Question 1

The purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to

Accepted Answer

A) uncover liabilities on the balance sheet that should not have been recorded until a subsequent period. 
B) find the documentation relating to a cash disbursement. 
C) uncover payments made in a subsequent accounting period that represent liabilities at the balance sheet date. 
D) uncover cash disbursements recorded in a subsequent accounting period that should be recorded in that period. 
A) uncover liabilities on the balance sheet that should not have been recorded until a subsequent period. 
B) find the documentation relating to a cash disbursement. 
C) uncover payments made in a subsequent accounting period that represent liabilities at the balance sheet date. 
D) uncover cash disbursements recorded in a subsequent accounting period that should be recorded in that period.

Question 2

The starting point for the verification of current-year acquisitions of manufacturing equipment is normally

Accepted Answer

A) the manufacturing equipment account in the general ledger. 
B) the acquisitions journal. 
C) the purchase requisitions file. 
D) a client schedule of all acquisitions recorded during the year. 
A) the manufacturing equipment account in the general ledger. 
B) the acquisitions journal. 
C) the purchase requisitions file. 
D) a client schedule of all acquisitions recorded during the year.

Question 3

In assessing control risk for purchases,an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents.Which account assertion would this test of controls most likely support?

Accepted Answer

A) completeness 
B) valuation and allocation 
C) existence and occurrence 
D) presentation and disclosure 
A) completeness 
B) valuation and allocation 
C) existence and occurrence 
D) presentation and disclosure

Question 4

Before a new vendor is added into the vendor master file (or the purchasing master file),the company should

Accepted Answer

A) conduct a credit check on the new vendor. 
B) have the vendor detail matched against the invoice detail. 
C) ask the purchasing manager to verify the authenticity of the vendor. 
D) have the accounting department enter the necessary detail about the vendor. 
A) conduct a credit check on the new vendor. 
B) have the vendor detail matched against the invoice detail. 
C) ask the purchasing manager to verify the authenticity of the vendor. 
D) have the accounting department enter the necessary detail about the vendor.

Question 5

The most important objectives for amortization expense are valuation and

Accepted Answer

A) accuracy. 
B) classification. 
C) cutoff. 
D) understandability. 
A) accuracy. 
B) classification. 
C) cutoff. 
D) understandability.

Question 6

Ordinarily,it is unnecessary to test the valuation of capital assets recorded in prior periods because

Accepted Answer

A) it will not affect the current valuations. 
B) they were verified in previous audits. 
C) the related amortization calculations for the current period are more important. 
D) the emphasis of the audit is on the income statement items,not the balance sheet items. 
A) it will not affect the current valuations. 
B) they were verified in previous audits. 
C) the related amortization calculations for the current period are more important. 
D) the emphasis of the audit is on the income statement items,not the balance sheet items.

Question 7

Describe the two objectives that are most important in auditing accumulated amortization.Explain why these objectives are important.

Accepted Answer

Two objectives are usually emphasized in

Question 8

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

Accepted Answer

A) is an understatement of net earnings. 
B) is an overstatement of net earnings. 
C) does not affect earnings. 
D) is indeterminable from the information given. 
A) is an understatement of net earnings. 
B) is an overstatement of net earnings. 
C) does not affect earnings. 
D) is indeterminable from the information given.

Question 9

When verifying current-year additions to manufacturing equipment,the two major objectives for this part of the audit are

Accepted Answer

A) accuracy and classification. 
B) detail tie-in and cutoff. 
C) disclosure and completeness. 
D) rights and existence. 
A) accuracy and classification. 
B) detail tie-in and cutoff. 
C) disclosure and completeness. 
D) rights and existence.

Question 10

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

Accepted Answer

A) purchase requisitions and accounts payable entries 
B) purchase requisitions and purchases orders 
C) receiving report and purchase orders 
D) purchase orders and bid quotes 
A) purchase requisitions and accounts payable entries 
B) purchase requisitions and purchases orders 
C) receiving report and purchase orders 
D) purchase orders and bid quotes

Question 11

To protect against theft of physical assets (such as computer equipment),the company should

Accepted Answer

A) assign computers to specific individuals at the company 
B) assign computers to specific areas within the company 
C) use strong access controls (such as login passwords)to prevent access 
D) have equipment engraved or otherwise permanently labelled and a subsidiary ledger maintained 
A) assign computers to specific individuals at the company 
B) assign computers to specific areas within the company 
C) use strong access controls (such as login passwords)to prevent access 
D) have equipment engraved or otherwise permanently labelled and a subsidiary ledger maintained

Question 12

ZyCo has recently converted to a new online accounts payable system.To test that all vendor balances have been converted to the vendor master file (completeness),the auditor would

Accepted Answer

A) conduct cutoff tests for receiving reports and vendor invoices. 
B) on a test basis,agree vendor file details for each vendor from the new (online)system to the old (batch)system. 
C) on a test basis,agree vendor file details for each vendor from the old (batch)system to the new (online)system. 
D) conduct tests of programs to verify that programs in the new systems are functioning as designed. 
A) conduct cutoff tests for receiving reports and vendor invoices. 
B) on a test basis,agree vendor file details for each vendor from the new (online)system to the old (batch)system. 
C) on a test basis,agree vendor file details for each vendor from the old (batch)system to the new (online)system. 
D) conduct tests of programs to verify that programs in the new systems are functioning as designed.

Question 13

The control test that requires "the auditor to compare recorded transactions in the acquisitions journal with the vendor's invoice,receiving report,and other supporting documentation" satisfies the objective of

Accepted Answer

A) occurrence. 
B) classification. 
C) completeness. 
D) accuracy. 
A) occurrence. 
B) classification. 
C) completeness. 
D) accuracy.

Question 14

The most common fraud in the acquisitions area is for the perpetrator to

Accepted Answer

A) alter the cheque payment file before it is printed so that the payee name is changed. 
B) issue payments to fictitious vendors and deposit the cheques to a fictitious account. 
C) change the optical characters at the bottom of a cheque to alter the account to be credited. 
D) issue duplicate payments for invoices and then pocket the second cheque. 
A) alter the cheque payment file before it is printed so that the payee name is changed. 
B) issue payments to fictitious vendors and deposit the cheques to a fictitious account. 
C) change the optical characters at the bottom of a cheque to alter the account to be credited. 
D) issue duplicate payments for invoices and then pocket the second cheque.

Question 15

When accounts payable and purchasing systems are highly automated,more detail is included in the transaction files.This deeper level of detail is illustrated by including

Accepted Answer

A) economic order quantities for each item that is held in inventory,including delivery times. 
B) quantities,prices,and item descriptions from each line of the vendor invoice. 
C) sequentially numbered purchase requisitions and purchase orders (with matching numbers). 
D) receiving report numbers that match the numbers on the vendor invoices for improved tracking. 
A) economic order quantities for each item that is held in inventory,including delivery times. 
B) quantities,prices,and item descriptions from each line of the vendor invoice. 
C) sequentially numbered purchase requisitions and purchase orders (with matching numbers). 
D) receiving report numbers that match the numbers on the vendor invoices for improved tracking.

Question 16

Because many of the types of errors and irregularities that may be found in the acquisition and payment cycle represent a misstatement of earnings and are of significant concern to the auditor,the tolerable exception rate selected by the auditor for attribute testing of this cycle will be

Accepted Answer

A) low. 
B) high. 
C) average. 
D) 15% or less. 
A) low. 
B) high. 
C) average. 
D) 15% or less.

Question 17

After the vendor master file data has been entered,to best improve internal controls the

Accepted Answer

A) vendor master file data should be matched to the accounts payable files. 
B) transaction file detail should be matched to the vendor master file. 
C) data entry should be independently verified. 
D) accounting department should file the new vendor authorization form sequentially. 
A) vendor master file data should be matched to the accounts payable files. 
B) transaction file detail should be matched to the vendor master file. 
C) data entry should be independently verified. 
D) accounting department should file the new vendor authorization form sequentially.

Question 18

To ensure that goods and services acquired are for authorized company purposes,and to help acquire only needed items

Accepted Answer

A) receiving reports should be independently signed and reconciled to the purchase order. 
B) proper authorization for acquisitions and changes to the master file should take place. 
C) purchase requisitions should be approved and matched to purchase orders. 
D) account allocations of vendor invoices should be carefully checked. 
A) receiving reports should be independently signed and reconciled to the purchase order. 
B) proper authorization for acquisitions and changes to the master file should take place. 
C) purchase requisitions should be approved and matched to purchase orders. 
D) account allocations of vendor invoices should be carefully checked.

The purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to

The starting point for the verification of current-year acquisitions of manufacturing equipment is normally

In assessing control risk for purchases,an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents.Which account assertion would this test of controls most likely support?

Before a new vendor is added into the vendor master file (or the purchasing master file),the company should

The most important objectives for amortization expense are valuation and

Ordinarily,it is unnecessary to test the valuation of capital assets recorded in prior periods because

Describe the two objectives that are most important in auditing accumulated amortization.Explain why these objectives are important.

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

When verifying current-year additions to manufacturing equipment,the two major objectives for this part of the audit are

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

To protect against theft of physical assets (such as computer equipment),the company should

ZyCo has recently converted to a new online accounts payable system.To test that all vendor balances have been converted to the vendor master file (completeness),the auditor would

The control test that requires "the auditor to compare recorded transactions in the acquisitions journal with the vendor's invoice,receiving report,and other supporting documentation" satisfies the objective of

The most common fraud in the acquisitions area is for the perpetrator to

When accounts payable and purchasing systems are highly automated,more detail is included in the transaction files.This deeper level of detail is illustrated by including

Because many of the types of errors and irregularities that may be found in the acquisition and payment cycle represent a misstatement of earnings and are of significant concern to the auditor,the tolerable exception rate selected by the auditor for attribute testing of this cycle will be

After the vendor master file data has been entered,to best improve internal controls the

To ensure that goods and services acquired are for authorized company purposes,and to help acquire only needed items

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 13: Audit of the Acquisition and Payment Cycle

The purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to

The starting point for the verification of current-year acquisitions of manufacturing equipment is normally

In assessing control risk for purchases,an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents.Which account assertion would this test of controls most likely support?

Before a new vendor is added into the vendor master file (or the purchasing master file),the company should

The most important objectives for amortization expense are valuation and

Ordinarily,it is unnecessary to test the valuation of capital assets recorded in prior periods because

Describe the two objectives that are most important in auditing accumulated amortization.Explain why these objectives are important.

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

When verifying current-year additions to manufacturing equipment,the two major objectives for this part of the audit are

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

To protect against theft of physical assets (such as computer equipment),the company should

ZyCo has recently converted to a new online accounts payable system.To test that all vendor balances have been converted to the vendor master file (completeness),the auditor would

The control test that requires "the auditor to compare recorded transactions in the acquisitions journal with the vendor's invoice,receiving report,and other supporting documentation" satisfies the objective of

The most common fraud in the acquisitions area is for the perpetrator to

When accounts payable and purchasing systems are highly automated,more detail is included in the transaction files.This deeper level of detail is illustrated by including

Because many of the types of errors and irregularities that may be found in the acquisition and payment cycle represent a misstatement of earnings and are of significant concern to the auditor,the tolerable exception rate selected by the auditor for attribute testing of this cycle will be

After the vendor master file data has been entered,to best improve internal controls the

To ensure that goods and services acquired are for authorized company purposes,and to help acquire only needed items

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters