Question 1

Which of the following may NOT be significantly affected by price increase for purchased goods?

Accepted Answer

A) Purchases made by colleges, universities, and professional schools 
B) Purchases made by hotels and motels 
C) Purchases made by supermarkets 
D) Purchases made by electronic computer manufacturing firms 
A) Purchases made by colleges, universities, and professional schools 
B) Purchases made by hotels and motels 
C) Purchases made by supermarkets 
D) Purchases made by electronic computer manufacturing firms

Question 2

If the purchasing department establishes strong controls over putting authorized vendors on an authorized vendor list, _______.

Accepted Answer

A) it is easy for employees to initiate transactions with fictitious vendors 
B) it is difficult for employees to initiate transactions with fictitious vendors 
C) it is difficult for employees to initiate transactions with legitimate vendors 
D) it is easy for employees to initiate transactions with legitimate vendors 
A) it is easy for employees to initiate transactions with fictitious vendors 
B) it is difficult for employees to initiate transactions with fictitious vendors 
C) it is difficult for employees to initiate transactions with legitimate vendors 
D) it is easy for employees to initiate transactions with legitimate vendors

Question 3

What is a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction called?

Accepted Answer

A) Evaluated Receipts Settlement 
B) Completeness of cash disbursements 
C) Evaluation of Receipts Settlement 
D) Cash disbursements 
A) Evaluated Receipts Settlement 
B) Completeness of cash disbursements 
C) Evaluation of Receipts Settlement 
D) Cash disbursements

Question 4

Identify whether the following tests are substantive analytical procedures, tests of details of transactions, or tests of details of account balances:
1) Test a sample of purchase requisitions for proper authorization.
2) Test transactions around year-end to determine if they are recorded in the proper period.
3) Review results of confirmation of selected accounts payable.
4) Compare payables turnover to previous years' data.
5) Obtain selected vendors' statements and reconcile to vendor accounts.
6) Compare purchase returns and allowances as a percentage of revenue or cost of sales to industry data.

Accepted Answer

Tests of details of transactions
2) Test

Question 5

The first step in initiating an Evaluated Receipts Settlement (ERS) transaction is the _______.

Accepted Answer

A) contract, which may be the only "electronic" element in the process. 
B) payment, which may be the only "paperwork" in the process. 
C) contract, which may be the only "paperwork" in the process. 
D) payment, which may be the only "electronic" element in the process. 
A) contract, which may be the only "electronic" element in the process. 
B) payment, which may be the only "paperwork" in the process. 
C) contract, which may be the only "paperwork" in the process. 
D) payment, which may be the only "electronic" element in the process.

Question 6

Data controls over payroll processing relate to which of the following assertions?

Accepted Answer

A) Completeness and accuracy 
B) Accuracy and classification 
C) Completeness, accuracy, and classification 
D) Occurrence, completeness, accuracy, and classification 
A) Completeness and accuracy 
B) Accuracy and classification 
C) Completeness, accuracy, and classification 
D) Occurrence, completeness, accuracy, and classification

Question 7

The second category of misstatements is "_______," which includes the failure to record deferred revenue obligations or normal accruals.

Accepted Answer

A) liabilities, payables, reserves, and accrual estimate failure 
B) expenses, payables, and reserves 
C) expense recording issues 
D) debt and equity issues 
A) liabilities, payables, reserves, and accrual estimate failure 
B) expenses, payables, and reserves 
C) expense recording issues 
D) debt and equity issues

Question 8

A Purchase Return Authorization is a form showing the description, quantity, and other data pertaining to the goods the vendor has authorized the purchaser to return.

Accepted Answer

A) True 
 B)False

Question 9

A risk related to what can go wrong with respect to receiving goods is _______.

Accepted Answer

A) that purchases have been made from unauthorized vendors 
B) that purchases have been made from authorized vendors 
C) goods received may not have been ordered 
D) goods received may have been ordered 
A) that purchases have been made from unauthorized vendors 
B) that purchases have been made from authorized vendors 
C) goods received may not have been ordered 
D) goods received may have been ordered

Question 10

Identify the types of substantive procedures used by the auditor to test accounts payable and accrued expenses.
Also state whether the substantive procedures could be used as a test of controls or a dual-purpose test.

Accepted Answer

The auditor uses substantive procedures

Question 11

Purchases of inventory on credit should involve _______.

Accepted Answer

A) debits to inventory and credits to payables 
B) debits to payables and credits to inventory 
C) debits to payables and credits to expenses 
D) debits to expenses and credits to cash 
A) debits to inventory and credits to payables 
B) debits to payables and credits to inventory 
C) debits to payables and credits to expenses 
D) debits to expenses and credits to cash

Question 12

When an entity has more than one class of employee, it is important to evaluate the reasonableness of payroll based on employee class.Which of the following procedures is commonly used to test this?

Accepted Answer

A) Calculate revenue per employee 
B) Calculate total payroll costs as a percent of revenue 
C) Comparing payroll expenses with prior year balances or budgets 
D) Calculate average payroll cost per employee classification 
A) Calculate revenue per employee 
B) Calculate total payroll costs as a percent of revenue 
C) Comparing payroll expenses with prior year balances or budgets 
D) Calculate average payroll cost per employee classification

Question 13

Which two of the following categories of misstatements are relevant to the purchasing and payroll cycles?

Accepted Answer

A) Expense (payroll, selling, administrative, general, and, other) recording issues 
B) Liabilities, payables, reserves, and accrual estimate failure 
C) Purchase failure 
D) Account transaction issues 
A) Expense (payroll, selling, administrative, general, and, other) recording issues 
B) Liabilities, payables, reserves, and accrual estimate failure 
C) Purchase failure 
D) Account transaction issues

Question 14

An entity's net operating cycle represents _______.

Accepted Answer

A) the time from using cash to purchasing goods or services to collecting cash from the sale of goods or services 
B) the time from receiving cash to purchasing goods or services to collecting cash from the sale of goods or services 
C) the time from using cash to selling goods or services to collecting cash from the sale of goods or services 
D) the time from using cash to purchase property, plant, and equipment to collecting on the sale of receivables. 
A) the time from using cash to purchasing goods or services to collecting cash from the sale of goods or services 
B) the time from receiving cash to purchasing goods or services to collecting cash from the sale of goods or services 
C) the time from using cash to selling goods or services to collecting cash from the sale of goods or services 
D) the time from using cash to purchase property, plant, and equipment to collecting on the sale of receivables.

Question 15

An internal document indicating the vendor, the amount due, and payment terms for the purchases received is referred to as a _______

Accepted Answer

The answer of An internal document indicating the vendor, the...

Question 16

Which of the following consists of procedures designed specifically to detect significant unrecorded obligations at the balance sheet date?

Accepted Answer

A) Search for unrecorded liabilities 
B) Vouching of recorded purchase transactions 
C) Confirmation of accounts payable 
D) Procedures for purchase returns 
A) Search for unrecorded liabilities 
B) Vouching of recorded purchase transactions 
C) Confirmation of accounts payable 
D) Procedures for purchase returns

Question 17

If purchase adjustments are estimated at quarter end, _______.

Accepted Answer

A) management should establish controls to ensure adjustments are made based on analysts' information and that adjustments are consistent from quarter to quarter 
B) the auditor should establish controls to ensure adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter 
C) management should establish controls to ensure adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter 
D) management should establish controls to ensure adjustments are made based on regulatory information and that adjustments are consistent from quarter to quarter 
A) management should establish controls to ensure adjustments are made based on analysts' information and that adjustments are consistent from quarter to quarter 
B) the auditor should establish controls to ensure adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter 
C) management should establish controls to ensure adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter 
D) management should establish controls to ensure adjustments are made based on regulatory information and that adjustments are consistent from quarter to quarter

Question 18

Assume you are an audit manager for a middle market manufacturing company.Your client is interested in using Evaluated Receipts Settlement (ERS) with their primary supplier; however, your client is unsure of how the process works and asks about the process of initiating an ERS transaction.Draft a note to your client describing the process of initiating a purchase order through shipment of the goods.

Accepted Answer

The purchase order is prenumbered to est

Question 19

A key tenet of internal control is _______ of duties

Accepted Answer

Segregatio

Question 20

Which type of confirmation is used more frequently by auditors - accounts receivable confirmations or accounts payable confirmations? Why?

Accepted Answer

Auditors typically use confirmations for

Which of the following may NOT be significantly affected by price increase for purchased goods?

If the purchasing department establishes strong controls over putting authorized vendors on an authorized vendor list, _______.

What is a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction called?

The first step in initiating an Evaluated Receipts Settlement (ERS) transaction is the _______.

Data controls over payroll processing relate to which of the following assertions?

The second category of misstatements is "_______," which includes the failure to record deferred revenue obligations or normal accruals.

A Purchase Return Authorization is a form showing the description, quantity, and other data pertaining to the goods the vendor has authorized the purchaser to return.

A risk related to what can go wrong with respect to receiving goods is _______.

Identify the types of substantive procedures used by the auditor to test accounts payable and accrued expenses. Also state whether the substantive procedures could be used as a test of controls or a dual-purpose test.

Purchases of inventory on credit should involve _______.

When an entity has more than one class of employee, it is important to evaluate the reasonableness of payroll based on employee class.Which of the following procedures is commonly used to test this?

Which two of the following categories of misstatements are relevant to the purchasing and payroll cycles?

An entity's net operating cycle represents _______.

An internal document indicating the vendor, the amount due, and payment terms for the purchases received is referred to as a _______

Which of the following consists of procedures designed specifically to detect significant unrecorded obligations at the balance sheet date?

If purchase adjustments are estimated at quarter end, _______.

A key tenet of internal control is _______ of duties

Which type of confirmation is used more frequently by auditors - accounts receivable confirmations or accounts payable confirmations? Why?

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters

Exam 12: Auditing the Purchases Cycle and Payroll Cycle

Which of the following may NOT be significantly affected by price increase for purchased goods?

If the purchasing department establishes strong controls over putting authorized vendors on an authorized vendor list, _______.

What is a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction called?

The first step in initiating an Evaluated Receipts Settlement (ERS) transaction is the _______.

Data controls over payroll processing relate to which of the following assertions?

The second category of misstatements is "_______," which includes the failure to record deferred revenue obligations or normal accruals.

A Purchase Return Authorization is a form showing the description, quantity, and other data pertaining to the goods the vendor has authorized the purchaser to return.

A risk related to what can go wrong with respect to receiving goods is _______.

Identify the types of substantive procedures used by the auditor to test accounts payable and accrued expenses. Also state whether the substantive procedures could be used as a test of controls or a dual-purpose test.

Purchases of inventory on credit should involve _______.

When an entity has more than one class of employee, it is important to evaluate the reasonableness of payroll based on employee class.Which of the following procedures is commonly used to test this?

Which two of the following categories of misstatements are relevant to the purchasing and payroll cycles?

An entity's net operating cycle represents _______.

An internal document indicating the vendor, the amount due, and payment terms for the purchases received is referred to as a _______

Which of the following consists of procedures designed specifically to detect significant unrecorded obligations at the balance sheet date?

If purchase adjustments are estimated at quarter end, _______.

A key tenet of internal control is _______ of duties

Which type of confirmation is used more frequently by auditors - accounts receivable confirmations or accounts payable confirmations? Why?

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters