allowances is evaluated as ineffective,

a. a larger sample is needed to verify cutoff.

b. sampling is not appropriate.

c. all sales returns must be traced to supporting documentation.

d. all sales returns must be confirmed with the customer.

55. In the sales and collection cycle, the results of the tests of controls determine

a. if tests of details of balances need to be performed.

b. whether positive or negative confirmations should be used for this engagement.

c. whether assessed control risk for sales and cash receipts needs to be revised.

d. the extent to which planned detection risk is satisfied for each accounts receivable objective.

56. Analytical procedures are often done

a. during the planning phase.

b. when performing detailed tests.

c. as a part of completing the audit.

d. all of the above.

57. When monetary-unit sampling has been concluded and the population is not considered acceptable, which one of the following courses of action would not be appropriate for the auditor?

a. Increase the sample size to see if this may satisfy the auditor's tolerable misstatement requirements.

b. Increase the tolerable misstatement amounts so that the error bounds are acceptable.

c. Request the client to correct the population.

d. Refuse to give an unqualified opinion.

58. Which of the following is a disadvantage of the monetary-unit sampling method?

a. It automatically increases the likelihood of selecting high dollar items from the population being audited.

b. It always gives the statistical conclusion as a dollar amount.

c. Computer assistance is needed to select monetary-unit samples from large populations.

d. If one large item makes up 10% of the total recorded dollar value of the population and the sample size is 100, approximately 10% of the sample items will come from that one large population item.

59. When an auditor performs tests of details of balances, the concern is determining

a. if the exception rate in the population is sufficiently low to justify reducing substantive testing.

b. both the effectiveness of controls and the monetary correctness of the transactions.

c. whether the monetary amount of an account balance is materially misstated.

d. all of the above.

60. The risk the auditor is willing to take of accepting a balance as correct when the true error in the balance is greater than the tolerable misstatement is

a. the upper bound.

b. the tolerable risk.

c. the acceptable risk of incorrect acceptance.

d. the lower bound.

61. The most commonly used method of statistical sampling for tests of details of balances is

a. attributes sampling.

b. variables sampling.

c. discovery sampling.

d. monetary-unit sampling.

62. In selecting the items to include in the sample, the auditor must

a. use a method that will guarantee that all items in the population are represented in the sample.

b. have reasonable assurance of obtaining a representative sample.

c. be assured of the randomness of the population.

d. be assured that each item chosen in the sample is a material amount.

63. The relationship between sample size and the acceptable risk of incorrect acceptance is

a. inverse; that is, larger = smaller.

b. direct; that is, larger acceptable risk = larger sample size.

c. variable; that is, sometimes larger = larger and sometimes not.

d. indeterminate.

64. In a probability-proportional-to-size (PPS) sample, all population physical audit units with an amount equal to or greater than the amount of the interval will automatically be included in the sample if the auditor uses

a. random selection.

b. systematic selection.

c. block selection.

d. stratified selection.

65. When errors are found, a common assumption in practice is to assume

a. a 100% assumption for all errors.

b. that the population errors are larger than the sample errors.

c. that the population errors are smaller than the sample errors.

d. that the actual sample errors are representative of the population errors.

66. As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This occurred because the true deviation rate in the population was

a. less than the risk of assessing control risk too low based on the auditor's sample.

b. less than the deviation rate in the auditor's sample.

c. more than the risk of assessing control risk too low based on the auditor's sample.

d. more than the deviation rate in the auditor's sample.

67. When using monetary-unit sampling, evaluating the likelihood of unrecorded items in the population

a. is unnecessary.

b. is impossible.

c. is possible but difficult.

d. is an automatic outcome of the process.

68. An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the

a. sample mean.

b. standard deviation.

c. standard error of the sample mean.

d. estimated population total minus the actual population.

69. Because tables are used in the calculation of misstatement bounds, the point estimate and sampling error are not calculated. This is because

a. they are extraneous and not needed.

b. this method determines the amount of error exactly, and doesn't need to develop a range.

c. their calculation is impossible with this method.

d. the tables include both the point estimate and the sampling error to derive the upper bound.

The following questions apply to an examination by Roberts & Lambert, CPAs, of the financial statements of Rainbow Manufacturing Corporation for the year ending Dec. 31, 2001.

Rainbow manufactures two products: Product A and Product B. Product A requires raw materials that have a very low per-item cost, and Product B requires raw materials that have a very high per-item cost. Raw materials for both products are stored in a single warehouse. In 2000, Rainbow established the total value of raw materials stored in the warehouse by physically inventorying an unrestricted random sample of items selected without replacement.

Lambert is evaluating the statistical validity of alternative sampling plans Rainbow is considering for 2001. He knows the size of the 2000 sample and that Rainbow did not use stratified sampling in 2000. Assumptions about the population, variability, specified precision (confidence interval), and specified reliability (confidence level) for a possible 2001 sample are given in each of the following five items. You are to indicate in each case the effect upon the size of the 2001 sample as compared to the 2000 sample. Each of the five cases is independent of the other four and is to be considered separately.

70. Rainbow wants to use unrestricted random sampling without replacement in 2001. Compared to 2000, the population size of the raw materials inventory is approximately the same and the variability of the items in the inventory is approximately the same.

Rainbow specifies the same precision but desires to change the specified reliability from 90% to 95%. Under these assumptions, the required sample size for 2001 should be

a. smaller than the 2000 sample size.

b. equal to the 2000 sample size.

c. larger than the 2000 sample size.

d. of a size that is indeterminate based upon the information given to you.

71. The method used to measure the estimated total error amount in a population when there is both a recorded value and an audited value for each item in the sample is

a. difference estimation.

b. mean-per-unit estimation.

c. ratio estimation.

d. monetary-unit sampling.

72. The auditor must deal with layers of the computed upper deviation rate from the attributes table because there are different error assumptions for each error. Assume a sample of 100 had found one error, and the computed upper deviation rate is shown in the following table:

Number Upper Precision

of Errors Limit from Table

0 .023

1 .038

The precision limit for the layer with one error is

a. 2.3%.

b. 3.8%

c. 6.1%.

d. 1.5%.

73. While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account

balance was materially misstated. It was, in fact, not materially misstated. This situation illustrates the risk of

a. incorrect rejection.

b. incorrect acceptance.

c. assessing control risk too low.

d. assessing control risk too high.

74. When monetary-unit sampling is used, a typical estimated error rate would be

a. 0% or 1%.

b. 2% or 3%.

c. 4% or 5%.

d. 5% to 10%.

75. Which of the following sampling plans would be designed to estimate a numerical measurement of a population, such as a dollar value?

a. Numerical sampling.

b. Discovery sampling.

c. Sampling for attributes.

d. Sampling for variables.

 

The following information relates to the next five questions:

An audit partner is developing an office-training program to familiarize his professional staff with statistical decision models applicable to the audit of dollar-value balances. He wishes to demonstrate the relationship of sample sizes to population size and variability and the auditor's specifications as to precision and confidence level. The partner prepared the following table to show comparative population characteristics and audit specifications of two populations.

 

Audit specifications of

Characteristics of a sample from population 1

population 1 relative relative to a sample

to population 2 from population 2

Specified

Specified confidence

Size Variability precision level

Case 1 Equal Equal Equal Higher

Case 2 Equal Larger Tighter Equal

Case 3 Larger Equal Tighter Lower

Case 4 Smaller Smaller Equal Lower

Case 5 Larger Equal Equal Higher

76. Based on the information presented above, you are to indicate for the specified case from the table the required sample size to be selected from population 1 relative to the sample from population 2. In case 1,

a. the required sample from population 1 is larger than the required sample size from population 2.

b. the required sample from population 1 is equal to the required sample size from population 2.

c. the required sample from population 1 is smaller than the required sample size from population 2.

d. the sample from population 1 is indeterminate relative to the required sample size from population 2.

77. In an examination of financial statements, a CPA generally will find stratified sampling techniques to be least appropriate to

a. year-end confirmation of bank balances.

b. tests of transactions for compliance with internal control.

c. the recalculation of a sample of factory workers' net pay.

d. examining charges to the maintenance account during the audit year.

78. The document that indicates the assignments or departments an employee worked for during a given time period is the

a. rate authorization form.

b. time card.

c. job time ticket.

d. payroll master file.

79. A form issued for each employee summarizing the earnings record for the calendar year is the

a. rate authorization form.

b. summary payroll report.

c. payroll master file.

d. W-2 form.

80. Most systems of internal control for payroll are

a. loosely structured but well controlled.

b. loosely structured and loosely controlled.

c. highly structured and well controlled.

d. highly structured but loosely controlled.

81. Which of the following would not justify an auditor's decision to spend very little time performing tests of transactions in the payroll and personnel cycle?

a. The new payroll bookkeeper has a much better educational background than the former one.

b. Employees will detect any underpayments.

c. Payroll transactions are uniform and uncomplicated.

d. Payroll transactions are extensively audited by government agencies.

82. Which of the following would not be a source of information for the rate authorization form?

a. Labor contracts.

b. Authorizations by management.

c. Authorization from the board of directors.

d. Internal Revenue Service tables.

83. "Recorded payroll payments are for work actually performed by nonfictitious employees" is the control objective of

a. authorization.

b. completeness.

c. existence.

d. accuracy.

84. Because of the lack of available evidence, it is usually difficult for an auditor to discover if an employee records more time on his or her time card than actually worked. One procedure is

a. to reconcile the total hours paid this period with a previous period.

b. to reconcile the total hours worked this period with a previous period.

c. to reconcile the total hours worked according to the summary payroll report with the total hours worked as recorded on the time card for the period.

d. to reconcile the total hours paid according to the payroll records with an independent record of the total hours worked, such as those maintained by production control.

85. Effective internal control over the payroll function would include which of the following?

a. Payroll department employees should be responsible for maintaining employee personnel records.

b. Payroll department employees should be supervised by the management of the personnel department.

c. Total time spent on jobs should be compared with total time indicated on time-clock punch cards.

d. Total time recorded on time-clock punch cards should be reconciled to job reports by employees responsible for those specific jobs.

86. The most important consideration in evaluating the fairness of the amounts accrued for vacation pay, sick pay, and other benefits is

a. the consistent accrual of these liabilities relative to those of the preceding year.

b. the actual expense incurred for the prior period.

c. the amount expended to date in the current period.

d. the profitability of the client which will enable these liabilities to be met.

87. In auditing payroll, which of the following procedures will take the least amount of auditor time?

a. Tests of controls.

b. Substantive tests of transactions.

c. Analytical procedures.

d. Tests of details of balances.

88. An audit procedure which reconciles total payroll expense in the general ledger with the payroll tax returns and the W-2 forms is seldom successful in discovering errors because

a. misstatements, if any, are likely to be in both sets of records.

b. the auditor expects that these will be different totals.

c. the financial statements cover a year, but the tax forms must be filed quarterly.

d. accounting principles used by companies may be different than those required on the tax return; for example, LIFO on the books but FIFO for taxes.

89. Which of the following is not a procedure that can be performed on canceled checks in an effort to detect defalcations?

a. Compare the endorsements on checks with authorized signatures.

b. Scan endorsements for unusual or recurring second endorsements.

c. Examine voided checks to be sure they haven't been used.

d. Examine the payroll records in subsequent periods to determine that terminated employees are no longer being paid.

90. The most important means of verifying account balances in the payroll and personnel cycle are

a. tests of controls and tests of transactions.

b. analytical procedures and tests of controls.

c. analytical procedures and tests of transactions.

d. test of controls and tests of details of balances.

91. Which of the following statements is not correct?

a. Liabilities for salaries, wages, and payroll taxes are a major part of the balance sheet at year-end.

b. Labor is an important consideration in the valuation of inventories in manufacturing and construction companies.

c. The amounts involved for salaries, wages, and employer/employee taxes are a major expense in most companies.

d. Payroll is an area where large amounts of company resources may be wasted through inefficiencies or may be stolen through fraud.

92. An auditor decides that it is important and necessary to observe a client's distribution of payroll checks on a particular audit. The client organization is so large that the auditor cannot conveniently observe the distribution of the entire payroll. In these circumstances, which of the following is most acceptable to the auditor?

a. Observation should be limited to one or more selected departments.

b. Observation should be made for all departments regardless of the inconvenience.

c. Observation should be eliminated, and alternative auditing procedures should be used to obtain satisfaction.

93. The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges. The most important control in the timely preparation of these returns is

a. computerized preparation of tax returns.

b. a well-defined set of policies that indicate when each form must be filed.

c. independent verification of computer output by a competent individual.

d. a Gaant chart.

94. Which of the following circumstances would not cause an auditor to extend payroll procedures considerably?

a. Payroll significantly affects inventory valuation.

b. There is a possibility of material fraudulent payroll transactions.

c. There is a weak internal control structure.

d. There is a lack of independent third-party evidence, such as confirmations.

95. Which of the following is not a type of error that gives the auditor concern in auditing payroll transactions?

a. An error that indicates possible fraud.

b. Computational errors in formulas when a computerized system is used.

c. Classification errors in charging labor to inventory and job cost accounts.

d. Weaknesses in the control system which allows underpayment of employees.

96. The periodic payment from the general cash account to the payroll account for net payroll should be tested for at least one payroll period. The major audit procedure is

a. an analytical review procedure that net pay is reasonable.

b. a test of controls that an imprest account is being used for payroll.

c. a substantive test that the correct amount was transferred for this test period.

d. a test of transactions that the check is prepared for the proper amount and deposited before payroll checks are handed out.

97. Once the auditor has determined the company's policy for accruing wages and knows it is consistent with that of previous years, the appropriate audit procedure to test for cutoff and accuracy is to

a. recalculate the client's accruals.

b. compare the ledger balance with the journal and the tax form.

c. confirm the amount with employees.

d. compare the recorded accrued wages with the amount approved in the minutes of the Board.

98. Which of the following statements is correct?

a. The overhead charged to inventory at the balance sheet date can be understated if the salaries of administrative personnel are inadvertently or intentionally charged to indirect manufacturing overhead.

b. When jobs are billed on a cost-plus basis, revenue and total expenses are both affected by charging labor to incorrect jobs.

c. Payroll is a significant portion of inventory for retail and service industry companies.

d. The valuation of inventory is affected if the direct labor cost of individual employees is improperly charged to the wrong job or process.

99. Which of the following best describes proper internal control over payroll?

a. The preparation of the payroll must be under the control of the personnel department.

b. The confidentiality of employee payroll data should be carefully protected to prevent fraud.

c. The duties of hiring, payroll computation, and payment to employees should be segregated.

d. The payment of cash to employees should be replaced with payment by checks.

100. Which of the following would not be a test used when auditing accrued sales commissions?

a. Confirm the commissions directly with the employees.

b. Test the calculations (recalculate) based on the agreement between client and employees.

c. Compare the method of accruing commissions with the previous years.

d. Test the detail tie-in in the commissions expense account at interim dates.

101. The auditor should review the preparation of at least one of each type of payroll tax form the client is responsible for filing, as a part of the auditor's responsibility for

a. doing tests of controls.

b. doing tests of balances.

c. doing tests of transactions.

d. understanding the client's internal controls.

102. Controls should prevent those responsible for the preparation of payroll checks from all but which one of the following activities?

a. Signing paychecks.

b. Distributing paychecks.

c. Access to time cards.

d. Access to the payroll journal.

103. Generally, the tests of transactions performed in the payroll cycle will use

a. a variables sampling plan that assumes a zero deviation rate.

b. a variables sampling plan that assumes a large deviation rate.

c. an attributes sampling plan that assumes a zero deviation rate.

d. an attributes sampling plan that assumes a large deviation rate.

104. Which of the following individuals is the most appropriate person to be assigned the responsibility of distributing envelopes that include employee payroll checks?

a. The company paymaster.

b. A member of the accounting department.

c. The internal auditor.

d. A representative of the bank where the company payroll is maintained.

105. The auditor's primary concern in testing payroll liabilities is to make sure that

a. expense has not been overstated, thus reducing profits.

b. there are no understated or omitted accruals.

c. employees' W-2 forms are accurate.

d. salaries of officers have not been misclassified as wages.

106. Which of the following is a test of controls?

a. Review the payroll journal, general ledger, and payroll earnings records for large or unusual amounts.

b. Examine time cards for indication of supervisor approval.

c. Compare canceled check with payroll journal for name, amount, and date.

d. Examine canceled checks for proper endorsement.

107. The file for recording each payroll transaction for each employee and maintaining total employee wages paid for the year to date is the

a. payroll master file.

b. summary payroll report.

c. payroll journal.

d. job time ticket.

108. In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can

a. increase asset valuations.

b. decrease asset valuations.

c. either a or b.

d. not affect asset valuations.

109. With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

a. requested by and approved by authorized individuals who have no incompatible duties.

b. used in the course of business and solely for business purposes during the year under audit.

c. received, counted, and checked to quantities and amounts on purchase orders and invoices.

d. properly recorded as assets and systematically amortized over the estimated useful life of the supplies.

110. A CPA learns that his client has paid a vendor twice for the same shipment, once based upon the original invoice and once based upon the monthly statement. A control procedure that should have prevented this duplicate payment is

a. attachment of the receiving report to the disbursement report.

b. prenumbering of disbursement vouchers.

c. use of a limit or reasonableness test.

d. prenumbering of receiving reports.

111. Which of the following internal accounting control procedures is effective in preventing duplicate payment of vendors' invoices?

a. Unused voucher forms should be prenumbered and accounted for.

b. Canceled checks should be sent to persons other than the cashier or accounting department personnel.

c. Properly authorized and approved vouchers with appropriate documentation should be the basis for check preparation.

d. The invoices should be stamped, perforated, or otherwise effectively canceled before submission for approval of the voucher.

112. Matching the supplier's invoice, the purchase order, and the receiving report normally should be the responsibility of the

a. warehouse receiving function.

b. purchasing function.

c. general accounting function.

d. treasury function.

113. An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all

a. merchandise received.

b. vendors' invoices.

c. canceled checks.

d. receiving reports.

114. For effective internal control purposes, the vouchers payable department generally should

a. obliterate the quantity ordered on the receiving department copy of the purchase order.

b. stamp, perforate, or otherwise cancel supporting documentation after payment is mailed.

c. establish the agreement of the vendor's invoice with the receiving report and purchase order.

d. ascertain that each requisition is approved as to price, quantity, and quality by an authorized employee.

115. When goods are received, the receiving clerk should match the goods with the

a. Purchase order and the requisition form.

b. Vendor's invoice and the receiving report.

c. Vendor's shipping document and the purchase order.

d. Receiving report and the vendor's shipping document.

116. Statistical sampling is less commonly used for the audit of accounts payable than for accounts receivable because it is more difficult to

a. determine the tolerable exception rate.

b. define the population.

c. decide on attributes or variables sampling.

d. mathematically calculate and interpret the results.

117. The test of transactions which requires "reconcile recorded cash disbursements with the cash disbursements on the bank statement" satisfies the objective of

a. existence.

b. completeness.

c. accuracy.

d. posting and summarization.

118. The analytical procedure that requires the auditor to "review the list of accounts payable for unusual or nonvendor payables" would have the best chance of discovering which possible error?

a. Invalid accounts or misstatements.

b. Unrecorded accounts or misstatements.

c. Classification error for non-trade liabilities.

d. Misstatement of accounts payable and expenses.

119. Which of the following statements is not true?

a. The ownership objective is an important part of verifying assets but not liabilities.

b. In auditing liabilities, the emphasis is on the search for understatements rather than overstatements.

c. Because of the emphasis on understatements in liability accounts, out-of-period liability tests are important for accounts payable.

d. The success of the auditor's search for unrecorded accounts payable is not dependent upon the materiality of the potential balance in the account.

120. The purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to

a. uncover liabilities on the balance sheet which should not have been recorded until a subsequent period.

b. find the documentation relating to a cash disbursement.

c. uncover payments made in a subsequent accounting period that represent liabilities at the balance sheet date.

d. uncover cash disbursements recorded in a subsequent accounting period which should be recorded in this period.

121. To test for overstatement cutoff errors in liabilities, the auditor should trace, to vendors' invoices, the receiving reports issued

a. after year-end.

b. before year-end.

c. the last day of the fiscal year.

d. both before and after year-end.

122. In determining that the accounts payable cutoff is correct, it is essential that the cutoff tests be coordinated with the

a. confirmation of payables.

b. tests on long-term liabilities.

c. observation of inventory.

d. cash count.

123. An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result

a. is an understatement of net earnings.

b. is an overstatement of net earnings.

c. does not affect earnings.

d. is indeterminable from the information given.

124. When an acquisition is on an FOB origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were

a. received prior to the balance sheet date.

b. shipped prior to the balance sheet date.

c. both shipped and received prior to the balance sheet date.

d. paid for in advance.

125. The auditor gets highly reliable evidence about individual transactions by examining

a. vendors' invoices.

b. vendors' statements.

c. confirmations of accounts payable balances.

d. all of the above.

126. Which of the documents listed below is best for verifying the correct balance in accounts payable?

a. Bills of lading.

b. Confirmations.

c. Vendors' invoices.

d. Vendors' statements.

127. A company failed to record an acquisition of merchandise and its attendant liability, but it was included in the physical count of ending inventory. The effect on the financial statements would be to

a. understate both assets and liabilities.

b. overstate net income and owners' equity.

c. understate assets and owners' equity.

d. understate liabilities, and overstate both net income and owners' equity.

128. Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received?

a. Count goods upon receipt in storeroom.

b. Match purchase order, receiving report, and vendor's invoice for each voucher in accounts payable department.

c. Compare goods received with goods requisitioned in receiving department.

d. Verify vouchers for accuracy and approval in internal audit department.

129. The auditor is primarily concerned with the overstatement of assets and the understatement of liabilities. The difference in emphasis results directly from

a. GAAP.

b. GAAS.

c. the legal liability of the CPA.

d. the nature of the errors which could occur.

130. When a client uses perpetual inventory records, the tests of details of balances for inventory can be significantly reduced if the auditor believes the perpetuals are accurate. The controls over the acquisitions included in the perpetuals are normally tested as a part of the

a. tests of controls.

b. tests of controls and tests of transactions.

c. tests of details of balances.

d. analytical procedures and tests of controls.

131. For good internal control, the purchasing department should not be responsible for

a. finding the lowest cost vendor.

b. reviewing vendors' catalog descriptions and prices for standardized items.

c. designing the purchase order form.

d. authorizing the acquisition of goods.

132. The purchase order, usually in writing, is a legal document that is

a. an offer to buy.

b. not enforceable if it is not in writing.

c. a binding agreement between client and vendor.

d. an acceptance of a vendor's catalog offer to sell.

133. Since the audit of accounts payable generally takes a considerable amount of audit time, effective internal control, properly tested, can significantly reduce audit costs by reducing

a. tests of controls.

b. tests of transactions.

c. analytical procedures.

d. tests of details of balances.

134. The main focus taken by the auditor in verifying liability balances is on the discovery of

a. understated liabilities.

b. overstated liabilities.

c. understated or omitted liabilities.

d. overstated or extraneous liabilities.

135. For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the

a. receiving report and the voucher.

b. vendor's packing slip and the voucher.

c. receiving report and the purchase order.

d. vendor's packing slip and the purchase order.

136. Internal controls which are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that

a. acquisitions are correctly valued.

b. existing acquisitions are recorded.

c. acquisitions are correctly classified.

d. recorded acquisitions are for goods and services received.

137. The personnel in the receiving department should

a. be supervised by the head of the storeroom, since it is the storeroom personnel who are responsible for the physical control of goods.

b. be supervised by the accounting department, since it is the accounting personnel who are responsible for the accuracy of the records about the goods.

c. be independent of both the storeroom and accounting functions.

d. be supervised by the shipping department since the receiving docks and the shipping docks are in close proximity.

138. Vendors' statements and vendors' invoices are both relatively reliable evidence because they

a. come directly to the auditor without being in client's possession.

b. originate from a third party.

c. validate the effectiveness of the control system.

d. all of the above.

139. Because many of the types of errors and irregularities that may be found in the acquisition and payment cycle represent a misstatement of earnings and are of significant concern to the auditor, the tolerable exception rate selected by the auditor will be

a. low.

b. high.

c. average.

d. 15% or less.

140. Failure to record the acquisition of goods received and services received directly affects the balance in

a. inventory.

b. property, plant, and equipment.

c. accounts payable.

d. capital.

141. It usually takes more time to audit the acquisition and payment cycle than any other cycle because

a. there is a greater possibility of fraud in these transactions.

b. internal controls in this area are usually weakest.

c. of the large number of accounts affected.

d. there is a greater likelihood of lawsuits against the CPA relating to these accounts.

142. Accounts affected by the acquisition and payment cycle include

a. liability and expense accounts.

b. asset, liability, and expense accounts.

c. expense and miscellaneous income accounts.

d. asset, liability, expense, and miscellaneous income accounts.

143. When processing and recording cash disbursements, it is important to have a method of canceling the supporting documents to prevent their reuse as support for another check at a later time. A common method is to

a. shred the documents so they can't be reused.

b. transfer possession of the documents to a bank vault such as a safety deposit box.

c. move the documents to a permanent off-site facility such as a warehouse.

d. write the check number on the supporting documents.

144. Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash disbursements, it is common in this audit area to use

a. block sampling.

b. variables sampling.

c. attributes sampling.

d. probability-proportional-to-size sampling.

145. Which of the below three is most reliable for verifying the correct balance of accounts payable?

a. Vendors' invoices.

b. Vendors' statements.

c. Confirmations.

d. Bills of lading.

146. Which of the following is an effective internal accounting control over cash payments?

a. Signed checks should be mailed under the supervision of the check signer.

b. Spoiled checks that have been voided should be disposed of immediately.

c. Checks should be prepared only by persons responsible for cash receipts and cash disbursements.

d. A check-signing machine with two signatures should be utilized.

147. For good internal control, the person who should sign checks should be the

a. treasurer.

b. purchasing agent.

c. accounts payable clerk.

d. person preparing the checks.

148. Which of the documents listed below is best for testing acquisition in tests of transactions?

a. Bills of lading.

b. Confirmations.

c. Vendors' invoices.

d. Vendors' statements.

149. The test of transactions which requires "recompute cash discounts" satisfies the objective of

a. existence.

b. completeness.

c. accuracy.

d. posting and summarization.

150. Which of these would not be considered an important control in the cash disbursements function?

a. Signing of checks by an individual with proper authority.

b. Separation of check signing from the accounts payable function.

c. Examination of the supporting documents by the Controller at the time the check is signed.

d. Physical control over the blank, voided, and signed checks.

151. The major balance sheet account in the acquisition and payment cycle is

a. purchases.

b. common stock.

c. accounts payable.

d. merchandise inventory.

152. When auditing accounts payable, auditors are usually especially concerned about the

a. existence and completeness objectives.

b. completeness and cutoff objectives.

c. existence and cutoff objectives.

d. existence and accuracy objectives.

153. An important control in the accounts payable and EDP departments is to require that those personnel who record acquisitions do not have access to

a. vendors' price lists.

b. the accounts payable master file.

c. lists of vendors' names and addresses.

d. cash, marketable securities, and other assets.

154. The internal control which requires that "checks are prenumbered and accounted for" satisfies the objective of

a. accuracy.

b. existence.

c. completeness.

d. posting and summarization.

155. When the client's physical inventory takes place before the last day of the year, it is still necessary to perform an accounts payable cutoff at the time of the physical count. In addition, the auditor must verify whether all acquisitions taking place between the physical count and the end of the year were added to

a. the physical inventory.

b. accounts payable.

c. accounts payable and cost of goods sold.

d. the physical inventory and accounts payable.

156. Operating control of the check-signing machine normally should be the responsibility of the

a. general accounting function.

b. treasury function.

c. legal counsel.

d. internal audit function.

157. Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the

a. department that initiated the requisition.

b. receiving department.

c. purchasing agent.

d. accounts payable department.

158. During the physical observation of the inventory, the auditor should review the procedures in the receiving department to determine that all inventory received was counted, and the auditor should record in the working papers the last receiving report number included in the physical count. During the year-end field work, the auditor should test the accounting records for

a. completeness.

b. cutoff.

c. classification.

d. calibration.

159. Once the auditor has decided on the specific procedures, the acquisitions tests and the cash disbursements tests are typically performed

a. concurrently.

b. sequentially.

c. independently.

d. separately.

160. Many companies do not maintain an accounts payable master file by vendor. These companies pay on the basis of

a. vendors' monthly statements.

b. individual vendors' invoices.

c. the accounts payable account in the general ledger.

d. dunning letters.

161. Which of the following departments typically has responsibility for verifying the propriety of acquisition transactions?

a. Sales department.

b. Purchases department.

c. Accounts payable department.

d. Accounts receivable department.

162. Sending confirmations to active vendors for which a balance has not been included in the accounts payable list is referred to as

a. positive confirmations.

b. negative confirmations.

c. zero-balance confirmations.

d. omitted confirmations.

163. A file for recording individual acquisitions, cash disbursements, and acquisition returns and allowances for each vendor is the

a. accounts payable master file.

b. cash disbursements transactions file.

c. acquisitions transactions file.

d. summary acquisitions report.

164. The substantive test which requires the auditor to "compare recorded transactions in the acquisitions journal with the vendor's invoice, receiving report, and other supporting documentation" satisfies the audit objective of

a. existence.

b. authorization.

c. completeness.

d. accuracy.

165. With which one of the following procedures would it not be appropriate to examine supporting documentation as a test of overstatement of accounts payable?

a. Trace receiving reports issued after year-end to related invoices.

b. Send confirmations to vendors with which the client does business.

c. Examine underlying documents for subsequent cash disbursements.

d. Examine underlying documentation for bills paid several weeks after the year-end.

166. Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

a. Internal accounting control over accounts payable is adequate, and there is sufficient evidence on hand to minimize the risk of a material misstatement.

b. Confirmation response is expected to be favorable, and accounts payable balances are of immaterial amounts.

c. Creditor statements are not available, and internal accounting control over accounts payable is unsatisfactory.

d. The majority of accounts payable balances are with associated companies.

167. Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because

a. this is a duplication of cutoff tests.

b. there is likely to be other reliable external evidence available to support the balances.

c. accounts payable balances at the balance sheet date may not be paid before the audit is completed.

d. correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment.

168. A client's purchasing system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the purchasing system?

a. Accounts payable are not materially understated.

b. Authority to incur liabilities is restricted to one designated person.

c. Acquisition of materials is not made from one vendor or one group of vendors.

d. Commitments for all purchases are made only after established competitive bidding procedures are followed.

169. The test of details of balances procedure to "trace from account payable list to vendors' invoices and statements" satisfies the objective of

a. existence.

b. completeness.

c. classification.

d. detail tie-in.

170. Although all accounts are affected to some degree by effective controls over classification, one of the areas least affected is

a. current period acquisitions of permanent assets.

b. repairs and maintenance expense.

c. leaseholds.

d. cash.

171. The point at which most companies first recognize the acquisition and related liability on their records is when the

a. purchase requisition is completed.

b. purchase order is completed.

c. receiving report is completed.

d. vendor's invoice is paid.

172. Comparing expenses to prior years' is an effective analytical procedure for accounts payable because expenses from year to year are

a. erratic.

b. variable.

c. dynamic.

d. relatively stable.

173. The overall objective in the audit of accounts payable is to determine whether accounts payable

a. is fairly stated and properly disclosed.

b. is overstated.

c. is understated.

d. is accurately stated.

174. The accounts payable department usually has responsibility for verifying the propriety of acquisitions by comparing the details on the

a. vendor's invoice and the receiving report.

b. vendor's invoice and the purchase requisition.

c. purchase order, receiving report, and vendor's invoice.

d. purchase requisition, purchase order, and receiving report.

175. The auditor's internal control objective to determine that "recorded acquisitions are for goods and services received" satisfies the audit objective of

a. accuracy.

b. existence.

c. authorization.

d. completeness.

176. By tracing receiving reports issued at and before year-end to vendors' invoices and making sure they are included in accounts payable, the auditor is testing for

a. theft of merchandise by employees.

b. unrecorded obligations.

c. lapping.

d. kiting.

177. The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because

a. accrued liability balances are less material than accounts payable balances.

b. accrued liabilities at year-end will become accounts payable during the following year.

c. evidence supporting accrued liabilities is non-existent, whereas evidence supporting accounts payable is readily available.

d. accrued liabilities usually pertain to services of a continuing nature, whereas accounts payable are the result of completed transactions.

178. The erroneous inclusion of transactions that should properly be recorded as assets into accounts such as repairs expense, lease expense, or supplies is a common client error. The auditor should evaluate the likelihood of these types of misclassifications in conjunction with

a. obtaining an understanding of the internal control structure.

b. the test of controls.

c. the tests of transactions.

d. the tests of details of balances.

179. To achieve effective internal accounting control over fixed-asset additions, a company should establish procedures that require

a. authorization and approval of major fixed-asset additions.

b. capitalization of the cost of fixed-asset additions in excess of a specific dollar amount.

c. classification, as investments, of those fixed-asset additions that are not used in the business.

d. performance of recurring fixed-asset maintenance work solely by maintenance department employees.

180. In verifying accumulated depreciation, the credits to accumulated depreciation are verified as part of the audit of depreciation expense, whereas the debits are normally tested as a part of the audit of

a. asset acquisitions.

b. capital acquisitions.

c. disposal of assets.

d. accumulated depreciation.

181. The most common audit test to verify additions to property, plant, and equipment is examination of vendors' invoices and receiving reports. This process is known as

a. verifying.

b. vouching.

c. dual referencing.

d. cross referencing.

182. Which of the following analytical procedures might highlight a possible misstatement of cost of goods sold?

a. Compare inventory turnover ratio with previous years'.

b. Compare individual expenses with previous years'.

c. Compare commission expense divided by sales with previous years'.

d. Compare prepaid insurance expense with previous years'.

183. Which of the following would not be classified as property, plant, and equipment?

a. Land and land improvements.

b. Leasehold improvements.

c. Construction of property, plant, and equipment in process.

d. Investments.

184. Property, plant, and equipment are assets that

a. have expected lives of more than one year.

b. are used in the business.

c. are not acquired for resale.

d. meet all of the requirements stated above.

185. The test of details of balances procedure which requires "review of transactions near the balance sheet date for proper period" is done to satisfy the audit objective of

a. classification.

b. existence.

c. cutoff.

d. accuracy.

186. It should ordinarily be unnecessary to examine supporting documentation for each addition to property, plant, and equipment, but it is normal to verify

a. all large transactions.

b. all unusual transactions.

c. a representative sample of typical additions.

d. all three of the above.

187. The auditor must know the client's capitalization policies to determine whether acquisitions are

a. recorded in accordance with GAAP.

b. treated consistently with those of the preceding year.

c. both of the above.

d. none of the above.

188. If the auditor believes there is a high likelihood of significant missing permanent assets that are still recorded on the accounting records, an appropriate procedure is to select a sample from the assets master file and examine

a. the assets.

b. all the related journal entries.

c. the documents verifying their acquisition.

d. the accumulated depreciation calculations.

189. Ordinarily, it is unnecessary to test the valuation of fixed assets recorded in prior periods because

a. it will not affect the current valuations.

b. they were verified in previous audits.

c. the related depreciation calculations for the current period are more important.

d. the emphasis of the audit is on the income statement items, not the balance sheet items.

190. Throughout the audit of prepaid insurance and insurance expense, the auditor should keep in mind that the amount in insurance expense is a residual based on

a. the beginning balance in prepaid insurance.

b. the payment of premiums during the year.

c. the ending balance in prepaid insurance.

d. all three of the above.

191. A common analytical procedure requires the auditor to compare total prepaid insurance and insurance expense with previous years'. This is a test of

a. accuracy.

b. existence.

c. disclosure.

d. reasonableness.

192. Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date are classified as

a. accounts payable.

b. accrued liabilities.

c. miscellaneous assets.

d. deferred charges.

193. The test of details of balances procedure to "examine vendors' invoices of closely related accounts such as repairs to uncover items that should be property, plant, and equipment" is done to satisfy the audit objective of

a. classification.

b. detail tie-in.

c. cutoff.

d. existence.

194. Occasionally, changing circumstances may necessitate a revaluation of the useful life of an asset. When this occurs, it involves a change in

a. accounting estimate rather than a change in accounting principle.

b. accounting principle rather than a change in accounting estimate.

c. both accounting principle and accounting estimate.

d. neither accounting principle nor accounting estimate.

195. Which of the following audit procedures would be least likely to lead the auditor to find an unrecorded fixed asset disposal?

a. Examination of insurance policies.

b. Review of repairs and maintenance expense.

c. Review of property tax files.

d. Scanning of invoices for fixed asset additions.

196. The tests of details of balances procedure for property, plant, and equipment which requires the auditor to examine vendors' invoices of closely related accounts such as repairs and maintenance to uncover items that should be property, plant, and equipment would satisfy the audit objective of

a. accuracy.

b. existence.

c. detail tie-in.

d. completeness.

197. The auditor interviews the plant manager. The auditor is most likely to rely upon this interview as primary support for an audit conclusion on

a. capitalization vs. expensing policy.

b. allocation of fixed and variable cost.

c. the necessity to record a provision for deferred maintenance costs.

d. the adequacy of the depreciation expense.

198. Which of the following is the most important internal control procedure over acquisitions of property, plant, and equipment?

a. Requiring acquisitions to be made by user departments.

b. Using a budget to forecast and control acquisitions and retirements.

c. Analyzing monthly variances between authorized expenditures and actual costs.

d. Establishing a written company policy distinguishing between capital and revenue expenditures.

199. Materiality is of special importance for verifying current year additions to property, plant, and equipment. The two major objectives for this part of the audit are

a. accuracy and classification.

b. detail tie-in and cutoff.

c. disclosure and completeness.

d. rights and existence.

200. In connection with a review of the prepaid insurance account, which of the following procedures would generally not be performed by the auditor?

a. Recompute the portion of the premium that expired during the year.

b. Prepare excerpts of insurance policies for audit working papers.

c. Confirm premium rates with an independent insurance broker.

d. Examine support for premium payments.

201. The most important objective for depreciation expense is proper

a. cutoff.

b. accuracy.

c. disclosure.

d. classification.

202. The test of details of balances procedure which requires a "recalculation of investment credit" is done to satisfy the audit objective of

a. classification.

b. detail tie-in.

c. existence.

d. accuracy.

203. The tests of details of balances procedure which requires the auditor to physically examine assets satisfies the audit objective of

a. cutoff.

b. existence.

c. classification.

d. completeness.

 

204. Depreciation expense is one of the few expense accounts that is not verified as a part of

a. tests of controls.

b. tests of transactions.

c. test of details of balances.

d. analytical procedures.

 

205. In verifying the amount of goodwill recorded by a client, an auditor can obtain the most convincing evidence by comparing the recorded value of assets acquired with the

a. assessed value as evidenced by tax bills.

b. insured value as evidenced by insurance policies.

c. appraised value as evidenced by independent appraisals.

d. seller's book value as evidenced by financial statements.

 

206. The failure to capitalize a permanent asset, or the recording of an asset acquisition at the improper amount, affects the income statement

a. for the current period.

b. for the depreciable life of the asset.

c. until the firm disposes of the asset.

d. forever.

 

207. An auditor would be least likely to use confirmations in connection with the examination of

a. inventories.

b. long-term debt.

c. property, plant, and equipment.

d. stockholders' equity.

 

208. Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?

a. Extraordinary repairs have lengthened the life of an asset.

b. Prior years' depreciation charges were erroneously understated.

c. A reserve for possible loss on retirement has been recorded.

d. An asset has been recorded at its fair value.

 

209. The failure to capitalize a permanent asset, or the recording of an asset acquisition at the improper amount, affects the balance sheet

a. forever.

b. for the current period.

c. for the depreciable life of the asset.

d. until the firm disposes of the asset.

 

210. Expense accounts analysis is closely related to tests of controls and substantive tests of transactions. The major difference is

a. the difference in the types of underlying documentation which is examined.

b. the degree of concentration on an individual account.

c. the use or nonuse of cutoff tests.

d. that one emphasizes transactions and the other emphasizes amounts.

 

211. The proper disclosure of property, plant, and equipment in the financial statements would ordinarily not include the disclosure of

a. gross costs.

b. leased property as a separate line item on the face of the statement.

c. liens on property as a separate line item on the face of the statement.

d. property, plant, and equipment as a separate item from other permanent assets.

 

212. The starting point for the verification of current year acquisitions of property, plant, and equipment is normally

a. the property, plant, and equipment account in the general ledger.

b. the acquisitions journal.

c. the purchase requisitions file.

d. a schedule obtained from the client of all acquisitions recorded in the general ledger during the year.

 

213. In the audit of property, plant, and equipment, it is helpful to separate the tests into all but which one of the following categories?

a. Verification of the beginning balance.

b. Verification of current year acquisitions.

c. Verification of current year disposals.

d. Verification of the ending balance.

 

214. A major consideration in verifying the ending balance in permanent assets is the possibility of existing legal encumbrances. Tests to identify possible legal encumbrances would satisfy the audit objective for

a. existence.

b. disclosure.

c. detail tie-in.

d. classification.

 

215. On most financial statements, prepaid insurance is combined with other prepaid expenses and included as a current asset. This will satisfy the auditor's presentation and disclosure objective if

a. it is consistent with the prior year.

b. the amount is small and not a significant consideration to statement users.

c. there are only a small number of policies.

d. all of the above are true.

 

216. Which of the following ratio and trend analysis procedures might identify a possible misstatement of expensing amounts that should be capital items?

a. Compare "depreciation expense divided by gross property, plant, and equipment cost" with previous years'.

b. Compare "accumulated depreciation divided by gross property, plant, and equipment cost" with previous years'.

c. Compare "monthly or annual repairs and maintenance, supplies expense, small tools expense, and similar accounts" with previous years'.

d. Compare "gross property, plant, and cost divided by some measure of production" with previous years'.

 

217. The two most important audit procedures for allocations are

a. consistency and GAAP.

b. tests of controls and tests of details of balances.

c. tests of controls and substantive tests of transactions.

d. tests for reasonableness using analytical procedures and recalculation.

 

218. Income statement accounts resulting from allocations are typically verified as a part of

a. tests of controls.

b. substantive tests of transactions.

c. analytical procedures.

d. all of the above.

 

219. The approach used to verify manufacturing equipment is different that the one used to verify

a. current assets.

b. patents.

c. copyrights.

d. all other types of property, plant, and equipment.

 

220. The verification of existence and tests for omissions of the insurance policies in force can be tested in one of two ways: by referring to supporting documentation or by obtaining a confirmation of insurance information from the company's insurance agent. Sending a confirmation to the client's insurance agent is preferable because

a. it is usually less time-consuming than vouching tests.

b. it provides 100% verification.

c. both a and b above.

d. it provides an adequate sample size.

 

221. In rare cases, the auditor may believe it is necessary that a complete physical inventory of fixed assets be taken to make sure they actually exist. If a physical inventory is taken, the auditor normally

a. takes the inventory.

b. requires client to take the inventory and provide documentation to the auditor.

c. observes the count.

d. requires that it be done by an outside, independent third party.

 

222. A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation, and accumulated depreciation is

a. the acquisitions journal.

b. the depreciation schedule.

c. the fixed asset master file.

d. the file of purchase requisitions.

 

223. The primary accounting record for property, plant, and equipment is generally

a. the fixed asset master file.

b. a purchase requisition.

c. the depreciation schedule.

d. an acquisitions journal.

 

224. After assessing control risk, the auditor must decide whether it is necessary to verify the existence of individual items of property, plant, and equipment included in the master file. This audit procedure, if performed, would satisfy the audit objective of

a. accuracy.

b. existence.

c. detail tie-in.

d. classification.

 

225. A record of insurance policies in force and the due date of each policy is contained in the

a. voucher register.

b. insurance register.

c. insurance expense account.

d. prepaid insurance account.

 

226. The emphasis in auditing property, plant, and equipment is on the verification of

a. current period acquisitions and retirements.

b. the balance carried forward in the account from the previous period (beginning balance).

c. the balance in the account after the current year's activities are considered (ending balance).

d. all three of the above.

 

227. An area of special concern to the auditor occurs when the client disposes of assets affected by the investment credit recapture provisions. Since the recapture affects the current year's income-tax expense and liability, the auditor must determine that client's calculation of the investment credit is accurate. Before the recalculation can be made, it is necessary to have an understanding of the recapture provisions for

a. the year the asset was disposed.

b. the year the investment credit was implemented by Congress.

c. the year the asset was acquired.

d. every year since the investment credit was implemented and/or changed by Congress.

 

228. When an asset is sold or disposed of without having been traded in for a replacement asset, the valuation of the transaction can be verified by examining the related

a. sales invoice and property master file.

b. purchase order and property master file.

c. sales invoice and merchandise inventory listing.

d. purchase order and merchandise inventory listing.

 

229. If the client fails to record disposals of property, plant, and equipment, both the original cost of the asset account and the net book value will be incorrect.

a. Both will be overstated indefinitely.

b. The original cost will be overstated indefinitely, and the net book value will be overstated until the asset is fully depreciated.

c. The original cost will be overstated indefinitely, and the net book value will be understated indefinitely.

d. The original cost will be overstated indefinitely, and the net book value will be understated until the asset is finally depreciated.

 

230. Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

a. Examination of correspondence with the corporate counsel concerning acquisition matters.

b. Examination of ownership documents registered and on file at a public hall of records.

c. Examination of corporate minutes and resolutions concerning the approval to acquire property, plant, and equipment.

d. Examination of deeds and title guaranty policies on hand.

 

231. Prepaid expenses, deferred charges, and intangibles are assets that vary in life from several months to several years. Their inclusion as assets results from the concept of

a. materiality.

b. consistency.

c. resale or liquidation value.

d. matching expenses with revenues.

 

232. The auditor's starting point for verifying disposals of property, plant, and equipment is the

a. equipment account in the general ledger.

b. file of shipping documents.

c. client's schedule of recorded disposals.

d. equipment subsidiary ledger.

 

233. Inadequate controls and misstatements discovered through tests of controls and substantive tests of transactions are an indication of the likelihood of misstatements in

a. the balance sheet.

b. the income statement.

c. the cash flow statement.

d. both the income statement and the balance sheet.

 

234. The internal allocations of accounting expense data are important because they determine

a. what GAAP must be used.

b. what GAAS must be applied.

c. the life of the asset.

d. whether a particular expenditure is an asset or a current period expense.

 

235. Because the failure to record disposals of property, plant, and equipment can significantly affect the financial statements, the search for unrecorded disposals is essential. Which of the following is not a procedure used to verify disposals?

a. Make inquiries of management and production personnel about the possibility of the disposal of assets.

b. Review whether newly acquired assets replace existing assets.

c. Test the valuation of fixed assets recorded in prior periods.

d. Review plant modifications and changes in product line, taxes, or insurance coverage.

 

236. One typical difference between the asset prepaid expenses and other assets, such as accounts receivable and inventory, is the immateriality of the former in many audits. Because of this immateriality, frequently the only audit procedure necessary to perform is

a. tests of control.

b. tests of transactions.

c. tests of details of balances.

d. analytical procedures.

 

237. Once the initial audit of a newly constructed industrial plant has been performed, with respect to consistency, which of the following is of least concern to the continuing auditor in the following year?

a. Prior years' capitalization policy.

b. Prior years' capitalization costs.

c. Prior years' depreciation methods.

d. Prior years' depreciable life.

 

238. When auditing a public warehouse, which of the following is the most important audit procedure with respect to disclosing unrecorded liabilities?

a. Observation of inventory.

b. Review of outstanding receipts.

c. Inspection of receiving and issuing procedures.

d. Confirmation of negotiable receipts with holders.

 

239. Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?

a. The cycle basis is used for physical counts.

b. Supplies of relatively little value are expensed when purchased.

c. Perpetual inventory records are maintained only for items of significant value.

d. The storekeeper is responsible for maintenance of perpetual inventory records.

 

240. To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditor should review and test the

a. terms of the open purchase orders.

b. purchase cutoff procedures.

c. contractual commitments made by the purchasing department.

d. purchase invoices received on or around year-end.

 

241. Which of the following is an effective internal accounting control measure that encourages receiving department personnel to count and inspect all merchandise received?

a. Quantities ordered are excluded from the receiving department copy of the purchase order.

b. Vouchers are prepared by accounts payable department personnel only after they match item counts on the receiving report with the purchase order.

c. Receiving department personnel are expected to match and reconcile the receiving report with the purchase order.

d. Internal auditors periodically examine, on a surprise basis, the receiving department copies of receiving reports.

 

242. Stone was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records. Stone has observed the current inventory but has not observed the physical inventory at the previous year-end date and concludes that the opening inventory balance, which is not auditable, is a material factor in the determination of cost of goods sold for the current year. Stone will probably

a. decline the engagement.

b. disclaim an opinion on the balance sheet and income statement.

c. express an unqualified opinion on the balance sheet and income statement, except for inventory.

d. express an unqualified opinion on the balance sheet and disclaim an opinion on the income statement.

 

243. Which one of the following procedures would not be appropriate for an auditor in discharging his responsibilities concerning the client's physical inventories?

a. Confirmation of goods in the hands of public warehouses.

b. Supervising the taking of the annual physical inventory.

c. Carrying out physical inventory procedures at an interim date.

d. Obtaining written representation from the client as to the existence, quality, and dollar amount of the inventory.

 

244. A CPA's client maintains perpetual inventory records. In the past, all inventory items have been counted on a cycle basis at least once during the year. Physical count and

perpetual record differences have been minor. Now, the client wishes to minimize the cost of physically counting the inventory by changing to a sampling method in which many inventory items will not be counted during a given year. For purposes of expressing an opinion on his client's financial statements, the CPA will accept the sampling method only if

a. a stratified sampling plan is used.

b. the sampling method has statistical validity.

c. the client is willing to accept a scope qualification in the auditor's report.

d. the client is willing to accept an opinion qualification in the auditor's report.

 

245. If the perpetual inventory master files show lower quantities of inventory than the physical count, an explanation of the difference might be unrecorded

a. sales.

b. sales discounts.

c. purchases.

d. purchase discounts.

 

246. Which of the following control procedures would most likely be used to maintain accurate perpetual inventory records?

a. Independent storeroom count of goods received.

b. Periodic independent comparison of records with goods on hand.

c. Periodic independent reconciliation of control and subsidiary records.

d. Independent matching of purchase orders, receiving reports, and vendors' invoices.

 

247. Apex Manufacturing Corporation mass-produces eight different products. The controller who is interested in strengthening internal controls over the accounting for materials used in production would be most likely to implement

a. a perpetual inventory system.

b. a job order cost accounting system.

c. an economic order quantity (EOQ) system.

d. a separation of duties among production personnel.

 

248. Cost accounting controls are those related to the physical inventory and the consequent costs from the point at which

a. materials are ordered for purchase until the finished product is sold.

b. the customer's order is received until the finished product is shipped.

c. raw materials are requisitioned until the finished product is sent to storage.

d. raw materials are requisitioned until the finished product is completely manufactured.

 

249. The requirements imposed by SAS No. 1 regarding the taking of inventory make the following distinction between those of auditor and client.

a. Client has the responsibility for setting up the procedures and auditor has the responsibility for making and recording the counts.

b. Client has the responsibility for setting up the procedures for taking an accurate physical inventory and actually making and recording the counts.

c. Auditor has the responsibility for setting up the procedures for taking an accurate physical inventory and actually making and recording the counts.

d. Auditor has the responsibility for setting up the procedures and client has the responsibility for following the procedures when actually making and recording the counts.

 

250. Controls which provide a means of ensuring that the physical counts are properly summarized, priced at the same amount as the unit records, correctly extended and totaled, and included in the general ledger at the proper amount are known as

a. standard cost controls.

b. pricing internal controls.

c. compilation internal controls.

d. count quantity internal controls.

 

251. Assume that the client's valuation of an inventory item is $10 per unit for 1,000 units, using FIFO. If the most recent acquisition of inventory was for 600 units at $10 per unit and the immediately preceding acquisition was for 700 units at $9 per unit, the inventory item is in error and it is

a. understated $400.

b. understated $300.

c. overstated $400.

d. overstated $700.

 

252. Assume that the client's valuation of an inventory item is $10 per unit for 1,000 units, using LIFO. If the most recent acquisition of a layer of inventory was for 600 units at $10 per unit and the immediately preceding layer was for 700 units at $9 per unit, the inventory item is in error and it is

a. understated $700.

b. understated $300.

c. overstated $400.

d. overstated $700.

 

253. When an outside specialist has assumed full responsibility for taking the client's physical inventory, reliance on the specialist's report is acceptable if

a. the auditor's report contains a reference to the assumption of full responsibility.

b. the auditor is satisfied through application of appropriate procedures as to the reputation and competence of the specialist.

c. the auditor conducted the same audit tests and procedures as would have been applicable if the client's employees took the physical inventory.

d. circumstances made it impracticable or impossible for the auditor either to do the work personally or observe the work done by the inventory firm.

 

254. Ball Company, which has no perpetual inventory records, takes a monthly physical inventory and reorders any item that is less than its reorder point. On February 5, 2001, Ball ordered 5,000 units of item A. On February 6, 2001, Ball received 5,000 units of item A that had been ordered on January 3, 2001. To prevent this excess ordering, Ball should

a. keep an adequate record of open purchase orders and review it before ordering.

b. use perpetual inventory records which indicate goods received, issued, and amounts on hand.

c. use prenumbered purchase orders.

d. prepare purchase orders only on the basis of purchase requisitions.

 

255. The test of details of balance procedure which requires the auditor to perform tests of lower-of-cost-or-market, selling price, and obsolescence is an attempt to satisfy the objective of

a. existence.

b. completeness.

c. accuracy.

d. realizable value.

 

256. In the case of inventories which in the ordinary course of business are in the hands of public warehouses or other outside custodians, the auditor's responsibility is to

a. make test counts of the inventory.

b. observe the client counting the inventory.

c. observe the custodian counting the inventory.

d. get direct confirmation in writing from the custodian.

 

257. The costs used to value the physical inventory must be tested to determine whether the client has correctly followed an inventory method that is in accordance with GAAP and is consistent with previous years. The audit procedures used to verify these costs are referred to as

a. price tests.

b. compilation tests.

c. cost tests.

d. consistency tests.

 

258. The inventory and warehousing cycle can be thought of as comprising two separate but closely related systems, one involving the actual physical flow of goods, and the other the

a. related costs.

b. storing of the goods.

c. internal control over those goods.

d. prevention of waste, obsolescence, and theft.

 

259. A basic characteristic of the audit of the inventory and warehousing cycle for a manufacturing company is the close relationship to other transaction cycles in the organization. Which of the following cycles does not have a direct tie-in to the inventory and warehousing cycle?

a. Acquisition and payment cycle.

b. Payroll and personnel cycle.

c. Sales and collection cycle.

d. Capital acquisition cycle.

 

260. The auditor must verify whether the physical counts were correctly summarized, the inventory quantities and prices were correctly extended, and the extended inventory was correctly footed. These tests are called

a. price tests.

b. compilation tests.

c. cost tests.

d. mechanical tests.

 

261. SAS No. 1 requires that audit procedures for inventory include that the auditor

a. must count the inventory.

b. must be present at the count and must receive adequate documentation form the client regarding the effectiveness of inventory-taking.

c. must be present at the count and satisfy him/herself regarding the effectiveness of inventory-taking.

d. need not be present at the count but must be satisfied regarding the effectiveness of inventory-taking.

 

262. The test of details of balance procedure which requires the auditor to account for unused inventory tag numbers to make sure none have been deleted is associated with the audit objective of

a. accuracy.

b. existence.

c. detail tie-in.

d. completeness.

 

263. The audit of year-end physical inventories should include steps to verify that the client's purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a

a. sale in the current period.

b. sale in the subsequent period.

c. purchase in the current period.

d. purchase return in the subsequent period.

 

264. The primary objective of a CPA's observation of a client's physical inventory count is to

a. discover whether a client has counted a particular inventory item or group of items.

b. obtain direct knowledge that the inventory exists and has been properly counted.

c. provide an appraisal of the quality of the merchandise on hand on the day of the physical count.

d. allow the auditor to supervise the conduct of the count so as to obtain assurance that inventory quantities are reasonably accurate.

 

265. A common inventory observation procedure is to be alert for items that are damaged, rust- or dust-covered, or located in inappropriate places. The balance-related audit objective being achieved by this procedure is

a. classification.

b. cutoff.

c. realizable value.

d. rights.

 

266. An early court case which led to the expansion of the auditor's responsibility for observing the client count inventory was the

a. Hochfelder case.

b. Continental Vending case.

c. McKesson & Robbins case.

d. National Student Marketing case.

 

267. The overall objective in the audit of the inventory and warehousing cycle is to determine that

a. gross profit and inventory are fairly presented on the financial statements.

b. inventory and cost of goods sold are fairly stated on the financial statements.

c. costs of goods sold and gross profit are correctly stated on the income statement.

d. inventory items on the balance sheet are neither fraudulent nor materially in error.

 

268. Which of the following is the best audit procedure for the discovery of damaged merchandise in a client's ending inventory?

a. Compare the physical quantities of slow-moving items with corresponding quantities of the prior year.

b. Observe merchandise and raw materials during the client's physical inventory count.

c. Review the management's inventory representation letter for accuracy.

d. Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average.

 

269. When verifying debits to the perpetual inventory records of a non-manufacturing company, an auditor would be most interested in examining a sample of purchase

a. orders.

b. invoices.

c. approvals.

d. requisitions.

 

270. Finished goods perpetual inventory master files include the same type of information as raw materials perpetuals but are

a. considerably more complex if costs are included along with units.

b. simpler since materials, labor, and overhead have been combined into one total value.

c. considerably more complex because of the paper trail that is needed in addition to the computer records.

d. simpler because the cost accounting system is in effect and well defined.

 

271. Which one of the following analytical procedures would be most helpful in alerting the auditor to the possibility of obsolete inventory?

a. Compare gross margin percentage with previous years'.

b. Compare unit costs of inventory with previous years'.

c. Compare inventory turnover ratio with previous years'.

d. Compare current year manufacturing costs with previous years'.

 

272. A common inventory observation procedure is to record in the work papers for subsequent follow-up the last shipping document number used at year-end. This procedure relates to which of the following audit objectives?

a. Inventory as recorded exists.

b. Existing inventory is counted and tagged.

c. Tags are accounted for to make sure none is missing.

d. Information is obtained to make sure sales and inventory purchases are recorded in the proper period.

 

273. A CPA observes his client's physical inventory count on December 31, 2001. There are eight inventory-taking teams, and a tag system is used. The CPA's observation normally may be expected to result in detection of which of the following inventory errors?

a. An error is made in the count of one inventory item.

b. The inventory omits items on consignment to wholesalers.

c. Some of the items included in the inventory had been received on consignment.

d. The inventory takers forgot to count all the items in one room of the warehouse.

 

274. For several years, a client's physical inventory count has been lower than what was shown on the books at the time of the count so that downward adjustments to the inventory account were required. Contributing to the inventory problem could be weaknesses in internal control that led to the failure to adjust the accounting records for some

a. purchases returned to vendors.

b. sales returns received.

c. sales discounts allowed.

d. cash purchases.

 

275. A common inventory observation procedure is to select a random sample of tag numbers and identify the tag with that number attached to the actual inventory item. The audit objective being achieved by this procedure is

a. inventory as recorded on tags exists (existence).

b. existing inventory is counted and tagged (completeness).

c. inventory is counted accurately (accuracy).

d. inventory is classified correctly (classification).

 

276. When auditing the inventory and warehousing cycle, the use of analytical procedures is

a. not important for this cycle.

b. less important than for any other cycle.

c. more important than for any other cycle.

d. as important as their use in any other cycle.

 

277. The auditor should be satisfied that acquisitions of raw materials and manufacturing costs are correctly stated at the completion of the

a. inventory and warehousing cycle.

b. payroll and personnel cycle.

c. acquisitions and payments cycle.

d. cash cycle.

 

278. Quigley Corporation's physical count of inventories was lower than the inventory quantities shown in its perpetual records. This situation could be the result of the failure to record

a. sales.

b. sales returns.

c. purchases.

d. purchase discounts.

 

279. From which of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

a. Observation of physical inventory counts.

b. Written inventory representations from management.

c. Confirmation of inventories in a public warehouse.

d. Auditor's recomputation of inventory extensions.

 

280. A well-designed computerized system of perpetual inventory master files includes

a. information about the units of inventory purchased, sold, and on hand.

b. information about the unit costs of inventory purchased, sold, and on hand.

c. information about the units of raw materials, work-in-process, and finished goods.

d. information about the units and unit costs of inventory purchased, sold, and on hand.

 

281. A major difficulty in the verification of inventory cost records is determining the reasonableness of

a. direct labor's hourly rate.

b. raw materials per unit cost.

c. cost allocations.

d. all three of the above.

 

282. A useful starting point for becoming familiar with the client's inventory is for the auditor to

a. read the AICPA's Industry Audit Guide.

b. review accounting theory covering special problems, such as gas and oil accounting, or lease-purchase agreements.

c. read the client's Accounting Manual.

d. tour the client's facility.

 

283. Which of the following situations would most likely require special audit planning by the auditor?

a. Inventory is comprised of precious stones.

b. Some items of factory and office equipment do not bear identification numbers.

c. Depreciation methods used on the client's tax return differ from those used on the books.

d. Assets costing less than $500 are expensed even though their expected life exceeds one year.

 

284. The auditor tests the quantity of materials charged to work-in-process by tracing these quantities to

a. cost ledgers.

b. perpetual inventory records.

c. receiving reports.

d. material requisitions.

 

285. The most important part of the observation of inventory is determining whether

a. the counts are accurate.

b. the inventory-takers are qualified.

c. obsolete inventory has been identified.

d. the physical count is being taken in accordance with the client's instructions.

 

286. Tests of the perpetual inventory master files for the purpose of reducing the tests of physical inventory or changing their timing are done through the use of

a. inquiry.

b. observation.

c. confirmation.

d. documentation.

 

287. As finished goods are completed by the production department and await shipment, they are placed in the

a. stockroom.

b. storeroom.

c. waiting room.

d. shipping room.

 

288. Which one of the following is not an important consideration with regard to the client's method of pricing inventory?

a. The method must be in accordance with GAAS.

b. The method must be in accordance with GAAP.

c. Application of the method must be consistent from year to year.

d. Cost vs. market value (replacement cost or net realizable value) must be considered.

 

289. After accounting for a sequence of inventory tags, an auditor traces a sample of tags to the physical inventory listing to obtain evidence that all items

a. included in the listing have been counted.

b. represented by inventory tags actually exist.

c. represented by inventory tags are included in the listing.

d. included in the listing are represented by inventory tags.

 

290. Sample size in physical observation of inventory is

a. determined using attributes sampling.

b. determined using variables sampling.

c. determined using dollar-unit sampling.

d. impossible to specify in units because the emphasis is on observing the client's procedures.

 

291. It is frequently possible to test the physical inventory prior to the balance sheet date when

a. there are accurate perpetual inventory master files.

b. year-end sales are small.

c. the internal control system is no better at year-end than at an earlier point in time.

d. the client counts inventory at interim dates.

 

292. The main difference between the two types of cost systems is that

a. one accumulates costs by materials issued and the other by labor incurred.

b. one accumulates costs by individual jobs and the other by particular processes.

c. one emphasizes costs accumulated in completed products and the other emphasizes costs associated with work-in-process.

d. one emphasizes costs adding value to the product and the other emphasizes costs incurred because of waste, scrap, and obsolescence.

 

293. The test of details of balance procedure which requires the auditor to review contracts with suppliers and customers and inquire of management for the possibility of the inclusion of consigned or other non-owned inventory is associated with the audit objective of

a. rights.

b. existence.

c. completeness.

d. realizable value.

 

294. With regard to the physical count of inventory, an adequate control procedure includes

a. proper instructions for the physical count.

b. independent internal verification of the counts.

c. independent reconciliations of the physical counts with perpetual inventory master files.

d. all three of the above.

 

295. Master files, worksheets, and reports that accumulate material, labor, and overhead as the costs are incurred are

a. accounting systems.

b. storeroom documents.

c. cost accounting records.

d. finished goods inventory records.

 

296. The auditor's tests of the adequacy of the physical controls over raw materials, work-in-process, and finished goods must be restricted to

a. observation and inquiry.

b. documentation and observation.

c. documentation and confirmation.

d. documentation and inquiry.

 

297. When there are no perpetual inventory files and the inventory is material,

a. an audit cannot be performed, so the auditor must issue a disclaimer.

b. a complete physical inventory must be taken by the client near year-end.

c. the auditor will have to perform the inventory count and determine valuation instead of the client.

d. the auditor is relieved of responsibility for observing inventory counts but still must do test counts.

 

298. Restrictions imposed by a client prohibit the observation of physical inventories, which are 35% of all assets. Alternative procedures cannot be applied, although the auditor was able to examine satisfactory evidence for all other items in the financial statements. The auditor should issue a(n)

a. qualified opinion.

b. disclaimer of opinion.

c. unqualified opinion with a separate explanatory paragraph.

d. adverse opinion.

 

299. Most of the audit testing of the storage of finished goods as well as the shipment of merchandise takes place during the testing of the

a. sales and collection cycle.

b. payroll and personnel cycle.

c. acquisitions and payments cycle.

d. inventory and warehousing cycle.

 

300. When a physical count of inventory is performed at an interim date, the auditor observes it at that time and tests the perpetuals for transactions

a. throughout the year.

b. which are a representative sample of the period under audit.

c. from the date of the count to year-end.

d. from the date of the count to the end of the audit field work.

 

301. In any company involved in manufacturing, an adequate cost accounting internal control system is necessary to indicate the relative profitability of the various products for management planning and control and to

a. determine variances from standards.

b. determine variances from budgets.

c. value inventories for financial statement purposes.

d. value inventories for audit verification.

 

302. Which of the following is not an aspect of concern when auditing the cost accounting system?

a. Unit cost records.

b. Physical controls over inventory.

c. Documents and records for transferring inventory.

d. Safeguarding the raw materials from point of receipt to the storeroom.

 

303. There must be a periodic physical count by the client of the inventory items on hand

a. only if the client uses the LIFO method.

b. only if client uses a lower-of-cost-or-market method.

c. regardless of the client's inventory valuation method.

d. only if the client uses either the LIFO or FIFO method.

 

304. The auditor can best verify a client's bond sinking fund transactions and year-end balance by

a. confirmation with the bond trustee.

b. confirmation with individual holder of retired bonds.

c. examination and count of the bonds retired during the year.

d. recomputation of interest expense, interest payable, and amortization of bond discount or premium.

 

305. When a company has treasury stock certificates on hand, a year-end count of the certificates by the auditor is

a. always required.

b. not required if treasury stock is a deduction from stockholders' equity.

c. required when the company classifies treasury stock with other assets.

d. required when the company had treasury stock transactions during the year.

 

306. To prevent the payment of a larger amount of dividends than was authorized, the corporation should use

a. a separate imprest dividend account.

b. an outside independent disbursing agency.

c. checks which cannot be written for an amount in excess of a stated maximum amount.

d. all of the above.

 

307. The tests of details of balances procedure which requires the auditor to examine notes paid after year-end to determine whether they were liabilities at the balance sheet date is an attempt to satisfy the audit objective of

a. existence.

b. completeness.

c. accuracy.

d. classification.

 

308. Which one of the following is not a characteristic of the capital acquisition and repayment cycle?

a. The exclusion of a few transactions is rarely material by itself.

b. There is a legal relationship between the client and the holder of the equity securities.

c. There is a direct relationship between the interest and dividends accounts and debt and equity.

d. Relatively few transactions affect the account balances, but each transaction is often highly material in amount.

 

309. Considering the effect of understatements of liabilities and owners' equity, a major audit concern is

a. omissions.

b. duplications.

c. redundancies.

d. all three of the above.

 

310. Which of the following is not an objective of the auditor's examination of notes payable?

a. To determine whether the internal controls are adequate.

b. To determine whether client's financing arrangements are effective and efficient.

c. To determine whether transactions regarding the principal and interest of notes are properly authorized.

d. To determine whether the liability for notes and related interest expense and accrued liabilities are properly stated.

 

311. Which of the following statements is not correct?

a. Bonds are issued infrequently by most companies.

b. The amount of a bond issue is normally large.

c. It is common to verify each transaction taking place in the capital acquisition cycle for the entire year as a part of verifying the balance sheet accounts.

d. It is unusual to see audit working papers that include the beginning balance of every account in the capital acquisition and repayment cycle, and documentation of every transaction that occurred during the year.

 

312. The audit objective to determine that existing notes payable are included in the notes payable schedule (completeness) is accomplished by the following test of balances procedure.

a. Confirm notes payable.

b. Examine duplicate copies of notes for principal and interest rates.

c. Trace the individual notes payable on the schedule to the master file.

d. Review the bank reconciliation for new notes credited directly to the bank account by the bank.

 

313. Any company whose stock is listed on a securities exchange is required to engage

a. a stock transfer agent.

b. an independent registrar.

c. both a and b above.

d. none of the above.

 

314. Round Corporation declared a 100% stock dividend during 2001. In connection with the examination of Round's financial statements, Round's auditor should determine that

a. the additional shares issued do not exceed the number of authorized but previously unissued shares.

b. stockholders received their additional shares by confirming year-end holdings with them.

c. the stock dividend was properly recorded at fair market value.

d. Round's stockholders have authorized the issuance of 100% stock dividends.

 

315. In the audit of notes payable, it is common to include tests of principal and interest payments as a part of the audit of the acquisitions and payment cycle because the payments are in the cash disbursements journal that is being sampled. It is also normal to test these transactions as part of the capital acquisitions and repayment cycle because

a. it is not unusual for the auditor to duplicate a process, thereby gathering a larger quantity of evidence.

b. replicating the evidence will provide the auditor with a higher level of assurance.

c. the tests done in the acquisitions and payments cycle will look only at the cash credit side so the tests done in the capital acquisitions and repayment cycle will look at the debit side of the transaction.

d. due to the infrequency of these transactions, in many cases no transactions involving notes payable are included in the sample tests of acquisitions and payments.

 

316. Which of the following concerns in auditing capital stock and paid-in capital involve tests of transactions?

a. Existing capital stock transactions are recorded.

b. Capital stock is properly valued.

c. Capital stock is properly disclosed.

d. All three of the above.

 

317. The audit objective requiring that existing notes payable are included in the notes payable schedule (completeness) is satisfied by performing the following audit procedure.

a. Confirm notes payable.

b. Trace the total of the notes payable schedule to the general ledger.

c. Review the notes payable schedule to determine whether any are related parties.

d. Obtain confirmations from creditors who have held notes from the client in the past and are not currently included in the notes payable schedule.

 

318. In the audit of the transactions and amounts in the capital acquisitions and repayments cycle, the auditor must take great care in making sure that the significant legal requirements affecting the financial statements have been properly fulfilled and

a. any violations are reported to the SEC.

b. are adequately disclosed in the financial statements.

c. must issue a disclaimer if they haven't been fulfilled.

d. any departures from the agreements are made with management's knowledge and consent.

 

319. Of the eight tests of details of balances objectives, which one is usually not an important concern in the audit of notes payable?

a. valuation.

b. existence.

c. ownership.

d. completeness.

 

320. Responsibility for the issuance of new notes should be vested in the

a. board of directors.

b. purchasing department.

c. accounting department.

d. accounts payable department.

 

321. Which of the following statements regarding notes and bonds payable is true?

a. If the debt is unsecured, it is a note payable; if it is secured by assets, it is a bond payable.

b. If the debt is for one year or less, it is a note payable; if it is for more than one year, it is a bond payable.

c. For loans of one year or less, a principal and interest payment is required only when the loan becomes due.

d. None of the above.

 

322. The audit objective to determine that notes payable and accrued interest on the notes payable schedule are accurate is accomplished by which of the following test of balances procedure?

a. Examine duplicate copies of notes for principal and interest rates.

b. Review the minutes of the board of directors for authorized but unrecorded notes.

c. Trace the total of the notes payable schedule to the general ledger.

d. Review the notes to determine whether any are with related parties or should be accounts payable.

 

323. Usually dividends are audited

a. using block sampling.

b. on a 100% basis.

c. using variables sampling.

d. using attributes sampling.

 

324. Analytical procedures are essential for notes payable because

a. of the paucity of documentation in this area.

b. there are few internal controls in this area which the auditor can rely upon to reduce substantive testing.

c. tests of details for interest expense and accrued interest can frequently be eliminated when results are favorable.

d. the large quantity of transactions would make this an expensive area to audit if some other means of reducing tests were not available.

 

325. Which of the following is a balance-related audit objective for owners' equity?

a. Rights.

b. Obligations.

c. Realizable value.

d. None of the above.

 

326. The primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is

a. correct calculation of the net income or loss for the year.

b. correct calculation of dividend payments for the year.

c. whether prior-period adjustments have been made correctly.

d. whether there are any restrictions on the payment of dividends.

 

327. The audit objective which requires the auditor to determine that notes payable on the notes payable schedule are properly classified can be tested with the following procedure.

a. Confirm notes payable.

b. Examine corporate minutes for loan approval.

c. Examine notes, minutes, and bank confirmations for restrictions.

d. Review the notes to determine whether any are with related parties.

 

328. Which of the following is not an important control over notes payable?

a. When the notes are paid, they should be destroyed so that they cannot be reissued.

b. Responsibility for the issuance of new notes should be vested in the board of directors or top management.

c. When notes payable are renewed, they should be subject to the same authorization procedures as those for the issuance of new notes.

d. The accounts payable department should automatically issue checks for the notes when they become due, in the same manner in which it prepares checks for acquisitions of goods and services.

 

329. Proper authorization for the issuance of notes payable requires that

a. responsibility for authorization should lie with the manager who must generate the revenue to repay the loan.

b. responsibility for authorizing notes should lie with the manager who will receive the benefits of the loan.

c. whenever notes are renewed (refinanced), they should be subject to the same authorization procedures as those used when they were first issued.

d. responsibility for authorization should lie with the treasurer's function, since the treasurer's department will receive the cash generated.

 

330. Tests of notes payable transactions involve the issue of notes and the repayment of principal and interest. These audit tests are a part of tests of controls and substantive tests of transactions for

a. cash receipts.

b. cash disbursements.

c. both a and b.

d. neither a nor b.

 

331. The periodic payments of interest and principal should be controlled as a part of the

a. sales and collection cycle.

b. acquisition and payment cycle.

c. interest and notes/bonds payable cycle.

d. capital acquisitions and repayments cycle.

 

332. The amount of time spent verifying owners' equity is frequently minimal for closely-held corporations because

a. these companies are so small that it is not necessary to audit the capital section.

b. the few owners all have access to the books so the auditor spends more time on accounts like liabilities, which affect outsiders.

c. there are few if any transactions during the year for the capital stock accounts, except for earnings and dividends.

d. there is no public interest in these companies.

 

333. An auditor would most likely verify the interest earned on bond investments by

a. testing the internal controls over cash receipts.

b. vouching the receipt and deposit of interest checks.

c. confirming the bond interest rate with the issuer of the bonds.

d. recomputing the interest earned on the basis of face amount, interest rate, and period held.

 

334. It is normal practice to verify all capital stock transactions

a. only when the client is small.

b. that are in excess of a material amount.

c. if there aren't very many during the year.

d. regardless of the controls in existence, because of their materiality and permanence in the records.

 

335. During the course of an audit, a CPA observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account. This observation could lead the auditor to suspect that

a. long-term debt is understated.

b. discount on bonds payable is overstated.

c. long-term debt is overstated.

d. premium on bonds payable is understated.

 

336. During an examination, Wicks learns that the audit client was granted a three-month waiver of the repayment of principal on the installment loan with Blank Bank without an extension of the maturity date. With respect to this loan, the audit program used by Wicks would be least likely to include a verification of

a. interest expense for the year.

b. balloon payment.

c. total liability at year-end.

d. installment loan payments.

 

337. Which of the following types of owners' equity transactions would not require authorization by the board of directors?

a. Issuance of capital stock.

b. Repurchase of capital stock.

c. Declaration of dividends.

d. None of the above.

 

338. Notes payable which have been repaid in full should be

a. canceled and destroyed.

b. canceled and returned to the creditor.

c. canceled and retained by an authorized company official.

d. destroyed so that they will not be paid again inadvertently.

 

339. The auditor's independent estimate of interest expense, using average notes payable outstanding and average interest rates, tests

a. the reasonableness of interest expense.

b. for omitted notes payable.

c. both a and b.

d. none of the above.

 

340. The tests of details of balances procedure which requires the auditor to trace the totals of the notes payable list to the general ledger satisfies the objective of

a. accuracy.

b. existence.

c. detail tie-in.

d. completeness.

 

341. When there are not numerous transactions involving notes during the year, the normal starting point for the audit of notes payable is

a. a schedule of notes payable and accrued interest prepared by the audit team.

b. a schedule of notes payable and accrued interest obtained from client.

c. a schedule of only those notes with unpaid balances at the end of the year prepared by client.

d. the notes payable account in the general ledger.

 

342. The record of the issuance and repurchase of capital stock for the life of the corporation is maintained in the

a. shareholders' capital stock master file.

b. capital stock certificate books.

c. schedule of stock owners.

d. corporate directory.

 

343. A company issued bonds for cash during the year under audit. To ascertain that this transaction was properly recorded, the auditor's best course of action is to

a. trace the cash received from the issuance to the accounting records.

b. confirm the results of the issuance with the underwriter or investment banker.

c. verify that the new cash received is credited to an account entitled "Bonds Payable."

d. request a statement from the bond trustee as to the amount of bonds issued and outstanding.

 

344. During its fiscal year, a company issued, at a discount, a substantial amount of first-mortgage bonds. When performing audit work in connection with the bond issue, the independent auditor should

a. confirm the existence of the bondholders.

b. review the minutes for authorization.

c. trace the net cash received from the issuance to the bond payable account.

d. inspect the records maintained by the bond trustee.

 

345. In connection with the audit of a current issue of long-term bonds payable, the auditor should

a. decide whether the bond issue was made without violating state or local law.

b. ascertain that the client has obtained the opinion of counsel on the legality of the issue.

c. calculate the effective interest rate to see if it is substantially the same as the rates for similar issues.

d. determine whether bondholders are persons other than owners, directors, or officers of the company issuing the bond.

 

346. Many of the Granada Corporation's convertible bondholders have converted their bonds into stock during the year under examination. The independent auditor should review the Granada Corporation's statement of changes in financial position to ascertain that it shows

a. only financial resources used to reduce convertible debt.

b. only financial resources provided by issuance of stock.

c. financial resources provided by the issuance of stock and used to reduce convertible debt.

d. nothing relating to the conversion because it does not affect net working capital.

 

347. The record of the outstanding shares at any given time is maintained in the

a. corporate directory.

b. stock certificate books.

c. schedule of stock owners.

d. shareholders' capital stock master file.

 

348. Which of the following balance-related audit objectives is not applicable to notes payable?

a. Detail tie-in.

b. Obligation.

c. Classification.

d. Realizable value.

 

349. The audit objective to determine that notes payable in the schedule exist is verified by the tests of balances procedure to

a. foot the notes payable list.

b. confirm notes payable.

c. recalculate interest expense.

d. examine the balance sheet for proper disclosure of noncurrent portions.

 

350. Which of the following concerns in auditing capital stock and paid-in capital involve tests of balances?

a. Capital stock is properly disclosed.

b. Existing capital stock transactions are recorded.

c. Recorded capital stock transactions are authorized.

d. All three of the above.

 

351. Which of the following is not an important balance-related audit objective in notes payable?

a. Accuracy.

b. Existence.

c. Completeness.

d. Presentation and disclosure.

 

352. When a dividend is declared by the Board, the source for determining who should receive dividend checks is the

a. shareholders' capital stock master file.

b. stock certificate books.

c. common stock account in the general ledger.

d. corporate directory.

 

353. If a company employs a capital stock registrar and/or transfer agent, the registrar or agent, or both, should be requested to confirm directly to the auditor the number of shares of each class of stock

a. surrendered and canceled during the year.

b. authorized at the balance sheet date.

c. issued and outstanding at the balance sheet date.

d. authorized, issued, and outstanding during the year.

 

354. Mars Company has a separate outside transfer agent and outside registrar for its common stock. A confirmation request sent to the transfer agent should ask for

a. a list of all stockholders and the number of shares issued to each.

b. a statement from the agent that all surrendered certificates have been effectively canceled.

c. total shares issued, shares issued in name of client, and unbilled fees.

d. total shares authorized.

 

 

ANSWERS

 

1 - 20. a, d, d, a, a, b, c, d, b, d, c, c, d, b, d, d, c, a, b, b

21 - 40. d, c, d, a, c, b, d, a, a, a, b, d, a, b, a, a, c, c, b, c

41 - 60. d, b, a, c, a, d, b, b, c, a, c, d, a, a, c, d, b, c, c, c

61 - 80. d, b, a, b, d, d, b, b, d, c, a, d, a, a, d, a, a, c, d, c

81 - 100. a, d, c, d, c, a, d, a, d, a, a, a, b, d, d, d, a, d, c, d

 

101 - 120. d, d, c, a, b, b, a, c, c, a, c, c, b, c, c, b, b, c, d, c

121 - 140. a, c, a, b, a, d, d, b, c, b, d, a, d, c, c, d, c, d, a, c

141 - 160. c, d, d, c, c, a, a, c, c, c, c, b, d, c, d, b, b, b, a, b

161 - 180. c, c, a, d, b, c, b, a, a, d, c, d, a, c, b, b, d, a, a, c

181 - 200. b, a, d, d, c, d, c, a, b, d, d, b, a, a, b, d, c, b, a, c

 

201 - 220. b, d, b, b, c, b, c, a, d, b, c, d, a, b, b, c, d, c, a, c

221 - 240. c, c, a, b, b, a, c, a, b, d, d, c, d, d, c, d, b, c, d, b

241 - 260. a, d, b, b, c, b, a, c, b, c, c, d, c, a, d, d, a, a, d, b

261 - 280. c, d, a, b, c, c, b, b, b, a, c, d, d, a, a, d, c, a, a, d

281 - 300. c, d, a, d, d, d, a, a, c, d, a, b, a, d, c, a, b, b, a, c

 

301 - 320. c, d, c, a, a, a, b, a, a, b, d, d, b, a, d, a, d, b, c, a

321 - 340. d, a, b, c, d, d, d, a, c, c, b, c, d, d, a, b, d, c, c, c

341 - 354. b, b, a, b, b, c, d, d, b, a, b, a, c, c