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

Since there are a large number of accounts involved in the acquisition and payment cycle, there is the potential for classification misstatements, some of which are likely to affect income.

At what point in the acquisition and payment cycle do most companies first recognize the acquisition and related liability on their records?

Describe the audit procedures typically used to test for out-of-period liabilities (also referred to as the search for unrecorded accounts payable).

A misstatement of an expense account usually also results in an equal misstatement of accounts receivable.

One of important internal controls over cash disbursements should include not only the physical signing of checks, but also the approval of electronic funds transfers by individuals with proper authority.

Which of the following is not a key control in the acquisition and payment cycle?