Exam 15: Audit of transaction cycles and financial statement balances I

The use of statistical sampling is less common for the audit of accounts payable than for accounts receivable because it is more difficult to define the population and determine the population size in accounts payable.

Identify the analytical procedures for the payroll and personnel cycle to test for possible misstatements.

Internal control over accounts payable is strengthened when a monthly reconciliation of the vendors' statements with recorded liabilities and the accounts payable master file with the general ledger is performed by:

State the primary determinants of the amount of time needed to perform the physical observation of inventory.

How is the payroll and personnel cycle different from other cycles?

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

The accounts payable department usually has responsibility for verifying the propriety of acquisitions by comparing the details on the:

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

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

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

Analytical procedures and tests of details of balances are the most important means of auditing the payroll and personnel cycle.

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.

A request by an authorised employee for goods or services is made on the:

Test results of the __________ cycle, in addition to the test results of inventory and warehousing, will affect the tests of details of balances for inventory.

To BEST ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditor should review and test the:

When auditing accounts payable, auditors typically set tolerable error relatively high.

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.

Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash payments, attributes sampling is rarely used when testing the acquisitions and cash payments cycle.

In the audit of inventory, the client is responsible for actually making and recording the count of physical inventory; the auditor's responsibility is to evaluate and observe the client's procedures and draw conclusions about the adequacy of the physical inventory.

What effect does the improper account classification of payroll have when payroll is a significant portion of inventory?