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18. ABC is a maker of old-styled Nokia-like cellphones. Due to fierce competition, ABCs market share had fallen from 80% in 2011 to 25% in 2015. In FY2016, out of 4 production lines, two lines are idle and covered by dust. The firm stopped depreciation on the two idle lines and changed the useful life of the remaining two lines from 5 years to 10 years. Auditor was unhappy with these changes, but after a long debate, two sides still could not reach agreement. The auditor is more likely to issue which kind of audit opinion:

A) Standard unmodified.

B) Standard unmodified opinion with an explanatory paragraph.

C) Qualified opinion with explanation.

D) Disclaimer with explanation on the disagreements.

19. An auditor has identified numerous credits to property, plant, and equipment cost account. Which of the following is most likely?

A) The estimated remaining useful lives of equipment were increased.

B) Company acquired new machinery.

C) Plant assets were retired during the year.

D) Manufacturing overhead allocations were revised at year-end.

20. Which of the following statements is generally not true for property, plant, and equipment as compared to most current asset accounts?

A) Relatively less transactions occur in property, plant, and equipment during the year.

B) PPE assets ordinarily have relatively longer useful lives.

C) A property, plant, and equipment cutoff error near year-end has a more significant effect on net income.

D) Property, plant, and equipment accounts typically have a higher dollar value.

21. When one CPA audits accounts payable for a publicly-traded firm, the most significant assertion relating to accounts payable is:

A) Existence.

B) Valuation

C) Completeness.

D) Rights and presentation.

22. For good internal control, the receiving department should be responsible for

A) finding the lowest cost vendor.

B) comparing quantity of goods received with quantity listed in the purchase order.

C) setting specifications for acquired raw material or components.

D) authorizing the acquisition of goods.

23. Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because:

A) This is a duplication of cutoff tests.

B) Accounts payable balances at the balance sheet date may not be paid before the audit is completed.

C) Correspondence with the audit clients attorney will reveal all legal action by vendors for nonpayment.

D) There is likely other reliable external evidence available to support the balance.

24. When an auditor finds a debit to accounts payable, which of the following accounts is most likely to be credited?

A) Accounts Receivable.

B) Accrued liabilities.

C) Cash.

D) Cost of goods sold.

25. For effective internal control, the accounts payable accounting clerk should compare the information on each vendors invoice with the:

A) Receiving report and the purchase order.

B) Purchase order and vendors packing slip.

C) Purchasing order and the voucher.

D) Receiving report and vendors packing slip.

26. Which of the following statements is correct regarding accounts payable audit?

A) A judgment whether an unrecorded payable should be recorded before the financial statements are prepared depends entirely upon the source of the payable.

B) Because it is generally more difficult to discover a transaction that has not been recorded than to discover one that has been recorded incorrectly, the audit objective of completeness drives many of the substantive procedures applied to these balances.

C) The confirmation of accounts payable selected from the year-end trial balance of such accounts is most effective in discovering unrecorded liabilities.

D) Unrecorded payables are often discovered through examining vouchers payable entered into the voucher register prior to the balance sheet date.

27. You are the senior auditor in charge of the 2014 Winston Inc. audit. Winston is a publicly traded company listed at NYSE. Its management are not shareholders of Winston and are rewarded with salary and bonus based on accounting performance. You will most likely perform extensive tests for possible understatement of

A) Revenues.

B) Assets.

C) Liabilities.

D) Shareholders contributed Capital.

28. Unrecorded liabilities are most likely to be found during the review of which of the following documents?

A) Unpaid bills.

B) Shipping records.

C) Bills of lading.

D) Unmatched sales invoices.

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