1. Which of the following is correct regarding 4.

Which of the following is correct regarding

the acquisition cycle? the purchase order form forwarded to the
receiving department?
a. The department requesting for the
items shall request for the goods and a. It is only copy of the purchase order
order them from the vendors. prepared by the purchasing
department.
b. Specific authorization to request for
items shall be obtained regardless of b. It shall clearly include the name of the
the peso amount of the items. vendor and the number of items
ordered.
c. The department in need of the goods
to be acquired shall approve the c. Indicating the quantity ordered in the
purchase form. form usually causes underpayment.

d. The purchasing department fills up the d. It is usually a “blind copy” designed to

purchase order form and sends them to require the receiving department to
authorized suppliers. count the goods received.

2. The stockroom serving as the company’s 5. The purchase order forwarded to the
warehouse for items acquired from receiving department indicates the vendor’s
wholesalers and ready to be sold to name and the quantities of materials
distributors is out of sufficient stock. Which ordered. This may possibly cause of
of the following function is incorrectly
performed? a. Payment for unauthorized items

a. The stockroom personnel prepare the b. Payment for unauthorized vendors

requisition form.
c. Overpayment for incomplete deliveries
b. The purchasing department acquires
d. Delay in recording purchases
the goods.
6. Upon receipt of goods, the receiving clerk
c. The receiving department accepts and
should match the goods with the
counts the goods.
a. Payment order and requisition
d. The accounting department pays for
the invoice due. b. Vendor’s invoice and the receiving
report
3. Employees in the same department most
likely would approve purchase orders, and c. Vendor’s shipping document and the
also purchase order

a. Reconcile the open invoice file d. Receiving report and the vendor’s
shipping documents
b. Inspect goods upon receipt
7. A receiving report is required before
c. Authorize requisition of goods
recording purchases in the journals to
d. Negotiate terms with vendors ensure that
 a. Only authorized purchases are a. Stamp, perforate, or otherwise cancel
recorded in the register supporting documentation after
payment is mailed- treasury dept.
b. All purchases approved have already
been recorded b. Ascertain that each requisition is
approved as to price, quantity and
c. All goods received by the entity are quality by an authorized employee-
recorded in the books purchasing department

d. The purchases recorded in the journals c. Obliterate the quantity ordered on the
have already been received receiving department copy of the
purchase order-purchasing dept
8. Receiving reports are examined and traced
to the recorded items in the purchases d. Establish the agreement of the
journals to ensure that vendor’s invoice with the receiving
report and purchase order
a. Only authorized purchases are
recorded in the register 11. The mailing of disbursement checks and
remittance advices should be controlled by
b. All purchases approved have already
the employee who
been recorded
a. Approved the vouchers for payment
c. All goods received by the entity are
recorded in the books b. Matched the receiving reports,
purchase orders and vendors invoices
d. The purchases recorded in the journals
have already been received c. Verified the mathematical accuracy of
the vouchers and remittance advices
9. The accounts payable department receives
a purchase order form to accomplish all of d. Signed the checks last
the following except
12. To assure that all purchases are authorized
a. Comparing invoice price to purchase before payment is made, accounting
order price department personnel should match the
vendor’s invoice to
b. Ensuring that the purchase had been
properly authorized a. Purchase requisition

c. Comparing quantity ordered to b. Receiving report

quantity purchased
c. Purchase order
d. Ensuring that the goods had been
received by the party requesting the d. Voucher
goods
13. To assure that all purchases are received
10. Accounts payable department generally before payment is made, accounting
should department personnel should match the
vendor’s invoice to

a. Purchase requisition
 b. Receiving report 17. The payroll and personnel cycle begins with
which of the following events?
c. Purchase order
a. Interviewing job candidates
d. Voucher
b. Hiring a new employee
14. An entity’s internal control requires for
every check request that there be an c. Existing employees submitting requests
approved voucher, supported by a pre- for payment for work performed
numbered purchase order and a pre-
numbered receiving report. To determine d. Issuance of paychecks
whether checks are being issued for
18. Which of the following is incorrectly
unauthorized expenditures, an auditor most
performed in the personnel and payroll
likely would select items for testing from
cycle?
the population of all
a. The HR department hires and fires
a. Purchase order
employees.
b. Cancelled checks
b. The HR approves pay rates and
c. Summarization changes to pay rates.

d. Completeness c. The production department approves

time card and job tickets.
15. The internal control which requires that
“checks are pre-numbered and accounted d. The accounting department processes
for” satisfies the objective of the payroll and distributes the
paychecks.
a. Accuracy
19. Which of the following procedures is most
b. Existence likely to ensure that employee job time
tickets are accurate?
c. Summarization
a. Check the employee clock cards against
d. Completeness job time tickets

16. Which of the following tests of control is at b. Keep employment information in the
least useful in assessing the transaction- human resource department
related audit objective of existence?
c. Make sure that the number of hours
a. Examine documents in voucher per week on each employee’s job time
package for existence ticket is 40

b. Examine supporting documents for d. Approve the payroll voucher in the

indication of approval accounts payable department

c. Attempt supporting documents with 20. For which of the following functions is the
valid and invalid use of pre-numbered documents least
important?
d. Account for sequence of vouchers
 a. Prenumbered sales involves in the sales 23. Before accepting an engagement to audit a
function new client, a CPA is required to obtain

b. Prenumbered receiving reports in the a. An understanding of the prospective

acquisitions function client’s industry and business

c. Prenumbered deposit slips in the cash b. The prospective client’s signature to

receipts function the engagement letter

d. Prenumbered time cards in the payroll c. A preliminary understanding of the

function prospective client’s control
environment
21. Which of the following controls most likely
would prevent direct labor hours from d. The prospective client’s consent to
being charged to manufacturing overhead? make inquiries of the predecessor
auditor, if any
a. Periodic independent counts of work in
process for comparison to recorded 24. Before accepting an audit engagement, a
amounts successor auditor should make specific
inquiries of the predecessor auditor
b. Comparison of daily journal entries regarding
with approved production orders
a. Disagreements the predecessor had
c. Use of time tickets to record actual with the client concerning auditing
labor worked on production orders procedures and accounting principles

d. Reconciliation of work-in-process b. The predecessor’s evaluation of

inventory with periodic cost budgets matters of continuing accounting
significance
22. Which of the following factors would most
likely cause a CPA to decide not to accept a c. The predecessor’s assessments of
new audit engagement? inherent risk and judgments about
materiality
a. The CPA’s lack of understanding of the
prospective client’s internal auditor’s 25. The auditor should document the
computer-assisted audit techniques. understanding established with a client
through a (n)
b. Management’s disregard of its
responsibility to maintain an adequate a. Oral communication with the client
internal control environment.
b. Written communication with the client
c. The CPA’s lack inability to determine
whether related-party transactions c. Written or oral communication with the
were consummated on terms client
equivalent to arm’s-length transactions.
d. Completely detailed audit plan
d. Management’s refusal to permit the
CPA to perform substantive tests 26. Which of the following matters is generally
before the year-end. included in an auditor’s engagement letter?
 a. Management’s responsibility for the making sure they are included in accounts
entity’s compliance with laws and payable, the auditor is testing for
regulations
a. Fictitious or overstated liabilities
b. The factors to be considered in setting
preliminary judgments about b. Unrecorded obligations
materiality
c. Theft of merchandise by employees
c. Management’s vicarious liability for
d. Kiting
illegal acts committed by its employees
30. A client erroneously recorded a large
d. The auditor’s responsibility to search
purchase twice. Which of the following
for significant internal control
internal control measures would be most
deficiencies
likely to detect this error in a timely and
27. Arrangements concerning which of the efficient manner?
following are least likely to be included in
a. Footing the purchases journal
engagement letter?
b. Sending written quarterly confirmations
a. A predecessor auditor
to all vendors
b. CPA investment in client securities
c. Reconciling vendor’s monthly
c. Fees and billing statements with subsidiary payable
ledger accounts
d. Other services to be provided in
addition to the audit d. Tracing totals from the purchase
journal to the ledger accounts
28. Which of the following documentation is
not required for an audit in accordance with
generally accepted auditing standards?

a. A written audit plan setting forth the

procedures necessary to accomplish
the audit’s objectives

b. An indication that the accounting

records agree or reconcile with the
financial statements

c. A client engagement letter that

summarizes the timing and details of
the auditor’s planned fieldwork (not
present in engagement letter)

d. The assessment of the risks of material

misstatement

29. By tracing receiving reports issued at and

before year-end to vendor’s invoices and