Question 1

Absent disputed amounts and minor timing differences,the vendor's statements should reconcile to the

Accepted Answer

A) acquisition journal. 
B) accounts payable master file. 
C) cash disbursements amount for purchases. 
D) vouchers payable amount for vendors. 
A) acquisition journal. 
B) accounts payable master file. 
C) cash disbursements amount for purchases. 
D) vouchers payable amount for vendors.

Question 2

Which of the following business functions is not considered to be part of the acquisitions class of transactions?

Accepted Answer

A) processing purchase orders 
B) recognizing liabilities 
C) receiving goods and services 
D) processing cash disbursements 
A) processing purchase orders 
B) recognizing liabilities 
C) receiving goods and services 
D) processing cash disbursements

Question 3

A document used by organizations to establish a formal means of recording and controlling acquisitions which usually contains a package of documents about the acquisition is the

Accepted Answer

A) voucher. 
B) purchase order. 
C) receiving report. 
D) purchase requisition. 
A) voucher. 
B) purchase order. 
C) receiving report. 
D) purchase requisition.

Question 4

An auditor is using audit sampling to test transactions in the acquisition and payment cycle.She would normally set the tolerable exception rate at what level?

Accepted Answer

A) Low 
B) Medium 
C) High 
D) Indeterminate 
A) Low 
B) Medium 
C) High 
D) Indeterminate

Question 5

To test for cutoff errors which overstate liabilities,the auditor should trace the receiving reports issued ________ to vendors' invoices.

Accepted Answer

A) after year-end 
B) before year-end 
C) the last day of the fiscal year 
D) both before and after year-end 
A) after year-end 
B) before year-end 
C) the last day of the fiscal year 
D) both before and after year-end

Question 6

The internal control that requires that "checks are prenumbered and accounted for" satisfies the objective of

Accepted Answer

A) accuracy. 
B) existence. 
C) completeness. 
D) posting and summarization. 
A) accuracy. 
B) existence. 
C) completeness. 
D) posting and summarization.

Question 7

Failure to record the acquisition of goods is a violation of which audit objective?

Accepted Answer

A) accuracy 
B) occurrence 
C) authorization 
D) completeness 
A) accuracy 
B) occurrence 
C) authorization 
D) completeness

Question 8

A substantive tests of transactions for acquisitions that would be used to provide evidence regarding the occurrence assertion would be to

Accepted Answer

A) compare the classification with the chart of accounts by referring to vendors' invoices. 
B) recompute the clerical accuracy on the vendors' invoice. 
C) review the acquisitions journal for large or unusual amounts. 
D) trace from a file of receiving reports to the acquisition journal. 
A) compare the classification with the chart of accounts by referring to vendors' invoices. 
B) recompute the clerical accuracy on the vendors' invoice. 
C) review the acquisitions journal for large or unusual amounts. 
D) trace from a file of receiving reports to the acquisition journal.

Question 9

What are the three most important controls over cash disbursements?

Accepted Answer

•signing of checks by an individual with

Question 10

Peprah Company pays its accounts payable 45 days after receipt of the goods or services.In this case,which audit procedure should be used to detect any unrecorded liabilities?

Accepted Answer

A) Examine cash disbursements for several weeks after the balance sheet date. 
B) Reconcile purchase orders to requisition orders. 
C) Reconcile purchase orders to receiving reports. 
D) Reconcile purchase orders to vendor invoices. 
A) Examine cash disbursements for several weeks after the balance sheet date. 
B) Reconcile purchase orders to requisition orders. 
C) Reconcile purchase orders to receiving reports. 
D) Reconcile purchase orders to vendor invoices.

Question 11

Discuss the circumstances in which it is desirable to send confirmation requests to the client's vendors.

Accepted Answer

It is desirable to send confirmation req

Question 12

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods,the quantity received,the date received,and other relevant data.

Accepted Answer

A) True 
 B)False

Question 13

Auditor confirmation of accounts payable balances at the balance sheet date may not need to be performed by the auditor because

Accepted Answer

A) this is a duplication of cutoff tests. 
B) there is likely to be other reliable external evidence available to support the balances. 
C) accounts payable balances at the balance sheet date may not be paid before the audit is completed. 
D) correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment. 
A) this is a duplication of cutoff tests. 
B) there is likely to be other reliable external evidence available to support the balances. 
C) accounts payable balances at the balance sheet date may not be paid before the audit is completed. 
D) correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment.

Question 14

In searching for unrecorded liabilities 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 which 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 for liabilities that existed at the balance sheet date. 
D) uncover cash disbursements recorded in a subsequent accounting period which should be recorded in this period. 
A) uncover liabilities on the balance sheet which 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 for liabilities that existed at the balance sheet date. 
D) uncover cash disbursements recorded in a subsequent accounting period which should be recorded in this period.

Question 15

A company recorded an acquisition of merchandise and its related liability,but failed to include the merchandise in ending inventory.The effect on the financial statements was to

Accepted Answer

A) understate liabilities. 
B) understate net income. 
C) overstate net income. 
D) have no impact on the financial statements since the errors cancel each other out. 
A) understate liabilities. 
B) understate net income. 
C) overstate net income. 
D) have no impact on the financial statements since the errors cancel each other out.

Question 16

The auditor is performing substantive tests of balances for accounts payable.What documentation would provide the best evidence for the ending balance?

Accepted Answer

A) vendors' invoices 
B) vendors' statements 
C) receiving reports 
D) purchase orders 
A) vendors' invoices 
B) vendors' statements 
C) receiving reports 
D) purchase orders

Question 17

At what point do most companies recognize liabilities in the acquisition and payment cycle when the goods are shipped FOB destination?

Accepted Answer

A) when the purchase order is issued 
B) when the vendor acknowledges receipt of the order 
C) when the goods or services are received 
D) when the vendor invoice is received 
A) when the purchase order is issued 
B) when the vendor acknowledges receipt of the order 
C) when the goods or services are received 
D) when the vendor invoice is received

Question 18

You are performing an audit of Hawk Company.In evaluating the accounts payable balance you are concerned with the completeness assertion.Which of the following audit procedures best satisfies your concern?

Accepted Answer

A) Send confirmations to only vendors with large balances. 
B) Send confirmations to vendors with large,active,zero balance accounts and a representative sample of all others. 
C) Send confirmations to vendors chosen from sample stratified by the dollar balance. 
D) Send confirmations to all vendors. 
A) Send confirmations to only vendors with large balances. 
B) Send confirmations to vendors with large,active,zero balance accounts and a representative sample of all others. 
C) Send confirmations to vendors chosen from sample stratified by the dollar balance. 
D) Send confirmations to all vendors.

Question 19

Auditors are especially concerned about the ________ and ________ balance-related audit objectives because of the potential for understatements in the account balance.

Accepted Answer

A) completeness;cutoff 
B) completeness;accuracy 
C) classification;realizable value 
D) classification;cutoff 
A) completeness;cutoff 
B) completeness;accuracy 
C) classification;realizable value 
D) classification;cutoff

Question 20

Which of the following accounts is not included in the acquisitions class of transactions?

Accepted Answer

A) inventory 
B) prepaid expenses 
C) sales discounts 
D) accounts payable 
A) inventory 
B) prepaid expenses 
C) sales discounts 
D) accounts payable

Exam 18: Audit of the Acquisition and Payment Cycle: Tests of Controls,

Absent disputed amounts and minor timing differences,the vendor's statements should reconcile to the

Which of the following business functions is not considered to be part of the acquisitions class of transactions?

A document used by organizations to establish a formal means of recording and controlling acquisitions which usually contains a package of documents about the acquisition is the

An auditor is using audit sampling to test transactions in the acquisition and payment cycle.She would normally set the tolerable exception rate at what level?

To test for cutoff errors which overstate liabilities,the auditor should trace the receiving reports issued ________ to vendors' invoices.

The internal control that requires that "checks are prenumbered and accounted for" satisfies the objective of

Failure to record the acquisition of goods is a violation of which audit objective?

A substantive tests of transactions for acquisitions that would be used to provide evidence regarding the occurrence assertion would be to

What are the three most important controls over cash disbursements?

Peprah Company pays its accounts payable 45 days after receipt of the goods or services.In this case,which audit procedure should be used to detect any unrecorded liabilities?

Discuss the circumstances in which it is desirable to send confirmation requests to the client's vendors.

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods,the quantity received,the date received,and other relevant data.

Auditor confirmation of accounts payable balances at the balance sheet date may not need to be performed by the auditor because

In searching for unrecorded liabilities the purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to

A company recorded an acquisition of merchandise and its related liability,but failed to include the merchandise in ending inventory.The effect on the financial statements was to

The auditor is performing substantive tests of balances for accounts payable.What documentation would provide the best evidence for the ending balance?

At what point do most companies recognize liabilities in the acquisition and payment cycle when the goods are shipped FOB destination?

You are performing an audit of Hawk Company.In evaluating the accounts payable balance you are concerned with the completeness assertion.Which of the following audit procedures best satisfies your concern?

Auditors are especially concerned about the ________ and ________ balance-related audit objectives because of the potential for understatements in the account balance.

Which of the following accounts is not included in the acquisitions class of transactions?

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters

Auditors are especially concerned about the and balance-related audit objectives because of the potential for understatements in the account balance.