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

The auditor is performing tests of transactions for individual accounts payable transactions with vendors. Which document provides more reliable information about individual transactions with vendors?

Vendors' statements and vendors' invoices are both relatively reliable evidence because they

When verifying the correct balance in accounts payable, vendors' invoices are more useful than vendors' statements.

To test for cutoff errors which overstate liabilities, the auditor should trace the receiving reports issued ________ to vendors' invoices.

A key internal control over the acquisition cycle is to ensure that the company requires recording transactions as soon as possible after the goods and services have been received. This satisfies the transaction-related audit objective of

An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result

Which substantive analytical procedure would help determine if there are unrecorded or nonexistent accounts?

Auditors typically set performance materiality for accounts payable relatively low.

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 satisfies your concern?

Most accrued liabilities can be identified by the existence of vendors' invoices for the obligation.

When determining sample sizes for accounts payable tests,

A company purchasing goods from a vendor on a FOB origin basis must record the liability when the goods are received at the company's receiving dock.

An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all

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

A substantive test of transactions for acquisitions that would be used to provide evidence regarding the occurrence assertion would be to

Failure to record the acquisition of goods and services received overstates both accounts payable and net income.

The total of the unpaid individual account balances in the accounts payable master file should equal the total accounts payable balance in the general ledger.

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

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