Exam 11: Auditing the Purchasing Process

An entity's internal control requires that for every check request there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all:

The principal business objectives of the purchasing process are acquiring goods and services and paying for those goods and services.

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

An important primary purpose of the auditor's review of the entity's procurement system should be to determine the effectiveness of the activities to protect against:

The purchase journal is referred to as a check register.

Match the test of controls described below to the appropriate assertion it is used to test. -Trace a sample of receiving reports to their respective vendor invoices and vouchers

When searching for unrecorded liabilities at year-end, the population identified for sampling would be:

In assessing control risk for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support?

Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue.

An examination of the balance in the accounts payable account is ordinarily not designed to:

Accounts payable confirmations are used to test:

An entity erroneously recorded a large purchase twice. Which of the following internal controls would be most likely to detect this error in a timely and efficient manner?

Match the test of controls described below to the appropriate assertion it is used to test. -Review entity's competitive bidding procedures

Assertions about classes of transactions and events for the period under audit include:

If completeness is a concern for accounts payable, auditors will send accounts payable confirmations to:

The auditor is most likely to verify accrued commissions payable in conjunction with the:

An auditor wishes to perform tests of controls on an entity's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

The key inherent risk factors an auditor must consider when auditing the purchasing process are industry factors. Which two are most important and why?

Identify the types of substantive procedures used by the auditor to test accounts payable and accrued expenses. Provide an example of how the auditor may use each substantive procedure. Identify if any of the substantive procedures can be used as a test of controls or a dual-purpose test.

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively?