Exam 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

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

The auditor has decided to use accounts payables confirmations when testing substantive testing for balances.Which two management assertions is she testing?

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:

The accounts payable department usually has responsibility for approving acquisitions for payment by comparing the details on the:

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

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

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

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?

Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash disbursements, it is common in this audit area to use:

A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms, and date of billing is called the voucher.

Explain why auditors should compare current year expense totals with prior year expense totals as an analytical procedure for accounts payable.

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

The auditor's ultimate substantive tests depend on the relative effectiveness of internal controls related to accounts payable.

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

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:

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:

Describe purchase requisitions and purchase orders.What is a key difference between the two documents?

Smaller privately held companies may not maintain an accounts payable master file by vendor.These companies pay on the basis of:

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