Question 1

When auditors complete an audit they are usually very knowledgeable about the client's business and business practices.

Accepted Answer

A) True 
 B)False  True

Question 2

Consider the following procedures for the verification of accounts payable:
-Invoices on disputed orders are routinely held in a "pending" file in vouchers payable until the dispute is resolved.
_____

Accepted Answer

A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP. 
A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP. H

Question 3

The accounts payable department is usually responsible for ensuring that purchases are accurately recorded.

Accepted Answer

A) True 
 B)False  True

Question 4

Evidence for the cash disbursement cutoff test may be obtained by personal observation and review of external documentation.

Accepted Answer

A) True 
 B)False

Question 5

Because many purchasing agents are involved in their preparation, purchase orders are
rarely prenumbered.

Accepted Answer

A) True 
 B)False

Question 6

Factors that may contribute to misstatements in the expenditure cycle assertions include all of the following except:

Accepted Answer

A)  there is usually a high volume of transactions. 
B)  unauthorized purchases and cash disbursements may be made. 
C)  purchased assets may be appropriated. 
D)  there may be duplicate payment of vendor's invoices. 
E)  contentious accounting issues may arise concerning whether a cost should be capitalized or expensed. 
A)  there is usually a high volume of transactions. 
B)  unauthorized purchases and cash disbursements may be made. 
C)  purchased assets may be appropriated. 
D)  there may be duplicate payment of vendor's invoices. 
E)  contentious accounting issues may arise concerning whether a cost should be capitalized or expensed.

Question 7

The computer file of purchase orders submitted to vendors for which the goods or services have not been received is the:

Accepted Answer

A)  open purchase order file. 
B)  approved vendor master file. 
C)  suspense file. 
D)  accounts payable master file. 
E)  purchase transactions file. 
A)  open purchase order file. 
B)  approved vendor master file. 
C)  suspense file. 
D)  accounts payable master file. 
E)  purchase transactions file.

Question 8

The specific objective accounts payable are legal obligations of the entity at the balance sheet date is derived from the:

Accepted Answer

A)  existence or occurrence. 
B)  completeness. 
C)  rights and obligations. 
D)  presentation and disclosure. 
E)  valuation or allocation. 
A)  existence or occurrence. 
B)  completeness. 
C)  rights and obligations. 
D)  presentation and disclosure. 
E)  valuation or allocation.

Question 9

Like the confirmation of accounts receivable, confirmation of accounts payable is required.

Accepted Answer

A) True 
 B)False

Question 10

Which one of the following financial ratios has a numerator and denominator whose amounts should change by approximately the percentage from year to year?

Accepted Answer

A)  quick ratio. 
B)  current ratio. 
C)  accounts payable turn days. 
D)  payables as a percentage of total assets. 
E)  cost of goods sold to accounts payable 
A)  quick ratio. 
B)  current ratio. 
C)  accounts payable turn days. 
D)  payables as a percentage of total assets. 
E)  cost of goods sold to accounts payable

Question 11

Vendors tardy in sending invoices resulting in cutoff problems in recording payables lead to overstatement of expenditures and payables.

Accepted Answer

A) True 
 B)False

Question 12

Suspense files are hard copy files that hold transactions that have not been processed because they have been rejected by computer application controls.

Accepted Answer

A) True 
 B)False

Question 13

Consider the following procedures for the verification of accounts payable:
-A number of checks were written and recorded on the last day of the year, but were not mailed until several days later.
_____

Accepted Answer

A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP. 
A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Question 14

A trace of the beginning balance for accounts payable to prior year's working papers is a substantive test for:

Accepted Answer

A)  initial procedures. 
B)  analytical procedures. 
C)  test of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure. 
A)  initial procedures. 
B)  analytical procedures. 
C)  test of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure.

Question 15

Department managers should regularly be asked to review the transactions that have been charged to their accounts.

Accepted Answer

A) True 
 B)False

Question 16

The computer file that contains data on approved unpaid vouchers is the:

Accepted Answer

A)  open purchase order file. 
B)  approved vendor master file. 
C)  suspense file. 
D)  accounts payable master file. 
E)  purchase transactions file. 
A)  open purchase order file. 
B)  approved vendor master file. 
C)  suspense file. 
D)  accounts payable master file. 
E)  purchase transactions file.

Question 17

An abnormal decrease in the accounts payable turnover ratio or unexpected increases in the current ratio may provide indicators of overstated liabilities.

Accepted Answer

A) True 
 B)False

Question 18

A copy of the receiving report should be forwarded to accounts payable.

Accepted Answer

A) True 
 B)False

Question 19

In assessing the risk of material misstatement the vendor who often offers price concessions or terms such that goods do not have to be paid for until the manufactured product is resold is the:

Accepted Answer

A)  manufacturing of construction machinery and equipment. 
B)  computer manufacturing. 
C)  retail grocer. 
D)  hotel. 
E)  local school district. 
A)  manufacturing of construction machinery and equipment. 
B)  computer manufacturing. 
C)  retail grocer. 
D)  hotel. 
E)  local school district.

Question 20

Consider the following procedures for the verification of accounts payable:
-Utility bills are never accrued. Instead, they are simply recorded and paid
immediately upon receipt the first week of the next period.
_____

Accepted Answer

A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP. 
A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Exam 15: Auditing the Expenditure Cycle

When auditors complete an audit they are usually very knowledgeable about the client's business and business practices.

Consider the following procedures for the verification of accounts payable: -Invoices on disputed orders are routinely held in a "pending" file in vouchers payable until the dispute is resolved. _____

The accounts payable department is usually responsible for ensuring that purchases are accurately recorded.

Evidence for the cash disbursement cutoff test may be obtained by personal observation and review of external documentation.

Because many purchasing agents are involved in their preparation, purchase orders are rarely prenumbered.

Factors that may contribute to misstatements in the expenditure cycle assertions include all of the following except:

The computer file of purchase orders submitted to vendors for which the goods or services have not been received is the:

The specific objective accounts payable are legal obligations of the entity at the balance sheet date is derived from the:

Like the confirmation of accounts receivable, confirmation of accounts payable is required.

Which one of the following financial ratios has a numerator and denominator whose amounts should change by approximately the percentage from year to year?

Vendors tardy in sending invoices resulting in cutoff problems in recording payables lead to overstatement of expenditures and payables.

Suspense files are hard copy files that hold transactions that have not been processed because they have been rejected by computer application controls.

Consider the following procedures for the verification of accounts payable: -A number of checks were written and recorded on the last day of the year, but were not mailed until several days later. _____

A trace of the beginning balance for accounts payable to prior year's working papers is a substantive test for:

Department managers should regularly be asked to review the transactions that have been charged to their accounts.

The computer file that contains data on approved unpaid vouchers is the:

An abnormal decrease in the accounts payable turnover ratio or unexpected increases in the current ratio may provide indicators of overstated liabilities.

A copy of the receiving report should be forwarded to accounts payable.

In assessing the risk of material misstatement the vendor who often offers price concessions or terms such that goods do not have to be paid for until the manufactured product is resold is the:

Consider the following procedures for the verification of accounts payable: -Utility bills are never accrued. Instead, they are simply recorded and paid immediately upon receipt the first week of the next period. _____

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters