Question 1

Operating control over the check signature plate normally should be the responsibility of the

Accepted Answer

A)  Secretary. 
B)  Chief accountant. 
C)  Vice President of Finance. 
D)  Treasurer. 
A)  Secretary. 
B)  Chief accountant. 
C)  Vice President of Finance. 
D)  Treasurer. D

Question 2

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Accepted Answer

A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Contrast the ratio of accounts payable to purchases with the prior year's ratio. 
C)  Vouch a sample of creditor balances to supporting invoices, receiving reports and purchase orders. 
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance. 
A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Contrast the ratio of accounts payable to purchases with the prior year's ratio. 
C)  Vouch a sample of creditor balances to supporting invoices, receiving reports and purchase orders. 
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance. D

Question 3

Because of the low volume of purchase return transactions,the auditor normally does not test the controls associated with these transactions.

Accepted Answer

A) True 
 B)False  True

Question 4

A client 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?

Accepted Answer

A)  Footing the purchases journal. 
B)  Reconciling vendors' monthly statements with subsidiary payable ledger accounts. 
C)  Tracing totals from the purchases journal to the ledger accounts. 
D)  Sending written quarterly confirmations to all vendors. 
A)  Footing the purchases journal. 
B)  Reconciling vendors' monthly statements with subsidiary payable ledger accounts. 
C)  Tracing totals from the purchases journal to the ledger accounts. 
D)  Sending written quarterly confirmations to all vendors.

Question 5

Unrecorded liabilities are most likely to be found during the review of which of the following documents?

Accepted Answer

A)  Unpaid bills. 
B)  Shipping records. 
C)  Bills of lading. 
D)  Unmatched sales invoices. 
A)  Unpaid bills. 
B)  Shipping records. 
C)  Bills of lading. 
D)  Unmatched sales invoices.

Question 6

The accounts payable department is responsible for ensuring that all vendor invoices,cash disbursements,and adjustments are recorded in the accounts payable records.

Accepted Answer

A) True 
 B)False

Question 7

Substantive procedures to examine the completeness assertion for accounts payable include

Accepted Answer

A)  Selecting a sample of vouchers and agreeing them to authorized purchase orders. 
B)  Selecting a sample of vouchers and tracing them to the purchases journal. 
C)  Comparing dates on vouchers to dates in the purchases journal. 
D)  Recomputing the mathematical accuracy of a sample of vendor invoices. 
A)  Selecting a sample of vouchers and agreeing them to authorized purchase orders. 
B)  Selecting a sample of vouchers and tracing them to the purchases journal. 
C)  Comparing dates on vouchers to dates in the purchases journal. 
D)  Recomputing the mathematical accuracy of a sample of vendor invoices.

Question 8

To determine whether accounts payable are complete,an auditor performs a test to verify that all merchandise received is recorded.The population of documents for this test consists of all

Accepted Answer

A)  Payment vouchers. 
B)  Receiving reports. 
C)  Purchase requisitions. 
D)  Vendors' invoices. 
A)  Payment vouchers. 
B)  Receiving reports. 
C)  Purchase requisitions. 
D)  Vendors' invoices.

Question 9

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

Accepted Answer

A)  Merchandise received. 
B)  Vendors' invoices. 
C)  Canceled checks. 
D)  Receiving reports. 
A)  Merchandise received. 
B)  Vendors' invoices. 
C)  Canceled checks. 
D)  Receiving reports.

Question 10

Which of the following procedures would an auditor least likely perform before the balance sheet date?

Accepted Answer

A)  Assessment of inherent risk. 
B)  Observation of merchandise inventory. 
C)  Assessment of control risk. 
D)  Identification of related parties. 
A)  Assessment of inherent risk. 
B)  Observation of merchandise inventory. 
C)  Assessment of control risk. 
D)  Identification of related parties.

Question 11

An auditor compares information on canceled checks with information contained in the cash disbursements journal.The objective of this test is to determine that

Accepted Answer

A)  Recorded cash disbursement transactions are properly authorized. 
B)  Proper cash purchase discounts have been recorded. 
C)  Cash disbursements are for goods and services actually received. 
D)  No discrepancies exist between the data on the checks and the data in the journal. 
A)  Recorded cash disbursement transactions are properly authorized. 
B)  Proper cash purchase discounts have been recorded. 
C)  Cash disbursements are for goods and services actually received. 
D)  No discrepancies exist between the data on the checks and the data in the journal.

Question 12

The authority to accept incoming goods in receiving should be based on a(an)

Accepted Answer

A)  Vendor's invoice. 
B)  Materials requisition. 
C)  Bill of lading. 
D)  Approved purchase order. 
A)  Vendor's invoice. 
B)  Materials requisition. 
C)  Bill of lading. 
D)  Approved purchase order.

Question 13

A purchase transaction usually begins with the preparation of a purchase order.

Accepted Answer

A) True 
 B)False

Question 14

The cash disbursements journal is also called the

Accepted Answer

A)  Voucher register. 
B)  Purchases journal. 
C)  Check register. 
D)  Accounts payable subsidiary ledger. 
A)  Voucher register. 
B)  Purchases journal. 
C)  Check register. 
D)  Accounts payable subsidiary ledger.

Question 15

Describe three categories of expenses outlined in FASB Concept Statement No.5.

Accepted Answer

The answer of Describe three categories of expenses outlined in...

Question 16

The mailing of disbursement checks and remittance advices should be controlled by the employee who

Accepted Answer

A)  Signed the checks last. 
B)  Approved the vouchers for payment. 
C)  Matched the receiving reports, purchase orders and vendors' invoices. 
D)  Verified the mathematical accuracy of the vouchers and remittance advices. 
A)  Signed the checks last. 
B)  Approved the vouchers for payment. 
C)  Matched the receiving reports, purchase orders and vendors' invoices. 
D)  Verified the mathematical accuracy of the vouchers and remittance advices.

Question 17

In testing controls over cash disbursements,an auditor most likely would determine that the person who signs the checks also

Accepted Answer

A)  Reviews the monthly bank reconciliation. 
B)  Returns the checks to accounts payable. 
C)  Is denied access to the supporting documents. 
D)  Is responsible for mailing the checks. 
A)  Reviews the monthly bank reconciliation. 
B)  Returns the checks to accounts payable. 
C)  Is denied access to the supporting documents. 
D)  Is responsible for mailing the checks.

Question 18

Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses.

Accepted Answer

A) True 
 B)False

Question 19

An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal.The purpose of this substantive procedure most likely was to

Accepted Answer

A)  Identify unusually large purchases that should be investigated further. 
B)  Verify that cash disbursements were for goods actually received. 
C)  Determine that purchases were properly recorded. 
D)  Test whether payments were for goods actually ordered. 
A)  Identify unusually large purchases that should be investigated further. 
B)  Verify that cash disbursements were for goods actually received. 
C)  Determine that purchases were properly recorded. 
D)  Test whether payments were for goods actually ordered.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 11: Auditing the Purchasing Process

Operating control over the check signature plate normally should be the responsibility of the

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Because of the low volume of purchase return transactions,the auditor normally does not test the controls associated with these transactions.

A client 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?

Unrecorded liabilities are most likely to be found during the review of which of the following documents?

The accounts payable department is responsible for ensuring that all vendor invoices,cash disbursements,and adjustments are recorded in the accounts payable records.

Substantive procedures to examine the completeness assertion for accounts payable include

To determine whether accounts payable are complete,an auditor performs a test to verify that all merchandise received is recorded.The population of documents for this test consists of all

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

Which of the following procedures would an auditor least likely perform before the balance sheet date?

An auditor compares information on canceled checks with information contained in the cash disbursements journal.The objective of this test is to determine that

The authority to accept incoming goods in receiving should be based on a(an)

A purchase transaction usually begins with the preparation of a purchase order.

The cash disbursements journal is also called the

Describe three categories of expenses outlined in FASB Concept Statement No.5.

The mailing of disbursement checks and remittance advices should be controlled by the employee who

In testing controls over cash disbursements,an auditor most likely would determine that the person who signs the checks also

Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses.

An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal.The purpose of this substantive procedure most likely was to

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

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

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