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

Companies may deliberately understate accounts payable to overstate financial performance.

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

When auditing accounts payable, the auditor is more concerned about the possibility of understatements than overstatements.

Which of the following is not one of the classes of transactions in the acquisition and payment cycle?

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."

The auditor's internal control objective to determine that "recorded acquisitions are for goods and services received" satisfies the audit objective of

An acquisitions transaction file is a computer-generated file that includes all information entered into the system regarding acquisition transactions.

When the client's physical inventory occurs before the last day of the year, it is still necessary to perform an accounts payable cutoff at the time of the count. In addition, the auditor must verify whether all acquisitions taking place between the count and the end of the year were added to

Auditors must also take into consideration the identification of material contracts, commitments, and related party transactions which require disclosure in the financial statements and/or the footnotes to the financial statements.

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?

Listed below are some management assertions made for the acquisition and payment cycle. For each one, give an example of how the auditor, by using the documents normally found in the process, can apply an auditing procedure to test the assertion. completeness timing accuracy

Auditors typically perform the acquisitions and cash disbursements tests at different times.

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

The acquisition and payment cycle typically begins with the initiation of a purchase requisition for goods and services from an authorized individual.

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

After a check is cashed by a vendor and clear's the vendors and the client's bank, the check is now a cancelled check and is no longer a liability, but now is a document.

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?

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

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

A liability is properly accounted for as an account payable if