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

When perpetual inventory master files are accurate, the physical inventory can be tested before the balance sheet date.

State each of the six specific transaction- related audit objectives for acquisitions and, for each objective, describe one common substantive test of transactions.

A purchase order is often used to indicate authorisation of the acquisition.

The reliability of the perpetual inventory master file will affect the extent of the auditor's physical examination of inventory.

The audit procedure 'Foot the inventory listing schedules for raw materials, work- in- process and finished goods' provides assurance mainly for the accuracy objective of inventory pricing and compilation.

Verifying acquisitions as part of the tests of the acquisition and payment cycle provides evidence about the accuracy of raw materials acquired and all manufacturing costs except labour.

An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result:

'Recorded payroll payments are for work actually performed by non- fictitious employees' is the transaction- related audit objective for payroll of:

In determining that the accounts payable cutoff is correct, it is essential that the cutoff tests be coordinated with the:

When inventory is shipped on an FOB origin basis, title passes to the buyer when it is received by the buyer.

The primary concern in testing payroll- related liabilities is to make sure that:

After the payroll total has been agreed upon, often a separate bank account is set up to pay the amount. This account is referred to as:

Which one of the following is a test of controls?

The document that indicates such things as the description and quantity of goods and services received, price including freight, cash discount terms and date of the billing is the:

The file for recording each payroll transaction for each employee and maintaining total employee wages paid for the year to date is the:

Which one of the following circumstances would NOT cause an auditor to extend payroll procedures considerably?

A document indicating a reduction in the amount owed to a vendor because of returned goods is:

From which one of the following evidence- gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

A major difficulty in the verification of inventory cost records is determining the reasonableness of cost allocations.

Describe the methodology for designing tests of details of balances for accounts payable.