Question 1

A vendor's statement is unreliable and auditors rarely use it.

Accepted Answer

A) True 
 B)False

Question 2

When testing the controls for the completeness transaction-related audit objectives,

Accepted Answer

A) failure to record the acquisition of goods or services will generally understate net income. 
B) failure to record the acquisition of goods or services has no impact on the balance sheet. 
C) it is generally easy for the auditor to determine whether unrecorded transactions exist. 
D) the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls. 
A) failure to record the acquisition of goods or services will generally understate net income. 
B) failure to record the acquisition of goods or services has no impact on the balance sheet. 
C) it is generally easy for the auditor to determine whether unrecorded transactions exist. 
D) the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls.

Question 3

Matching the supplier's invoice,the purchase order,and the receiving report prior to preparing the voucher would normally be the responsibility of the

Accepted Answer

A) warehouse receiving function. 
B) purchasing function. 
C) general accounting function. 
D) treasury function. 
A) warehouse receiving function. 
B) purchasing function. 
C) general accounting function. 
D) treasury function.

Question 4

Cutoff procedures for inventory purchased should be designed by companies to assure that

Accepted Answer

A) inventory owned by the company has been received. 
B) inventory included in the year-end inventory count has been paid. 
C) inventory received before year-end was recorded before year-end. 
D) inventory was correctly valued at year-end. 
A) inventory owned by the company has been received. 
B) inventory included in the year-end inventory count has been paid. 
C) inventory received before year-end was recorded before year-end. 
D) inventory was correctly valued at year-end.

Question 5

Which of the following accounts is not part of the acquisition and payment cycle?

Accepted Answer

A) prepaid expenses 
B) accounts payable 
C) sales returns and allowances 
D) property,plant,and equipment 
A) prepaid expenses 
B) accounts payable 
C) sales returns and allowances 
D) property,plant,and equipment

Question 6

An auditor is gathering evidence on the completeness assertion.To do so,she performs a test to verify that all goods received by the company have been recorded properly.The document population for this test would consist of all

Accepted Answer

A) vendor invoices. 
B) purchase orders. 
C) receiving reports. 
D) cash disbursements for accounts payable. 
A) vendor invoices. 
B) purchase orders. 
C) receiving reports. 
D) cash disbursements for accounts payable.

Question 7

The extent of a search for unrecorded liabilities largely depends on

Accepted Answer

A) materiality and inherent risk. 
B) materiality and control risk. 
C) materiality only. 
D) inherent risk only. 
A) materiality and inherent risk. 
B) materiality and control risk. 
C) materiality only. 
D) inherent risk only.

Question 8

When determining the methodology for designing tests of details of balances for accounts payable,

Accepted Answer

A) the focus by many companies on improving their supply-chain management activities has led to numerous changes in the design of systems used to initiate and record acquisition and payment activities. 
B) it is relatively inexpensive to audit accounts payable. 
C) performance materiality for accounts payable is set relatively low. 
D) inherent risk is often set at low. 
A) the focus by many companies on improving their supply-chain management activities has led to numerous changes in the design of systems used to initiate and record acquisition and payment activities. 
B) it is relatively inexpensive to audit accounts payable. 
C) performance materiality for accounts payable is set relatively low. 
D) inherent risk is often set at low.

Question 9

Auditors are normally more concerned about violations of the completeness objective for acquisitions than about violations of the occurrence objective for acquisitions.

Accepted Answer

A) True 
 B)False

Question 10

With respect to a small company's system of purchasing supplies,an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

Accepted Answer

A) requested by and approved by the same individual. 
B) used in the course of business and solely for business purposes during the year under audit. 
C) received,counted,and checked to quantities and amounts on purchase orders and invoices. 
D) properly recorded as assets and systematically amortized over the estimated useful life of the supplies. 
A) requested by and approved by the same individual. 
B) used in the course of business and solely for business purposes during the year under audit. 
C) received,counted,and checked to quantities and amounts on purchase orders and invoices. 
D) properly recorded as assets and systematically amortized over the estimated useful life of the supplies.

Question 11

Describe the audit procedures typically used to test for out-of-period liabilities (also referred to as the search for unrecorded accounts payable).

Accepted Answer

The audit procedures typically used to t

Question 12

When verifying the correct balance in accounts payable,vendors' invoices are more useful than vendors' statements.

Accepted Answer

A) True 
 B)False

Question 13

The controls over acquisitions included in the perpetual inventory records are normally tested as a part of the test of controls and substantive tests of transactions for the sales and collection cycle.

Accepted Answer

A) True 
 B)False

Question 14

By tracing receiving reports issued at and before year-end to vendors' invoices and making sure they are included in accounts payable,the auditor is testing for

Accepted Answer

A) theft of merchandise by employees. 
B) unrecorded obligations. 
C) lapping. 
D) kiting. 
A) theft of merchandise by employees. 
B) unrecorded obligations. 
C) lapping. 
D) kiting.

Question 15

The main focus taken by the auditor in verifying liability balances is on the discovery of I. understated liabilities.
II) omitted liabilities.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 16

A liability is properly accounted for as an account payable if

Accepted Answer

A) the amount is known and owed as of the balance sheet date. 
B) the amount can be estimated and is owed at the balance sheet date. 
C) the amount is known at the balance sheet date and owed by the end of the next fiscal year. 
D) the amount is estimated and owed within 90 days of the balance sheet date. 
A) the amount is known and owed as of the balance sheet date. 
B) the amount can be estimated and is owed at the balance sheet date. 
C) the amount is known at the balance sheet date and owed by the end of the next fiscal year. 
D) the amount is estimated and owed within 90 days of the balance sheet date.

Question 17

Which of the following is most reliable for verifying the correct balance of accounts payable?

Accepted Answer

A) vendors' invoices 
B) vendors' statements 
C) confirmations 
D) bills of lading 
A) vendors' invoices 
B) vendors' statements 
C) confirmations 
D) bills of lading

Question 18

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

Accepted Answer

A) received prior to the balance sheet date. 
B) shipped on or before the balance sheet date. 
C) both shipped and received prior to the balance sheet date. 
D) paid for in advance. 
A) received prior to the balance sheet date. 
B) shipped on or before the balance sheet date. 
C) both shipped and received prior to the balance sheet date. 
D) paid for in advance.

Question 19

After a purchase requisition is approved,a ________ must be initiated to purchase the goods or services.

Accepted Answer

A) purchase order 
B) vendor order 
C) call order 
D) vendor invoice 
A) purchase order 
B) vendor order 
C) call order 
D) vendor invoice

Question 20

Discuss the key internal controls that should be present in the receiving goods and services function in the acquisitions and payment cycle.

Accepted Answer

For good internal control over the recei

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

A vendor's statement is unreliable and auditors rarely use it.

When testing the controls for the completeness transaction-related audit objectives,

Matching the supplier's invoice,the purchase order,and the receiving report prior to preparing the voucher would normally be the responsibility of the

Cutoff procedures for inventory purchased should be designed by companies to assure that

Which of the following accounts is not part of the acquisition and payment cycle?

An auditor is gathering evidence on the completeness assertion.To do so,she performs a test to verify that all goods received by the company have been recorded properly.The document population for this test would consist of all

The extent of a search for unrecorded liabilities largely depends on

When determining the methodology for designing tests of details of balances for accounts payable,

Auditors are normally more concerned about violations of the completeness objective for acquisitions than about violations of the occurrence objective for acquisitions.

With respect to a small company's system of purchasing supplies,an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

Describe the audit procedures typically used to test for out-of-period liabilities (also referred to as the search for unrecorded accounts payable).

When verifying the correct balance in accounts payable,vendors' invoices are more useful than vendors' statements.

The controls over acquisitions included in the perpetual inventory records are normally tested as a part of the test of controls and substantive tests of transactions for the sales and collection cycle.

By tracing receiving reports issued at and before year-end to vendors' invoices and making sure they are included in accounts payable,the auditor is testing for

The main focus taken by the auditor in verifying liability balances is on the discovery of I. understated liabilities. II) omitted liabilities.

A liability is properly accounted for as an account payable if

Which of the following is most reliable for verifying the correct balance of accounts payable?

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

After a purchase requisition is approved,a ________ must be initiated to purchase the goods or services.

Discuss the key internal controls that should be present in the receiving goods and services function in the acquisitions and payment cycle.

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

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