Auditing Control Activities Quiz

The process of gathering evidence about a company's internal controls to understand their effectiveness.

Evaluating the risk of material misstatement in the financial statements related to internal controls.

Procedures that help determine the effectiveness of internal controls. Examples include observing procedures, examining documents, and interviewing personnel.

A document that formally requests the purchasing department to purchase goods or services. It should be approved by a supervisor with budgetary responsibility.

A document created upon receipt of goods, listing the quantities and types of goods received from a vendor.

A document that summarizes the details of a purchase, including the vendor, amount owed, and payment date. It usually serves as authorization to record and pay a liability.

A computer file that stores data on approved purchase vouchers for goods that have been received. It's used to update accounts payable, inventory, and the general ledger.

Distinct individuals or departments should handle the processes of requesting goods and services, receiving goods, and paying for them.

The process of examining the general ledger for unusual or suspicious entries.

A list of all amounts owed by a company at a specific point in time, usually the balance sheet date.

The ratio of the cost of goods sold to the average accounts payable balance. A high ratio indicates that a company is paying its suppliers quickly.

A test to verify that all purchases made before the balance sheet date are recorded in the correct period.

A test to verify that all cash disbursements made before the balance sheet date are recorded in the correct period.

Goods shipped FOB shipping point are included in the buyer's inventory and A/P, while goods shipped FOB destination point are included in the seller's inventory until receipt by the buyer.

An auditor's test to verify the existence of accounts payable by matching recorded payables to supporting documentation, such as invoices and purchase orders.

This test involves tracing dated receiving reports to voucher register entries and vouching recorded entries to supporting documentation. It typically covers a period of 5 to 10 business days before and after the balance sheet date.

The auditor verifies if different people are responsible for key stages of fixed asset management, ensuring no single person has complete control.

This involves checking if the company has a formal system for proposing, approving, and tracking capital expenditures.

The auditor examines if written authorization from a senior manager is required to proceed with fixed asset acquisitions.

The auditor verifies if the company has procedures for: inviting bids, selecting suppliers, approving prices, payment terms, and ensuring timely delivery.

The auditor checks if competitive bids are used for purchasing, and if not, why.

The auditor verifies that the specifications of received assets are compared to purchase orders, and rejected assets result in timely debit notes.

The auditor examines if periodic comparisons of actual expenditures are made against the capital budget, and any deviations require approval.

The auditor confirms if the company has a system for getting approval before moving assets from one department to another.

Ensuring the organization keeps track of assets leased or used but not owned, like rented equipment.

Maintaining a well-organized register of documents proving ownership of assets, like title deeds.

Safeguarding important documents relating to asset ownership, like title deeds, and ensuring they are regularly checked for authenticity.

The act of identifying fixed assets within an organization and assigning them unique identifiers.

Implementing security measures to protect fixed assets from damage, theft, or unauthorized access. This might include alarms, locks, or security personnel.

Verifying the physical existence of assets by comparing them to records, especially for assets held by external parties.

Regularly assessing assets for potential damage, obsolescence, or inactivity, and taking appropriate action to manage these issues.

The process of examining the organization's internal audit procedures for fixed assets and determining their effectiveness.

The process of examining and verifying the accuracy of the records for property, plant, and equipment.

A summary table that shows all the changes in a company's property, plant, and equipment holdings over a period of time.

Verifying that the assets recorded on the company's books actually exist.

Verifying that the company has legal title or the right to use the recorded fixed assets.

Determining if the fixed assets are valued at the appropriate amount, including depreciation.

Making sure the company's fixed assets are used for the stated purpose and are operational.

Verifying that the depreciation expense for fixed assets is accurate and matches the accounting policies.

Auditing the company's policies and procedures for acquiring, using, and managing their fixed assets.

Auditors examine whether the depreciation methods are designed to spread the cost of assets evenly over their useful life.

Auditors assess whether the company has considered factors that might accelerate depreciation, such as extra production shifts or technological advancements.

Auditors compare the depreciation rates used in previous years to identify any significant changes and investigate the reasons behind them.

Auditors check if the company's depreciation calculations are accurate by tracing them back to individual asset records.

Auditors verify that the company's depreciation expense matches the amount credited to accumulated depreciation.

Auditors examine the records related to the disposal of assets to ensure that depreciation is properly adjusted.

Auditors analyze the summary of accumulated depreciation in the general ledger to ensure it matches the details in the subsidiary records.

Auditors test the calculations of depreciation provisions for a representative sample of assets to ensure they are accurate.