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

Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that:

A substantive test of transactions commonly used to test the completeness objective for acquisitions is "Trace from a file of receiving reports to the acquisitions journal."

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

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

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

A document generally received from the vendor which indicates a reduction in the amount owed due to the company granting an allowance is a:

Which of the following tests of controls is least useful in assessing the transaction-related audit objective related to occurrence?

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.

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

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

________ is a balance-related audit objective that is not applicable to liabilities.

You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities.You have decided to vouch a sample of entries in the accounts payable master file to supporting documents.Which assertion is this test of controls most likely to support?

What typically ends the acquisitions and payment cycle?

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

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 satisfy your concern?

A document indicating a reduction in the amount owed to a vendor because of returned goods is:

Discuss the key internal controls that should be present in the processing purchase orders function in the acquisitions and payment cycle.

The audit procedure "Test clerical accuracy by footing the journals and tracing postings to general ledger and to accounts payable and inventory master files" is used to test the posting and summarization objective for acquisitions.

Auditors need to distinguish between accounts payable and accrued liabilities in designing the appropriate control and substantive tests.A liability is properly accounted for as an account payable if:

The audit procedure "Examine canceled check for authorized signature, proper endorsement, and cancellation by the bank" is used to test the occurrence objective for cash disbursements.