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13) Custody is transferred from the warehouse to the shipping department upon authorization of the

A. invoice.

B. customer order.
C. purchase order.

D. shipping order.

14) The most reliable evidence comes from

A. examining a sales invoice.
B. a negative confirmation.

C. a blank confirmation.

D. a positive confirmation.

15) Approval of credit sales by the credit department supports the assertion of

A. valuation or allocation.

B. existence or occurrence.

C. rights and obligations.

D. completeness.

16) A proof of cash is normally used

A. when control risk for cash is low.

B. for all engagements.

C. when lapping is suspected.

D. to test the transactions process when controls over cash are weak.

17) An enlightened management may decrease the probability of fraud in the company best by

A. stressing negative observations on their work to increase performance.

B. restricting authority for profit objective determination to top management.

C. establishing work teams that share responsibilities, performance, and bonuses based on collective efforts.
D. measuring performance and awarding bonuses on the basis of short-term operating results.

18) When counting cash on hand, the auditor must exercise control over all cash and other negotiable assets to prevent

A. substitution of stolen funds.
B. theft.

C. kiting.

D. lapping.

19) Inventory must be recorded when

A. the related revenue is recognized.

B. the company has title to it.

C. it is shipped from the vendor.

D. it is received.

20) Responsibility for the physical inventory count lies with the

A. client.

B. vendor.

C. inventory specialist.
D. auditor.

21) The source of authorization for preparation of materials requisitions is the

A. production plan.
B. bill of materials.
C. sales forecast.

D. purchase order.

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Solution Summary

Custody is transferred from the warehouse to the shipping department upon authorization of the

A. invoice.

B. customer order.
C. purchase order.

D. shipping order.

14) The most reliable evidence comes from

A. examining a sales invoice.
B. a negative confirmation.

C. a blank confirmation.

D. a positive confirmation.

15) Approval of credit sales by the credit department supports the assertion of

A. valuation or allocation.

B. existence or occurrence.

C. rights and obligations.

D. completeness.

16) A proof of cash is normally used

A. when control risk for cash is low.

B. for all engagements.

C. when lapping is suspected.

D. to test the transactions process when controls over cash are weak.

17) An enlightened management may decrease the probability of fraud in the company best by

A. stressing negative observations on their work to increase performance.

B. restricting authority for profit objective determination to top management.

C. establishing work teams that share responsibilities, performance, and bonuses based on collective efforts.
D. measuring performance and awarding bonuses on the basis of short-term operating results.

18) When counting cash on hand, the auditor must exercise control over all cash and other negotiable assets to prevent

A. substitution of stolen funds.
B. theft.

C. kiting.

D. lapping.

19) Inventory must be recorded when

A. the related revenue is recognized.

B. the company has title to it.

C. it is shipped from the vendor.

D. it is received.

20) Responsibility for the physical inventory count lies with the

A. client.

B. vendor.

C. inventory specialist.
D. auditor.

21) The source of authorization for preparation of materials requisitions is the

A. production plan.
B. bill of materials.
C. sales forecast.

D. purchase order.

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