1.AUD
The scope of audits of recipients of federal financial assistance in accordance with federal audit regulations varies. Which of the following elements do these audits have in common?
A. The auditor is required to disclose all situations and transactions that could be indicative of fraud, abuse, and illegal acts to the federal inspector general.
B. The materiality levels are higher and are determined by the government entities that provide the federal financial assistance to the recipients.
C. The auditor is required to document an understanding of internal control established to ensure compliance with the applicable laws and regulations.
D. The accounts should be 100% verified by substantive tests because certain statistical sampling applications are not permitted.
2.BEC
The use of indirect materials in a job-order cost system would usually be reflected in the general ledger as an increase in
A. Stores control.
B. Work in process control.
C. Factory overhead control.
D. Factory overhead applied.
3.REG
Golden has been engaged by Silver to act as the agent for Silver, an undisclosed principal. As a result of this relationship
A. Golden has the same implied powers as an agent engaged by a disclosed principal.
B. Silver cannot be held liable for any torts committed by Golden in the course of carrying out the engagement.
C. Golden will be free from personal liability on authorized contracts for Silver when it is revealed that Golden was acting as an agent.
D. Silver must file the appropriate form in the proper state office under the fictitious business name statute.
4.FAR
During the current year, Golden Foundation, a nongovernmental not-for-profit organization, received $100,000 in unrestricted contributions from the general public. Golden’s board of directors stipulated that $75,000 of these contributions would be used to create an endowment. At the end of the current year, how should Golden report the $75,000 in the net assets section of the statement of financial position?
A. Permanently restricted.
B. Unrestricted.
C. Temporarily restricted.
D. Donor restricted.
Answer:
1.C
This answer is correct because all such audits require auditors to document an understanding of internal control established to ensure compliance with the applicable laws and regulations.
2.C
C is correct. The use of indirect materials would be recorded by a credit to stores control (i.e., inventory of direct and indirect materials) and a debit to manufacturing overhead (MOH) control. Debiting MOH control increases the balance of this account.
A is incorrect. Stores control would be credited, thereby decreasing this account.
B is incorrect. No entry is made to work in process control for the use of indirect materials. However, if the question had asked about the use of direct materials, this answer would have been correct.
D is incorrect. The MOH applied account is used to apply MOH to production based on a predetermined rate. Therefore, MOH applied is not used to record the actual use of indirect materials.
3.A
A is correct because classification of a principal as disclosed, undisclosed, or partially disclosed affects the contractual liability of the agent toward third parties. The authority given the agent, however, is not affected. An agent representing an undisclosed principal has the same implied authority as an agent representing a disclosed principal.
4.B
This answer is correct because the donation was unrestricted. The board elected to create the endowment.
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