Exam 15: Audit of Transaction Cycles and Financial Statement Balances I

Discuss the four aspects of the audit of cost accounting with which the auditor is most concerned.

For good internal control, the purchasing department should NOT be responsible for:

Perpetual inventory master files maintained by persons who do not have custody of or access to assets are a useful cost accounting control, because:

The audit procedure 'Compare pay rates with the workplace agreement' is normally performed when testing the completeness objective for payroll.

Internal control over accounts payable is strengthened when a monthly reconciliation of the vendors' statements with recorded liabilities and the accounts payable master file with the general ledger is performed by:

The document that indicates the time an employee stopped working each day and the number of hours worked is the:

The basis for the auditor's verification of inventory pricing and compilation is the substantive testing performed in that area. What is the purpose of each group of test?

When goods are received, adequate control requires examination for:

The internal control which requires that 'cheques are prenumbered and accounted for' satisfies the transaction- related audit objective for cash payments of:

Controls which provide a means of ensuring that the physical counts are properly summarised, priced at the same amount as the unit records, correctly extended and totalled and included in the general ledger at the proper amount are known as:

The costs used to value the physical inventory must be tested to determine whether the client has correctly followed an inventory method that is in accordance with accounting standards and is consistent with previous years. The audit procedures used to verify these costs are referred to as:

Cost accounting controls are those related to the physical inventory and the consequent costs from the point at which:

Which one of the following is NOT an element of the audit of the inventory and warehousing cycle?

The total of the individual employee earnings in the payroll master file equals the:

An auditor learns that his client has paid a vendor twice for the same shipment, once based upon the original invoice and once based upon the monthly statement. A control procedure that should have prevented this duplicate payment is:

Performing the physical count of inventory on a cycle basis throughout the year is acceptable for both perpetual and periodic inventory systems.

Which of the following is NOT a factor affecting the complexity of the audit of inventory?

Match five of the terms for documents and records (a- m) used in the acquisitions and payment cycle with the descriptions provided below (1- 5): a. purchase requisition b. purchase order c. receiving report d. acquisitions journal e. summary acquisitions report f. vendor's invoice g. debit note h. voucher i. accounts payable master file j. accounts payable trial balance k. vendor's statement l. cheque m. cash payments journal 1. A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted. 2. A document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition. 3. A document prepared by the purchasing department indicating the description, quantity and related information for goods and services that the company intends to purchase. 4. A listing of the amount owed to each vendor at a point in time. 5. A document used to establish a formal means of recording and controlling acquisitions; it includes a cover sheet and a package of relevant documents.

For effective internal control purposes, the accounts payable department generally should:

Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash payments, attributes sampling is rarely used when testing the acquisitions and cash payments cycle.