AICPA AICPA Certifications CPA-TEST Questions & Answers

• Question 1001:

  Which of the following internal control activities is not usually performed in the vouchers payable department?

  A. Matching the vendor's invoice with the related receiving report.

  B. Approving vouchers for payment by having an authorized employee sign the vouchers.

  C. Indicating the asset and expense accounts to be debited.

  D. Accounting for unused prenumbered purchase orders and receiving reports.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. Accounting for unused prenumbered purchase orders and receiving reports is an

  effective control, but it would not typically be performed in the vouchers payable department.

  Choice "a" is incorrect. Reconciling the vendor invoice with the related receiving report is typically

  performed by a vouchers payable clerk.

  Choice "b" is incorrect. The vouchers payable department is responsible for approving vouchers for

  payment.

  Choice "c" is incorrect. Indicating the asset and expense accounts to be debited is not an internal control

  procedure.

• Question 1002:

  In assessing control risk for purchases, an auditor vouches a sample of entries in the voucher register to

  the supporting documents. Which assertion would this test of controls most likely support?

  A. Completeness.

  B. Occurrence.

  C. Accuracy.

  D. Rights and obligations.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. Vouching to supporting documents tests the occurrence assertion.

  Choice "a" is incorrect. Tracing from supporting documentation to the voucher register would support the

  completeness assertion.

  Choice "c" is incorrect. The accuracy assertion would be tested by examining the details of the supporting

  documents.

  Choice "d" is incorrect. The rights and obligations assertion does not relate to transactions and events.

• Question 1003:

  Which of the following procedures most likely would not be an internal control designed to reduce the risk of errors in the billing process?

  A. Comparing control totals for shipping documents with corresponding totals for sales invoices.

  B. Using computer programmed controls on the pricing and mathematical accuracy of sales invoices.

  C. Matching shipping documents with approved sales orders before invoice preparation.

  D. Reconciling the control totals for sales invoices with the accounts receivable subsidiary ledger.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. Reconciling control totals for sales invoices with the accounts receivable subsidiary

  ledger is not an effective control related to the billing process, since errors that exist in the preparation of

  invoices would likely carry through to accounts receivable.

  Choice "a" is incorrect. Comparing shipping totals with sales invoice totals is an effective control to reduce

  billing errors.

  Choice "b" is incorrect. Computer controls related to pricing and mathematical accuracy will reduce billing

  errors.

  Choice "c" is incorrect. Matching shipping documents with approved sales orders ensures that invoices are

  properly authorized and only goods ordered have been shipped.

• Question 1004:

  Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments?

  A. Accounts receivable.

  B. Credit.

  C. Accounts payable.

  D. Treasurer.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. The treasurer does not perform duties that are incompatible with authorizing writeoffs

  since he or she is usually not involved with sales transactions or recordkeeping.

  Choice "a" is incorrect. Recording accounts receivable and authorizing write-offs would constitute an

  improper segregation of duties.

  Choice "b" is incorrect. Granting credit and authorizing write-offs represents an improper segregation of

  duties since non-existent customers could have credit authorized and then have their accounts written off.

  Choice "c" is incorrect. The accounts payable department is typically involved in the expenditure cycle, not

  the revenue cycle.

• Question 1005:

  To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is:

  A. Supported by a vendor's invoice.

  B. Stamped "paid" by the check signer.

  C. Prenumbered and accounted for.

  D. Approved for authorized purchases.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. By stamping the voucher "paid," the check signer cancels the voucher so it cannot be

  resubmitted for payment.

  Choice "a" is incorrect. Even invoices that are supported by prenumbered sales invoices can be

  resubmitted for payment if they are not canceled, resulting in duplicate payments.

  Choice "c" is incorrect. Accounting for the sequence of prenumbered vouchers would only test whether all

  vouchers are present. It would not prevent a voucher from being paid twice.

  Choice "d" is incorrect. Proper authorization would help ensure that payments were properly authorized,

  but would not prevent duplicate payments.

• Question 1006:

  Sound internal control dictates that, immediately upon receiving checks from customers by mail, a responsible employee should:

  A. Add the checks to the daily cash summary.

  B. Verify that each check is supported by a prenumbered sales invoice.

  C. Prepare a duplicate listing of checks received.

  D. Record the checks in the cash receipts journal.

  Correct Answer: C

  Explanation:

  Choice "c" is correct. Upon receipt of cash, a remittance listing should be prepared.

  Choice "a" is incorrect. Recording the check in the daily cash summary would ordinarily be done by a

  second party after the initial listing has been prepared.

  Choice "b" is incorrect. Verifying that each check is supported by a valid invoice is not necessary.

  Choice "d" is incorrect. Recording the check in the cash receipts journal would ordinarily be done by a

  second party after the initial listing has been prepared.

• Question 1007:

  An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to:

  A. Identify unusually large purchases that should be investigated further.

  B. Verify that cash disbursements were for goods actually received.

  C. Determine that purchases were properly recorded.

  D. Test whether payments were for goods actually ordered.

  Correct Answer: C

  Explanation: Choice "c" is correct. In general, an audit procedure can be restated as the question to be answered. In this case, tracing a sample of purchase orders and related receiving reports to the purchases journal and the cash disbursements journal seeks to answer the question, "Were all purchases properly recorded?" (the completeness assertion). Choice "a" is incorrect. Tracing a sample of source documents to summary records would not identify unusually large transactions requiring additional attention. Choice "b" is incorrect. In order to verify that cash disbursements were for goods actually received, a sample of cash disbursements should be vouched back to receiving reports. Choice "d" is incorrect. In order to verify that cash disbursements were for goods actually ordered, a sample of cash disbursements should be vouched back to purchase orders.

• Question 1008:

  Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?

  A. Vouch a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file.

  B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance.

  C. Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.

  D. Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions.

  Correct Answer: C

  Explanation: Choice "c" is correct. The auditor is able to detect liabilities not recorded at year-end by comparing cash payments made after the balance sheet date to the related receiving reports and vendor invoices; any payments made on transactions dated before year-end reflect a liability that should have been recorded. Choice "a" is incorrect. Vouching a sample of recorded accounts payable entries to unmatched receiving reports does not test the completeness of the listing. Unrecorded liabilities would not be included in recorded accounts payable entries. Choice "b" is incorrect. Purchase orders issued after year-end should not be included in the year-end balance of accounts payable. This would be an example of an overstated liability, rather than an unrecorded one. Choice "d" is incorrect. Examination of cash disbursements entries made just prior to the balance sheet date relates to liabilities that have been paid, which would not be considered to be outstanding liabilities at year-end.

• Question 1009:

  The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may:

  A. Not believe that the bank is obligated to verify confidential information to a third party.

  B. Sign and return the form without inspecting the accuracy of the client's bank reconciliation.

  C. Not have access to the client's cutoff bank statement.

  D. Be unaware of all the financial relationships that the bank has with the client.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. A bank employee may not have access to all information about transactions with the

  audit client and thus may be unaware of all the financial relationships the bank has with the client.

  Choice "a" is incorrect. Standard bank confirmations contain a signature from an authorized client

  employee and are a very commonly used audit procedure. It is unlikely that a bank would refuse the

  request since it has been authorized by the client.

  Choice "b" is incorrect. The confirmation is used to verify the bank balance as of year-end. Bank

  employees generally would not have access to the client's bank reconciliation.

  Choice "c" is incorrect. Even though it is likely that the bank would have access to a cutoff bank statement,

  the detail on this statement is unnecessary to confirm the final balance.

• Question 1010:

  Which of the following sets of information does an auditor usually confirm on one form?

  A. Accounts payable and purchase commitments.

  B. Cash in bank and collateral for loans.

  C. Inventory on consignment and contingent liabilities.

  D. Accounts receivable and accrued interest receivable.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. The standard AICPA bank confirmation form includes spaces for the bank to confirm

  both cash balances on deposit at the bank and collateral pledged on loans originating from the bank.

  Choice "a" is incorrect. Purchase commitments are not typically confirmed on an accounts payable

  confirmation request.

  Choice "c" is incorrect. Contingent liabilities (confirmed in a letter of inquiry to the client's attorney or bank)

  and inventory on consignment (confirmed with the consignee) are not confirmed together.

  Choice "d" is incorrect. Accrued interest receivable (usually on investments held by a trust company) is not

  typically confirmed along with trade accounts receivable.