Exam 11: Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Test counts are performed by the auditor to give the impression of control and they are not used for substantive testing.

Stable relationships are expected between specific accounts (for example,cost of goods sold and sales)that can be investigated for unusual discrepancies.

Which of the following might an auditor do in testing for the existence of accounts payable?

Generally accepted auditing standards (GAAS)require the auditor to observe the taking of the physical inventory at year-end.

An indication of potential inventory fraud is that inventory levels are growing faster than sales.

Which of the following signals a potential fraud that may occur for the overstatement of inventory accounts?

The acquisition and payment cycle includes processes for identifying products or services to be acquired,purchasing goods and services,receiving the goods,approving payments,and paying for goods and services received.

Supply chain management has helped many companies improve the efficiency of operations.

For proper control,the receiving department should receive a copy of the purchase order that has the quantities blanked out.

Comparison of Controls in Traditional and Automated Systems Discuss the differences between a traditional receiving system and an automated integrated receiving system.

The auditor may discover that the recorded cost of inventory exceeds the designated market price when testing which assertion?

Testing cash disbursements subsequent to the year under audit allows the auditor to determine certain payables that may not have been recorded previously.

A networked software system linking a company's Web site to other vendors whose offerings and prices have been preapproved by appropriate management is call an automated purchasing system.

When the auditor reviews vendor invoices while testing disbursements to determine whether the client actually owes a liability for the accounts payable,the auditor is testing for which assertion?

Which of the following is not a rationale that purchasing is a separate function in many organizations?

Which assertion has the greatest emphasis when auditing accounts payable?

Which of the following would the auditor most likely do when testing the valuation assertion?

Inventory controls What are some of the important controls that are expected to be included in a well-conceived inventory control system?

An auditor may best test commissions expense for salespeople when control risk is low by performing which of the following procedures?

Auditing the valuation assertion for inventory of a client utilizing the FIFO cost flow assumption will require the auditor to examine which of the following?