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

Inadequate controls over purchases and accounts payable can result in opportunities to embezzle from the organization.

Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received?

For companies using Electronic Data Interface (EDI), the invoice is transmitted from the supplier electronically. EDI affects how the auditor evaluates audit evidence in this transaction cycle.

Most companies maintain an accounts payable master file by vendor.

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 that the entity being audited satisfy the control objective that

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

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

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

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

Auditors examine supporting documentation for cash disbursements subsequent to the balance sheet date in order to determine whether the cash disbursement was for a current period liability. Describe at least two audit procedures the auditor would perform to provide evidence that the cash disbursement was made for a current period liability.

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.

What typically initiates the acquisitions and payment cycle?

The extent of a search for unrecorded liabilities largely depends on

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 cash account is not part of the acquisitions and payment cycle.

A document review of which of the following is most likely to yield evidence of any unrecorded liabilities?

To test for overstatement cutoff amounts when auditing accounts payable, the auditor should trace receiving reports issued before year-end to related vendors' invoices to make sure they are not recorded as accounts payable.

Discuss each of the four business functions that comprise the acquisition and payment cycle.

Which of the following is not a typical audit procedure performed as part of the out-of-period liability tests?