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

Which one of the following duties should not be assigned the purchases department?

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.

A document indicating a reduction in the amount owed to a vendor because of returned goods is:

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

Which of the following accounts is not part of the acquisition and payment cycle?

The auditor gets highly reliable evidence about individual transactions by examining:

Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that:

Which of the following accounts is not included in the acquisitions class of transactions?

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

Smaller privately held companies may not maintain an accounts payable master file by vendor.These companies pay on the basis of:

Discuss each of the four business functions that comprise the acquisition and payment cycle.

Match seven of the terms for documents and records (a-m)used in the acquisitions and cash disbursement cycle with the descriptions provided below (1-7): a.Purchase requisition b.Purchase order c.Receiving report d.Acquisitions journal e.Summary acquisitions report f.Vendor's invoice g.Debit memo h.Voucher i.Accounts payable master file j.Accounts payable trial balance k.Vendor's statement l.Check m.Cash disbursements journal ________ 1.A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted. ________ 2.A document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition. ________ 3.A document prepared by the purchasing department indicating the description,quantity,and related information for goods and services that the company intends to purchase. ________ 4.A listing of the amount owed to each vendor at a point in time. ________ 5.A document used to establish a formal means of recording and controlling acquisitions; it includes a cover sheet and a package of relevant documents. ________ 6.A document used to request goods and services by an authorized employee. ________ 7.The listing or report that includes all cash payments for a given period.

How do auditors determine the extent of testing of internal controls in the acquisition and payment cycle?

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

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

What typically ends the acquisitions and payment cycle?

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

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

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 satisfy your concern?

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