Reference no: EM132944885

Problem 1: When a test of controls reveals some deviations, under what conditions will the auditor still be able to depend on the control system?

Option 1: The error was immaterial and discovered to be an isolated departure.
Option 2: The circumstances did not lead to a material error in the financial statements.
Option 3: Substantive procedures indicate that no further errors exist.
Option 4: The total error found was immaterial to the financial statements.

Problem 2: Which one of the controls listed below should have prevented the following misstatement: A sales invoice for $8,400 was calculated correctly but, by mistake, was key-entered as $4,800 to the sales journal and to the accounts receivable master file. The customer paid the amount on his monthly statement, $4,800.

Option 1: Sales invoice numbers, prices, discounts extensions and additions are independently checked
Option 2: Unauthorised deductions from payments made by customers, or other matters in dispute, are investigated promptly by a person independent of the accounts receivable function
Option 3: Prelistings and predetermined totals are used to control postings
Option 4: Customers monthly statements are verified and mailed by a responsible person other than the sales clerk who prepared them