Name: _________________________________________________ Date: _____________________ Score: __________________

AUDIT
Substantive Test of Inventories and Cost of Sales
Substantive Test of Investments
Substantive Test of PPE
Mock Board Training Program 2024-2025

1. What is the most likely course of action that an auditor would take after determining that performing substantive tests on
inventory will take less time than performing tests of controls?
a. Assess control risk at a low level
b. Perform both tests of controls and substantive tests on inventory
c. Perform only substantive tests on inventory
d. Perform only tests of controls on inventory
2. From the auditor’s point of view, inventory counts are more acceptable prior to the year-end when
a. Internal control is weak
b. Accurate perpetual inventory records are maintained
c. Inventory is slow-moving
d. Significant amounts of inventory are held on consignment basis
3. Which of the following is true about the auditor’s observation of the client’s physical inventory?
a. The count must be made at year-end
b. The auditor should supervise the client’s personnel
c. The auditor’s observation addresses the existence assertion
d. The auditor should justify any omission of the observation in the audit report
4. Which of the following audit procedures most likely would provide assurance that a manufacturing entity’s inventory valuation
is proper?
a. Testing the entity’s computation of standard overhead rates
b. Obtaining confirmation of inventories pledged under loan agreements
c. Reviewing a cutoff procedure for inventories
d. Tracing test counts to the entity’s inventory listing
5. The client’s physical count of inventories is lower than the inventory quantities in the perpetual records. This could be the
result of a failure to record:
a. Purchases
b. Sales
c. Purchase discounts
d. Sales discounts
6. Which of the following best describes the reason that the auditors record their inventory test counts in the working papers?
a. To document every test count
b. For subsequent comparison with the completed inventory listing
c. To document compliance with generally accepted accounting principles
d. For use in subsequent audits
7. An auditor has accounted for a sequence of inventory tags and is now going to trace information on a representative number
of tags to the inventory summary sheets. Which assertion does this procedure relate to most directly?
a. Completeness
b. Legality
c. Existence
d. Valuation
8. An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population
for this test consists of all:
a. Merchandise received
b. Canceled checks
c. Vendor’s invoices
d. Receiving reports
9. To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditors should
review and test the:
a. Terms of the open purchase orders
b. Purchase cutoff procedures
c. Contractual commitments made by the purchasing department
d. Purchase invoices received on or around year-end
10. In auditing a manufacturing entity, which of the following procedures would an auditor least likely perform to determine
whether slow-moving, defective, and obsolete items included in inventory are properly identified?
a. Test the computation of standard overhead rates
b. Tour the manufacturing plant or production facility
c. Compare the inventory balances to anticipated sales volume
d. Review inventory experience and trends
11. To establish the existence and ownership of a long-term investment in the common stock of a publicly traded company, an
auditor ordinarily performs a security count or
a. Relies on the client’s internal controls if the auditor has reasonable assurance that the control procedures are being
applied as prescribed
b. Confirms the number of shares owned that are held by an independent custodian
c. Determine the market price per share at the reporting date from published quotations
d. Confirms the number of shares owned with the issuing company
12. Which of the following is considered a primary audit procedure to establish the existence and ownership of investments?
a. Inspection of property, plant, and equipment
b. Inquiry with management regarding ownership of investments
c. Inspection and count of securities
d. Recomputation of ending balance of investments
13. In confirming with an outside agent, such as a financial institution, that the agent is holding investment securities in the client’s
name, an auditor would most likely gather evidence in support of management’s financial statement assertions of existence or
occurrence and:
a. Valuation or allocation
b. Rights and obligations
c. Completeness
d. Presentation and disclosure
14. Ensuring that all investments owned by the entity at the reporting date are included on the statement of financial position
satisfies the assertion of?
a. Valuation or allocation
b. Rights and obligations
c. Completeness
d. Presentation and disclosure
15. To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely
would
a. Inspect the stock certificates evidencing the investment
b. Examine the audited financial statements of the investee company
c. Review the broker’s advice or cancelled checks for the investment’s acquisition
d. Obtain market quotation from financial newspapers or periodicals
16. An auditor testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the:
a. Completeness of recorded investment income
b. Classification between current and noncurrent portfolios
c. Valuation of marketable equity securities
d. Existence of unrealized gains or losses in the portfolio
17. Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments?
a. Tracing interest declarations to an independent record book
b. Recomputing interest earned
c. Confirming interest rate with the issuer of the bonds
 d. Vouching the receipts and deposit of interest checks
18. Which of the following is the most effective audit procedure for verification of dividends earned on the investments in equity
securities?
a. Tracing deposit of dividend checks to the cash receipts book
b. Reconciling amounts received with published dividend records
c. Comparing the amounts received with preceding year dividends received
d. Recomputing selected extensions and footing of dividend schedules and comparing totals to the general ledger
19. Ensuring that investments and related investment income accounts are properly classified, described, and disclosed in the
financial statements, including notes, in accordance with the applicable PFRS satisfies the assertion of?
a. Valuation or allocation
b. Rights and obligations
c. Completeness
d. Presentation and disclosure
20. An auditor compares annual revenues and expenses with similar amounts from the prior year and investigates all changes
exceeding 10%. This procedure most likely could indicate that
a. Fourth quarter payroll taxes were properly accrued and recorded, but were not paid until early in the subsequent year
b. Unrealized gains from increases in the value of FVTOCI securities were recorded in the income account for FVTPL
securities.
c. The annual provision for uncollectible accounts expense was inadequate because of worsening economic conditions
d. Notice of an increase in property tax rates was received by management, but was not recorded until early in the
subsequent year
21. When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at
a low level usually performs:
a. Tests of controls and extensive tests of property and equipment balances at the end of the year. B
b. Analytical procedures for current year property and equipment transactions.
c. Tests of controls and limited tests of current year property and equipment transactions.
d. Analytical procedures for property and equipment balances at the end of the year.
22. A continuing audit client’s property, plant, and equipment and accounts receivable accounts have approximately the same
year-end balance. In this circumstance, when compared to PPE one would normally expect the audit of accounts receivable to
require:
a. More audit time
b. Less audit time
c. Approximately the same amount of audit time
d. Similar confirmation procedures
23. Which of the following is not one of the auditors' objectives in auditing depreciation?
a. Establishing the reasonableness of the client's replacement policy.
b. Establishing that the methods used are appropriate.
c. Establishing that the methods are consistently applied.
d. Establishing the reasonableness of depreciation computations.
24. Which of the following is the best evidence of continuous ownership of property?
a. Examination of the deed
b. Examination of rent receipts from lessees of the property
c. Examination of the title policy
d. Examination of canceled check in payment for the property
25. Which of the following is not a test primarily used to test PPE accounts for overstatement?
a. Investigation of reductions in insurance coverage
b. Review of property tax bills
c. Examination of retirement work orders prepared during the year
d. Vouching retirements of plant and equipment
26. An auditor has identified numerous debits to accumulated depreciation of equipment. Which of the following is most likely?
a. The estimated remaining useful lives of equipment were increased
b. Plant assets were retired during the year
 c. The prior year’s depreciation expense was erroneously understated
d. Overhead allocations were revised at year-end
27. The auditors are least likely to learn of retirements of equipment through which of the following?
a. Review of the purchase returns and allowances account
b. Review of depreciation
c. Analysis of the debits to the accumulated depreciation account
d. Review of insurance policy riders
28. Which of the following is used to obtain evidence that the client’s equipment accounts are not understated?
a. Analyzing repairs and maintenance expense accounts
b. Vouching purchases of plant and equipment
c. Recomputing depreciation expense
d. Analyzing the miscellaneous revenue account
29. Property acquisitions that are misclassified as maintenance expense would most likely be detected by an internal control
system that provides for:
a. Investigation of variances within a formal budgeting system
b. Review and approval of the monthly depreciation entry by the plant supervisor
c. Segregation of duties of employees in the accounts payable department
d. Examination by the internal auditors of vendor invoices and canceled checks for property acquisitions
30. For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements
of equipment acquisitions?
a. Service Revenue.
b. Sales.
c. Repairs and maintenance expense.
d. Sales salaries expense.