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

The acquisition and payment cycle ends with the receiving of the goods or services.

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.

The computer-generated file which records acquisitions, disbursements and allowances for each vendor is the

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

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

The documents typically used to reconcile the balance on the accounts payable list with the confirmation or vendors' statements include all of the following except for

Auditors primarily emphasize the understatement of liabilities in the audit of accounts payable because they are concerned about potential legal liability.

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

The balance-related audit objective realizable value is not applicable when auditing accounts payable.

You are the in-charge auditor and are designing audit procedures for accounts payable. Which of the following management assertions would you normally be most concerned about?

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

Purchase returns and allowances and purchase discounts business functions are generally not significant in amount for most companies.

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

The overall objective in the audit of the acquisition and payment cycle is

Cutoff information for inventory acquisitions should be obtained during

It is possible to use Electronic Data Interface (EDI) to process payments to vendors electronically using Electronic Funds Transfer (EFT) between the company's bank and the vendor's bank.

The test of transactions which requires one to "reconcile recorded cash disbursements with the cash disbursements on the bank statement" satisfies the objective of

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

For effective internal control purposes, the accounts payable department generally should

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