Question 1

Accounts payable confirmations do not normally specify the amount due.

Accepted Answer

A) True 
 B)False

Question 2

The primary account balance in the expenditure cycle is accounts payable.

Accepted Answer

A) True 
 B)False

Question 3

Regarding purchase returns and allowances, control activities useful in reducing the risk of misstatements include all of the following except:

Accepted Answer

A)  all purchase returns should be authorized by the vendor. 
B)  goods should be returned only with a proper purchase return authorization. 
C)  the computer should match debit memo information with the authorization for purchase return and the shipping documents. 
D)  the computer generates a report of all authorized purchase returns that have not been shipped or have not resulted in a debit memo. 
E)  all of the above 
A)  all purchase returns should be authorized by the vendor. 
B)  goods should be returned only with a proper purchase return authorization. 
C)  the computer should match debit memo information with the authorization for purchase return and the shipping documents. 
D)  the computer generates a report of all authorized purchase returns that have not been shipped or have not resulted in a debit memo. 
E)  all of the above

Question 4

Consider the following procedures for the verification of accounts payable:
-Purchases are often recorded for goods that are never received.

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 5

Disbursement checks generally include a stub, similar to a payroll check stub, which identifies the vendor invoice number and the invoice(s) being paid.

Accepted Answer

A) True 
 B)False

Question 6

Consider the following procedures for the verification of accounts payable:
-Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became "past due."
_____

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 7

The auditor is concerned that individuals in the purchasing department are initiating purchases on their own to companies in which they have a vested interest. The document the auditor would be most interested in reviewing under these circumstances would be the:

Accepted Answer

A)  purchase order. 
B)  receiving report. 
C)  voucher. 
D)  purchase requisition. 
E)  bill of lading. 
A)  purchase order. 
B)  receiving report. 
C)  voucher. 
D)  purchase requisition. 
E)  bill of lading.

Question 8

The computer file that contains pertinent information on vendors and suppliers that have been approved to purchase services from and make payments to 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 9

Consider the following procedures for the verification of accounts payable:
-A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated.
_____

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 10

The specific audit objective that all purchases and cash disbursements made during the period were recorded relates to:

Accepted Answer

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

Question 11

Documentation supporting payables recorded but remaining unpaid through the end of fieldwork should also be examined on a test basis.

Accepted Answer

A) True 
 B)False

Question 12

There are three major substantive tests of details of accounts payable transactions.

Accepted Answer

A) True 
 B)False

Question 13

Consider the following procedures for the verification of accounts payable:
-A number of open vouchers were accidentally omitted from the list given to the auditor.
_____

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

The expenditure cycle would include:

Accepted Answer

A)  the purchase of another entity's stocks. 
B)  the purchase of treasury stock. 
C)  payroll transactions. 
D)  payments by check. 
E)  the purchase of another entity's bonds. 
A)  the purchase of another entity's stocks. 
B)  the purchase of treasury stock. 
C)  payroll transactions. 
D)  payments by check. 
E)  the purchase of another entity's bonds.

Question 15

In regard to the valuation or allocation of accounts payable, inherent risk is:

Accepted Answer

A)  high. 
B)  very high. 
C)  very low. 
D)  low. 
E)  moderate. 
A)  high. 
B)  very high. 
C)  very low. 
D)  low. 
E)  moderate.

Question 16

All purchase cycle disclosures that should have been included in the financial statements have been included is a balance objective.

Accepted Answer

A) True 
 B)False

Question 17

Consider the following procedures for the verification of accounts payable:
-Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion.
_____

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 18

The computer file that holds transactions that have not been processed because they have been rejected by computer application controls 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 19

The computer file that contains data for approved vouchers for purchases that have 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 20

In understanding the client's business and industry, briefly describe the expenditure cycle characteristics of a (1) large retail grocer and (2) public school district.

Accepted Answer

1.A large retail grocer purchases and re

Exam 15: Auditing the Expenditure Cycle

Accounts payable confirmations do not normally specify the amount due.

The primary account balance in the expenditure cycle is accounts payable.

Regarding purchase returns and allowances, control activities useful in reducing the risk of misstatements include all of the following except:

Consider the following procedures for the verification of accounts payable: -Purchases are often recorded for goods that are never received.

Disbursement checks generally include a stub, similar to a payroll check stub, which identifies the vendor invoice number and the invoice(s) being paid.

Consider the following procedures for the verification of accounts payable: -Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became "past due." _____

The auditor is concerned that individuals in the purchasing department are initiating purchases on their own to companies in which they have a vested interest. The document the auditor would be most interested in reviewing under these circumstances would be the:

The computer file that contains pertinent information on vendors and suppliers that have been approved to purchase services from and make payments to is the:

Consider the following procedures for the verification of accounts payable: -A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated. _____

The specific audit objective that all purchases and cash disbursements made during the period were recorded relates to:

Documentation supporting payables recorded but remaining unpaid through the end of fieldwork should also be examined on a test basis.

There are three major substantive tests of details of accounts payable transactions.

Consider the following procedures for the verification of accounts payable: -A number of open vouchers were accidentally omitted from the list given to the auditor. _____

The expenditure cycle would include:

In regard to the valuation or allocation of accounts payable, inherent risk is:

All purchase cycle disclosures that should have been included in the financial statements have been included is a balance objective.

Consider the following procedures for the verification of accounts payable: -Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion. _____

The computer file that holds transactions that have not been processed because they have been rejected by computer application controls is the:

The computer file that contains data for approved vouchers for purchases that have been received is the:

In understanding the client's business and industry, briefly describe the expenditure cycle characteristics of a (1) large retail grocer and (2) public school district.

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