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

State each of the eight specific balance-related audit objectives for accounts payable, and, for each objective, describe one common test of details of balances.

A comparison of the current year's inventory turnover ratio with that of previous years may indicate the presence of obsolete inventory.

Once the auditor has determined the company's policy for accruing wages and knows it is consistent with that of previous years, the appropriate audit procedure to test for cutoff and accuracy is to:

The overall objective of the audit of the inventory and warehousing cycle is to determine that:

The costs used to value the physical inventory must be tested to determine whether the client has correctly followed an inventory method that is in accordance with accounting standards and is consistent with previous years.The audit procedures used to verify these costs are referred to as:

Misstatements in payroll are rarely material.

Cost accounting controls are divided into which broad categories?

It usually takes more time to audit the acquisition and payment cycle than any other cycle because:

Discuss each of the four business functions in a typical payroll and personnel cycle.

A substantive test of transactions commonly used to test the accuracy objective for acquisitions is 'compare paid cheques with the acquisitions journal and cash payments journal'.

The most important consideration in evaluating the fairness of the amounts accrued for holiday pay, sick pay, and other benefits is the:

Matching the vendor's invoice, the purchase order, and the receiving report normally should be the responsibility of the:

Why is inherent risk often assessed as relatively high for inventory?

The major balance sheet account in the acquisition and payment cycle is:

When an acquisition is on an FOB origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were:

Comparing expenses to prior years' expenses is an effective analytical procedure for accounts payable because expenses from year to year are:

The auditor must verify whether the physical counts were correctly summarised, the inventory quantities and prices were correctly extended, and the extended inventory was correctly footed.These tests are called:

A document identifying the description, supplier, quantity, and related information for goods and services the company intends to purchase is the:

As operating effectiveness of internal controls improves and is supported by additional tests of controls, substantive testing can be reduced.

The document that indicates the description and quantity of goods and services received, price, freight charges, discount terms, and date of the billing is the: