To test the client's cutoff of inventories, the auditors will make a record of the serial number of

the final receiving and shipping documents used prior to the taking of the physical inventory. 
True    False

9. The use of a tagging system for inventory taking is designed to prevent double counting of
goods. 
True    False

10. The examination of warehouse receipts is not sufficient verification of a material amount of

goods stored in public warehouses. 
True    False

 
 

Multiple Choice Questions

 

11. An auditor suspects that certain client employees are ordering merchandise for themselves
over the Internet without recording the purchase or receipt of the merchandise. When vendors'
invoices arrive, one of the employees approves the invoices for payment. After the invoices are
paid, the employee destroys the invoices and the related vouchers. In gathering evidence
regarding the fraud, the auditor most likely would select items for testing from the file of all 
A. Cash disbursements.
B. Approved vouchers.
C. Receiving reports.
D. Vendors' invoices.

 
12. Which of the following is not true relating to the auditors' observation of the client's physical
inventory? 
A. The auditors should evaluate the client's planning of the physical inventory.
B. The auditors should make certain that consigned items from suppliers are included in physical
inventory totals.
C. The auditors should evaluate the adequacy of the client's counting procedures.
D. The auditors should take test counts of the client's inventory. The first step in the risk-management
process is to identify and classify the organization’s
assets. Information and systems must be assessed to determine their worth. When asset identification
and valuation is completed, the organization can start the risk-identification process.
Risk identification involves identifying potential risks and threats to the organization’s assets.
A risk-management team is tasked with identifying these threats. The team then can examine
the impact of the identified threats. This process can be based on real dollar amounts or on
gut feeling and intuition. When the impact is analyzed, the team can look at alternatives for
handling the potential risks. Risks can be:
. Accepted—The risk is understood and has been evaluated. Management has decieded
that the benefits outweigh the risk. As an example, the company might be considering

setting up an e-commerce website. Although it is agreed