ACC311-OLD MIDTERM PAPER 2

ACC311-MIDTERM PAPER SOLVED BY AHSAN

Question:

Test of controls comprise of testing of all EXCEPT

Options: Design Implementation Operating efficiency

Operating effectiveness

Question:

Analytical procedures are carried out for which one of the following purposes?

Options:

To reduce detection risk

To assess inherent risk

To reduce control risk

To determine detection risk

Question:

Nature of audit procedure’ refers to which one of thefollowing desc ription?

Options:

It refers to the purpose i.e. (tests of controls or substantiveprocedures) and their type that is inspections observation inquiry confirmation recalculation re- performances or analytical procedures

.        It refers when audit procedures are to be performed or the period or date to which the audit evidence applies

.        It refers to sample size or number of observations of a control activity (quantity of audit evidence)

.        It refers to the nature of testingand their procedures that is designing structuring and compiling work to be done

Question:

The auditors are required to perform tests of controls when

Options:

The internal controls are operating inefficiently

Substantive procedures alone provide sufficient appropriate audit evidence at the assertion level.

Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.

Analytical procedures alone do not provide sufficient appropriate audit evidence at the assertion level.

Question:

Following desc riptions are the examples of substantive testingEXCEPT:

Options:

Test of account balances to verify the correctness of the amounts

Verification that an operating system and/or applications are configured appropriately to the companies needs

Review of minutes of directors; meetings and inquiry

Use of statistical sampling to determine the accuracy of financial statement figures

Question:

How often the Bank reconciliations should be prepared?

Options: Weekly Monthly

Quarterly 

Annually

Question:

How often Inventory levels should be checked against the inventory records in order to

keep its control effectively?

Options: Rarely Periodically 

Never

Daily

Question:

What auditors seek in the register of noncurrent assets foreach major group of assets?

Details of each item its cost and accumulated depreciation

Details of each item its cost anddepreciation

Details of each item its cost and capital investment expected returns

Question:

Which one of the following may NOT consist of any verification methods?

Options:

Closing balance Acquisitions Disposals Reconciliation

Question:

Which one of the following may not be any matter relevant to verification of assets?

Options: Taxation Vouching 

        Insurance

The letter of representation

Question:

Which one of the following aspects of assets must be verified?

Options:

Cost and authorization 

Value andexistence 

Beneficial investment

Presentation in the accounts

Question:

An Automobile Company hires auditors at theyear end. Auditors are at the stageof

verification and vouching of company’s financials. Before examining the equity section they develop general aspects concerning the owner’s equity. In your opinion which one of thefollowing aspects may NOT be considered by the auditors duringthis assessment?

Capital stock is enough to execute the company’s financial needs

Reserves are properly classified and presented

Movements in reserves are properly authorized

Question:

Non current assets manufactured or constructed by the company itself should reflect

which types of costs in the costing records?

Options:

Direct costs plus relevant overhead but not include any profit

Direct costs plus relevant overhead and any profit earned on it 

Indirect costs plus relevant overhead but not include any profit 

Indirect costs plus relevant overhead and any profit earned on it

Question:

Which one of the following matters should be included in the letter of representation?

Options:

Existence of any immaterial mistake in the statements 

Existence of any fraud or error in the statementsCompany’s growth trend in the future in figures Market value of the company’s stock

Question:

Who should prepare the annual capital expenditure budgets of the company in order to

keep effective?

Options:

Someone directly responsible to theshareholders

Someone directly responsible for goods delivery to the customers 

Someone directly responsible to the board of directors 

Someone directly responsible to deal with the suppliers