Midterm Examination in Auditing in a CIS Environment

1. Tracing transactions through the system to determine whether procedures are being
applied as prescribed
a. Test of controls
b. Inspection
c. Walk through
d. Analytical procedure

2. The following are the different techniques in documenting the auditors’

understanding of the client’s internal control system, except
a. Narrative memorandum
b. Questionnaires
c. Flowchart
d. Procedures manual

3. Reasons to evaluate internal control would not include

a. Basis for planning
b. Determining the nature, timing, and extent of substantive procedures
c. Basis for type of opinion to be rendered
d. Formulating constructive suggestions for improvements

4. Audit information is usually considered relevant when it is

a. Derived through valid statistical sampling.
b. Objective and unbiased.
c. Factual, adequate, and convincing.
d. Consistent with the audit objectives.

5. Which is clearly a test of control?

a. Confirmation to a customer of an accounts receivable balance
b. Examination of a sample of purchase order records for electronic authenticated
authorization
c. Observing the controller’s use of the company owned equipment
d. Sending a letter to the client’s attorney to determine a litigation that is pending
between the plaintiff and the defendant

6. Which of the following factors most likely would influence an auditor’s

determination of the auditability of the entity’s financial statements?
a. The complexity of the accounting system
b. The existence of related party transactions
c. The adequacy of accounting records
d. The operating effectiveness of control procedures

7. The form and content of audit engagement letters may vary for each client, but they
would generally include reference to the following, except:
a. The objective of the audit of financial statements
b. Auditor’s responsibility for the financial statements.
c. The form of any reports or other communication of results of the engagement.
d. Unrestricted access to whatever records, documentation and other information
requested in connection with the audit.
8. The independent auditor’s responsibility in a regular audit is to express opinion
on the financial statements. The auditor’s opinion:
a. Helps the company adopt sound accounting principles
b. Assists the company in maintaining adequate and effective system of accounts
c. Helps management safeguard the company assets
d. Helps establish the credibility of the financial statements

9. Which statement(s) is(are) incorrect regarding the auditor’s responsibility to

consider fraud and error in an audit of financial statements?
a. The auditor is not and cannot be held responsible for the prevention of fraud and
error being the primary responsibility of both the management and those charged
with governance
b. When planning and performing audit procedures and evaluating and reporting the
results thereof, the auditor should consider the risk of misstatements in the
financial statements resulting from fraud
c. In planning the audit, the auditor should discuss with other members pf the audit
team the susceptibility of the entity to material statements in the financial
statements resulting from fraud or error and exercise professional skepticism (the
best method to detect method)
d. The auditor should design audit programs that will provide reasonable assurance
that material errors and fraud will be detected in the ordinary course of the
examination

10.Which of the following statements best describes an auditor’s responsibility

regarding misstatements?
a. An auditor should obtain reasonable assurance that the financial statements taken
as a whole are free from material misstatements, whether caused by fraud or error.
b. An auditor should obtain absolute assurance that material misstatements in the
financial statements will be detected.
c. An auditor is responsible to detect material errors but has no responsibility to
detect material fraud that is concealed through employee collusion or management
override of internal control
d. An auditor’s failure to detect a material misstatement resulting from fraud is an
indication of noncompliance with the requirements of the Philippine Standards on
Auditing

11.When an auditor is sued for negligence in the performance of an audit, to what

parties does the contributory negligence defense apply?
a. Only to the parties having a contractual relationship with the auditor
b. To any third party that relied on the audited financial statements
c. To any third party that lost money or suffered damages from investing in the
audited company
d. Only to those third parties that the auditor could reasonably have known would have
relied on the audited financial statements

12. A proper segregation of duties requires

a. An individual maintaining custody of an asset be entitled to access the accounting
records for the asset.
b. An individual authorizing a transaction records it.
c. An individual recording a transaction not compare the accounting record of the
asset with the asset.
d. An individual authorizing a transaction maintain a custody of the asset that
results from a transaction.

13.When auditing a company, the auditor should obtain an understanding of

internal control sufficient to:
a. Provide reasonable protection against client fraud and defalcations by client
employees.
b. Assess control risk.
c. Provide a basis for suggestions to the client for improving the accounting system.
d. Provide a method for safeguarding assets, checking the accuracy and reliability of
accounting data, promoting operational efficiency, and encouraging adherence to
prescribed managerial policies.

14.Which of the following would require auditing through the computer rather than
auditing around the computer?
a. These are small volumes of input/output data
b. The internal controls are not embedded in the computer system
c. The system is complex and includes key parts of the accounting system
d. The system was audited with computer-assisted audit techniques (CAATs) in the
previous years, revenue from the award credits is recognized at the point of sale

15.Which of the following would be considered to be an application control in an

information system?
a. Controls over system software acquisition
b. Controls pertaining to system access security
c. Controls pertaining to the follow-up of exception reports
d. Control pertaining to application systems maintenance

16.The primary responsibility for designing, implementing and maintaining internal

control, and the tone of internal control typically originates, rests with
a. Internal auditors.
b. The CFO.
c. The external auditor.
d. The management/TCWG.

17. Which of the following elements is not a part of an entity’s control?

a. Control risk
b. Control activities
c. The accounting system
d. The control environment

18. PSAs require auditors to document which of the following matters related to
the auditor’s consideration of material misstatements due to fraud?
a. Reasons supporting a conclusion that there is not a significant risk of material
improper expense recognition.
b. Procedures performed to obtain information necessary to identify and assess the
risks of material fraud.
c. Results of the internal auditor’s procedures performed to address the risk of
management override of controls.
d. Discussions with management regarding separation of duties.

19.Communication of a misstatement resulting from fraud, or suspected fraud, or error

to the appropriate level of management on a timely basis is important because it
enables management to take action as necessary. Ordinarily, the appropriate level
of management is
a. At least equal to level of persons who appear to be involved with misstatements or
suspected fraud
b. At least one level above persons who appear to be involved with the misstatement or
suspected fraud
c. The audit committee of board of directors
d. The lead of internal audit department

20.The following are examples of circumstances that may indicate the possibility that
the financial statements may contain a material misstatement resulting from fraud,
except
a. Transactions that are recorded in a complete or timely manner or are properly
recorded as to amount, accounting period, classification, or entity policy.
b. Unsupported or unauthorized balances or transactions.
c. Last minute adjustments that significantly affect financial results.
d. Tips or complaints to the auditor about alleged fraud.

21.The following are examples of circumstances that may indicate the possibility that
the financial statements may contain a material misstatement resulting from fraud,
except
a. Unwillingness by management to permit the auditor to meet privately with those
charge with governance.
b. Accounting policies that appear to be consistent with industry norms.
c. Frequent changes in accounting estimates that do not appear to result from changed
circumstances
d. Tolerance of violations of the entity’s Code of Conduct

22.Which of the following is the auditor least likely to do when aware of an

illegal act?
a. Discuss the matter with the client’s legal counsel.
b. Obtain evidence about the potential effect of the illegal act on the financial
statements.
c. Contact the local law enforcement office regarding potential criminal wrongdoing.
d. Consider the impact of the illegal act and its relationship with the company’s
management.

23.The risk of not detecting a material misstatement resulting from a fraud is higher
than the risk of not detecting a material misstatement resulting from error
because
a. The effect of fraudulent act is likely omitted in the accounting records
b. Fraud is ordinarily accompanied by acts specifically designed to conceal its
existence and auditors do not make legal determinations of whether fraud has
actually occurred
c. Fraud is always a result of connivance between or among employees
d. The auditor is responsible to detect errors but not fraud

24. The following are examples of error, except

a. A mistake from gathering or processing data from which financial statements are
prepared
b. An incorrect accounting estimate arising from oversight or misinterpretation of
facts
c. A mistake in the application of accounting principles relating to measurement,
recognition, classification, presentation or disclosure
d. Misrepresentation in the financial statements of events, transactions, or other
significant information

25.The objective of performing analytical procedures in planning an audit

engagement is to identify the existence of
a. Unusual transactions and events.
b. Recorded transactions that were not properly authorized.
c. Related party transactions.
d. Illegal acts that went undetected because of internal control weaknesses.

26.If an auditor establishes a relatively low level for materiality, then the
auditor will
a. Accumulate an undetermined amount of evidence.
b. Accumulate more evidence than if a higher level had been set.
c. Accumulate less evidence than if a higher level had been set.
d. Accumulate approximately the same evidence as would be the case were a higher level
set.

27.The senior auditor responsible for coordinating the field work usually
schedules a pre-audit conference with the audit team primarily to
a. Establish the need for using the work of specialists and internal auditors.
b. Provide an opportunity to document staff disagreements regarding technical issues.
c. Discuss staff suggestions concerning the establishment and maintenance of time
budgets.
d. Give guidance to the staff regarding both technical and personnel aspects of the
audit.

28. Which of the following statement would least likely appear in an auditor’s
engagement letter?
a. Our fees, which will be billed as work progresses, are based on the time required
by the individuals assigned to the engagement plus out-of-pocket expenses.
b. After performing our preliminary analytical procedures, we will discuss with you
the other procedure we consider necessary to complete the engagement.
c. Our audit will be made with the objective of our expressing an opinion on the
financial statements.
d. We remind you that the responsibility for the preparation of financial statements
including adequate disclosure is that of the management of the entity.

29.Which of the following is not correct regarding the communications between

successor and predecessor auditors?
a. The burden of initiating the communication rests with the predecessor auditor
b. The predecessor auditor may choose to provide a limited response to a successor
auditor.
c. The burden of initiating the communication rests with the successor auditor
d. The predecessor auditor must receive their former client’s permission prior to
divulging information to the successor auditor

30. The auditor should design the written audit program so that:
a. Each account balance will be tested under either tests of controls or tests of
transactions.
b. The audit procedures selected will achieve specific audit objectives.
c. All material transactions will be selected to substantive testing.
d. Substantive tests prior to the balance sheet date will be minimized.

31.An auditor is required to establish an understanding with the client regarding

the services to be performed for each engagement. This understanding generally
includes
a. The auditor’s responsibility for ensuring that those charged with governance are
aware of any significant deficiencies in internal control that may come to the
auditor’s attention.
b. Management’s responsibility for providing the auditor with the assessment of the
risk of material misstatement due to fraud.
c. Management’s responsibility for errors and illegal activities of employees that may
cause material misstatement.
d. The auditor’s responsibility to apply the concept of materiality in planning and
performing the audit.

32.An auditor who accepts an audit engagement and does not possess the industry
expertise of the business entity, should:
a. First inform management that an unqualified opinion cannot be issued.
b. Engage financial experts familiar with the nature of the business entity.
c. Refer a substantial portion of the audit to another CPA who will act as the
principal auditor.
d. Obtain knowledge of matters that relate to the nature of the entity's business.

33.Which of the following will an auditor least likely discuss with the former
auditor of a potential client prior to acceptance of an audit engagement?
a. Integrity of the management
b. Disagreement between the predecessor auditor and the management regarding
accounting principles
c. Fees charged for the services
d. Reasons for changing audit firms

34. With respect to errors and irregularities, the auditor should plan to
a. Search for irregularities that would have a material effect and for errors that
would have either material or immaterial effect on the financial statements.
b. Discover errors or irregularities that have either material or immaterial effect on
the financial statements.
c. Search for error that would have a material effect and for irregularities that
would have either material or immaterial effect on the financial statements.
d. Search for errors or irregularities that would have a material effect on FS.

35.A successor auditor has accepted an engagement that was previously performed by a
predecessor auditor and, prior to accepting the engagement, has communicated with
the predecessor. When the successor believes that the predecessor has performed
satisfactory previous audits, which of the following is correct?
a. Absent ongoing litigation, a predecessor must provide all working papers requested
by the predecessor.
b. A second communication is required and must include details of previous audits.
c. The client should be informed of the need to perform a detailed audit of all
opening balances.
d. Ordinarily the successor auditors may be able to accept the opening balances of the
current year with a minimum of verification work.

36.Which of the following conditions most likely would pose the greatest risk in
accepting a new audit engagement?
a. There will be a client-imposed scope limitation.
b. Staff will need to be rescheduled to cover this new client.
c. The firm will have to hire a specialist in one audit area.
d. The client's financial reporting system has been in place for 10 years.

37.Which of the following factors most likely would lead a CPA to conclude that a
potential audit engagement should not be accepted?
a. It is unlikely that sufficient evidence is available to support an opinion on the
financial statements.
b. Management continues to employ an inefficient system of information technology to
record financial transactions.
c. There are significant related party transactions that management claims occurred in
the ordinary course of business.
d. Internal control activities requiring the segregation of duties are subject to
management override.

38.After preliminary audit, arrangements have been made, an engagement

confirmation letter should be sent to the client. The letter usually would not
conclude
a. A reference to the auditor’s responsibility for the detection of errors or
irregularities
b. An estimate of the time to be spent on the audit work by audit staff and management
c. A statement that management advisory services would be made available upon request
d. A statement that a management letter will be issued outlining comments and
suggestions as to any procedures requiring the client’s attention

39.If an auditor believes that an understanding with the client has not been
established, he or she should ordinarily
a. Perform the audit with increased professional skepticism
b. Decline to accept or perform the audit
c. Assess the control risk at the maximum level and perform a primarily substantive
audit
d. Modify the scope of the audit to reflect an increased risk of material misstatement
due to fraud

40. In making client acceptance decisions the audit firm will consider:
a. inherent and control risk of the client.
b. audit risk to the CPA Firm.
c. the client’s business risk and the CPA firm’s engagement risk.
d. CPA Firms

41.Jenna, CPA, has been retained to audit the financial statements of JMV Co. JMV’s
predecessor auditor was Moshe, CPA, who has been notified by JMV that Moshe’s
services have been terminated. Under these circumstances, which party should
initiate the communication between Jenna and Moshe?
a. Jenna, the incoming auditor.
b. Moshe, the predecessor auditor
c. JMV’s controller.
d. The chairman of JMV’s board of directors

42. A CPA firm’s quality control procedures pertaining to the acceptance of a

prospective audit client would most likely include
a. Inquiry of management as to whether disagreements between the predecessor auditor
and the prospective client were resolved satisfactorily.
b. Consideration of whether sufficient competent evidential matter may be obtained to
afford a reasonable basis for an opinion.
c. Inquiry of third parties, such as the prospective client’s bankers and attorneys,
about information regarding the prospective client and its management.
d. Consideration of whether the internal control structure is sufficiently effective
to permit a reduction in the required substantive tests.
43. Which of the following is the correct order of steps in the audit process?
A. Perform tests of control
B. Develop an overall strategy for the expected conduct and scope of the
audit
C. Obtain client’s written representation
D. Prepare engagement letter
E. Perform substantive tests
a. D, A, B, E, C
b. D, B, A, E, C
c. D, B, C, A, E
d. D, B, E, A, C

44.When the auditors develops supporting evidence for amounts posted to account
balances with documentary evidence, that process is called:
a. inquiry
b. confirmation
c. vouching
d. physical examination

45.Which of the following business functions is associated with the

revenue/receipts cycle?
a. Obligations are paid to vendors and employees.
b. Resources are distributed to outsiders in exchange for promises of future payments.
c. Resources are used, held, or transformed.
d. Capital funds are received from investors and creditors.

46. Which of the following is not a common activity in the revenue/receipt cycle?
a. Order entry
b. Receiving
c. Inventory control
d. Cash collection

47.Which of the following is not likely a source of information about the

accounting system in the revenue area?
a. Direct inquiry of customers.
b. Prior experience with the client.
c. Systems flowcharts prepared by the EDP department.
d. Financial reporting manuals.

48.Which of the following gives an indication of a potential fraudulent

activity?
a. Numerous credit memoranda have been issued to the company’s biggest customer.
b. Internal auditor cannot locate several credit memoranda to support reductions of
customers’ balances.
c. The year-end bank reconciliation has no outstanding checks or deposit older than 15
days.
d. No one was absent the day the auditors handed out the paychecks.

49.Which of the following control procedures would most likely assure that
access to shipping, billing, inventory control, and accounting records is
restricted to personnel authorized by management?
a. Segregate the responsibilities for authorization, execution, and recording, and
prenumber and control the custody of documents.
b. Establish the cash receipts function in a centralized location and require a daily
reconciliation of cash receipts records and deposit slips.
c. Establish policy and procedures manuals, organization charts, and supporting
documents.
d. Periodically substantiate and evaluate the recorded account balances.

50.Assuming cash receipts from credit sales have been misappropriated, which of the
following is likely to conceal the misappropriation and unlikely to be detected?
a. Understanding the sales journal.
b. Overstating the accounts receivable control account.
c. Overstating the account receivable subsidiary ledger.
d. Overstating the cash receipts journal.

51.A company has computerized sales and cash receipts journals. The computer
programs for theses journals have been properly debugged. The auditor discovered
that the total of the accounts receivable subsidiary accounts differs materially
from the accounts receivable control account. This discrepancy could indicate
a. Lapping of receivables.
b. Credit memoranda being improperly recorded.
c. Receivables not being properly aged.
d. Statements being intercepted prior to mailing.

52.The person who opens the mail commonly prepares a remittance advice when a
customer fails to return one with the payment. Consequently, mail should be opened
by
a. Credit manager.
b. Receptionist.
c. Sales manager.
d. Accounts receivable clerk.

53.In considering internal control within the revenue/receipt cycle, what is the
purpose of a transaction walk through?
a. To gain an assurance that employees are performing assigned functions accurately.
b. To confirm the results of the auditor’s understanding of the internal control
structure.
c. To select documents for detailed tests of controls.
d. To verify the results of the auditor’s sampling plan.

54.After making the deposit, the daily cash summaries and the validated deposit slips
should be forwarded by the cashier directly to the:
a. Treasurer.
b. Accounts receivable clerk.
c. General accounting.
d. Internal auditor.

55.Alpha company uses its sales invoices for posting to perpetual inventory records.
Inadequate internal control procedures over the invoicing function allow goods to
be shipped that are not yet invoiced. The inadequate controls could cause an
a. Understatement of revenues, receivables, and inventory.
b. Overstatement of revenues and receivables, and an understatement of inventory.
c. Understatement of revenues and receivables, and an overstatement of inventory.
d. Overstatement revenues, receivables, and inventory.

56.A company policy should clearly indicate that defective merchandise returned
customers is to be delivered to the
a. Sales clerk
b. Receiving clerk.
c. Inventory control clerk.
d. Accounts receivable clerk.

57.To determine whether internal control operates effectively to minimize errors of

failure to bill a customer for a shipment, the auditor would select a sample of
transactions from the population represented by the
a. Customer order file.
b. Shipping records file.
c. Subsidiary customer accounts ledger.
d. Sales invoice.
58. The purpose of tests of controls over sipping is to determine whether
a. Billed goods have been shipped.
b. Shipments are billed.
c. Shipping department personnel are competent.
d. Credit is approved before goods are shipped.

59. The purpose of the tests of controls over billing is to determine whether
a. Billed goods have been shipped.
b. Shipments are billed.
c. Shipping department personnel are competent.
d. Credit is approved before goods are shipped.

60. An effective procedure to test for unbilled shipments is to trace from the
a. Sales journal to the shipping documents.
b. Shipping documents to the sales journal.
c. Sales journal to the accounts receivable ledger.
d. Sales journal to the general ledger sales account.

61.The accounts payable department receives a purchase order form to accomplish all
of the following except
a. comparing invoice price to purchase order price.
b. ensuring that the purchase had been properly authorized.
c. ensuring that the goods had been received by the party requesting the goods.
d. comparing quantity ordered to quantity purchased.

62. Which of the following is a primary function of the purchasing department?

a. Authorizing the acquisition of goods.
b. Ensuring the acquisition of goods of a specified quality.
c. Verifying the propriety of goods of a specified quality.
d. Reducing expenditures for goods acquired.

63.Which of the following control procedures could prevent or detect payment for goods
that have been received?
a. Counting goods when received.
b. Matching the purchase order, receiving report, and vendor’s invoice.
c. Comparing goods received with goods requisitioned
d. Verifying vouchers for accuracy and approval.

64.Omitting quantities from copies of purchase orders sent to the receiving

department is a control procedure intended mainly to
a. ensure that goods received are physically counted by receiving department
personnel.
b. identify and return damaged goods as soon as they are received.
c. provide a cross-check for verifying the accuracy of perpetual inventory records.
d. prevent theft goods by receiving department personnel.

65.Which of the following is not an appropriate activity for the treasurer’s

department?
a. Prepares checks.
b. Cancels vouchers.
c. Forwards checks to vendors.
d. Prepares vouchers.

66.As a senior auditor, you are reviewing a write-up of internal control in cash
receipts and disbursements procedures. Which of the following deficiencies alone
should cause you the least concern?
a. Checks are signed by only one person.
b. Signed checks are distributed by the controller to approved payees.
c. The treasurer fails to establish bona fide names and addresses of check payees.
d. Cash disbursements are made directly out of cash receipts.
67. Matching the suppliers’ invoice, the purchase order, and the receiving report
normally should be the responsibility of the
a. receiving department.
b. accounts payable department.
c. purchasing department.
d. treasury function.

68.Which of the following is a necessary control procedure for cash

disbursements?
a. Checks should be signed by the controller and at least one other employee of the
employee.
b. Checks should be sequentially numbered, and the numerical sequence should be
accounted for by the person preparing the bank reconciliation.
c. Checks and supporting documents should be marked “paid” immediately after the check
is returned with the bank statement.
d. Checks should be sent directly to the payee by the employee who prepares documents
that authorizes check preparation.

69. When goods are received, the receiving clerk should match the goods with the
a. purchase order and requisition.
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 documents.

70.To assure that disbursements are neither improper nor inaccurate, an entity
should require that all checks be
a. signed by an officer after supporting documentation has been examined.
b. reviewed by the treasurer before mailing.
c. numbered sequentially and accounted for by internal auditors.
d. canceled when they are returned with the bank statement.

71.Which of the following control questions relates to the existence and

occurrence objective in purchasing and accounts payable?
a. Are the purchase order forms prenumbered and the numerical sequence checked for
missing documents?
b. Does the accounting department check invoices for mathematical accuracy?
c. Does the chart of accounts and accounting manual give instructions for classifying
debit entries?
d. Are receiving reports prepared for each item received?

72.To adequately provide for the segregation of duties, the purchase

requisitions for regular inventory stock should be initiated by which of the
following departments?
a. Purchasing department.
b. Sales department.
c. Warehouse.
d. Shipping.

73.Which of the following is an internal control procedure that would prevent a paid
disbursement voucher from being presented for payment a second time?
a. Vouchers should be prepared by individuals who are responsible for signing
disbursement checks.
b. Disbursement vouchers should be approved by at least two responsible management
officials.
c. The date on a disbursement voucher should be within a few days of the date the
voucher is presented for payment.
d. The official signing the check should cancel the paid voucher after examining the
documentation supporting the disbursement.

74.Purchase cutoff procedures should be designed to test that merchandise is

included in the inventory of the client when the client:
a. Has paid for the merchandise.
b. Has physical possession of the merchandise.
c. Holds legal title to the merchandise.
d. Holds the shipping documents for the merchandise issued in the company’s name.

75.Only one of the following four statements which compare confirmation of

accounts payable with suppliers and confirmation of accounts receivable with
customers is true. The true statement is that
a. confirmation of accounts payable with suppliers is a more widely accepted auditing
procedure than is confirmation of accounts receivable with customers.
b. it is less likely that the confirmation request sent to the supplier will show the
amount owed him or her than that the request sent to the customer will show the
amount due from him or her.
c. statistical sampling techniques are more widely accepted in the confirmation of
accounts payable than in the confirmation of accounts receivable.
d. compared to the confirmation of accounts payable, the confirmation of accounts
receivable will tend to emphasize accounts with zero balances at the balance sheet
date.

76.Which of the following audit procedures is not designed primarily to test for the
correctness of purchases and sales cutoff?
a. Observe shipping and receiving areas during physical inventory observation and
relate goods to the last receipt and shipment for the year. Determine that these
are the final entries in the purchases and sales records for the year.
b. Examine sales and purchases invoices for a few days before and after year end.
Compare with dates of receipt and shipment with freight terms to determine that the
transactions were recorded in the proper accounting period.
c. Record last document numbers (sales invoice, voucher, check, receiving report) for
the year and relate to goods in shipping and receiving areas at year end.
d. Trace client’s unit costs to the auditor’s copies of audited price lists.

77.Which of the following procedures would help an auditor test for

overstatements of accounts payable at the balance sheet date?
a. Trace entries in the cash disbursements records to items in the accounts payable
trial balance.
b. Agree items in the file of unmatched receiving reports to the accounts payable
balance.
c. Trace items in the accounts payable trial balance to documentation contained in
canceled voucher packages.
d. Coordinate cutoff tests performed for receiving and for shipping.

78.When an auditor selects a sample of items form the vouchers payable register for
the last month of the period being audited and traces the items to underlying
documents, the auditor is gathering evidence primarily in support of the assertion
that
a. Recorded obligations were paid.
b. Incurred obligations were recorded in the correct period.
c. Recorded obligations were valid.
d. Cash disbursements were recorded as incurred obligations.

79.Unrecorded liabilities are most likely to be found during the review of which of
the following documents?
a. Unpaid bills
b. Bills of lading
c. Shipping records
d. Unmatched sales invoices

80.Accrued liabilities generally differ from accounts payable in that accrued

liabilities:
a. Accumulate over time.
b. Are usually confirmed at year-end.
c. Can be found by a review of unpaid invoices.
d. Are never included in cost of goods sold.