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    Audit: observation, fixed assets, unrecorded transactions

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    Please help with these four questions

    _____ 12. The use of a "blind" purchase order is designed to prevent errors by the:

    A. Purchase department

    B. Receiving department

    C. Stores department

    D. Accounting department

    _____13. Which of the following best describes the auditors' typical observation of plant and equipment?

    A. The auditors observe a physical inventory of plant and equipment, annualy.

    B. The auditors observe all additions to plant and equipment made during the year.

    C. The auditors observe all major plant and equipment items in the clients' accounts each year.

    D. The auditors observe major additions to plant and equipment made during the year.

    _____ 14. A continuing audit client's property, plant and equipment and accounts have approximately the same year end balance. In this circumstance, when compared to property, plant and equipment one would normally expect the audit of accounts to receivable to require:

    A. More audit time

    B. Less audit time

    C. Approximately the same amount of audit time

    D. Similar confirmation procedures

    _____ 16. Which of the following procedures for detecting unrecorded transactions at the clients December 31 year end is least likely to result in discovery of an unrecorded year end account payable?

    A. Examination of invoices received after year-end.

    B. Examination of vouchers payable entered in the January voucher register

    C. Examination of January receiving reports prepared for goods shipped FOB destination in December to the client

    D. Confirmation of year end accounts payable

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    Solution Preview

    12. The blind purchase order is one which is sent through the system to test the receiving department procedures. Blind means it isn't a real one but simply a test run. Answer is B.

    13. An auditor would not normally observe all the equipment each year, but would rather place reliance on the prior year workpapers and only test the current year additions. D makes the ...

    Solution Summary

    The explanations for the questions eliminate all the incorrect answers.