Question 1

The cutoff assertion for accounts payable includes

Accepted Answer

A)  determining whether all accounts payable are recorded. 
B)  determining whether all accounts payable actually are liabilities. 
C)  determining whether all accounts payable are recorded in the proper period. 
D)  determining whether all accounts payable are properly classified in the financial statements. 
A)  determining whether all accounts payable are recorded. 
B)  determining whether all accounts payable actually are liabilities. 
C)  determining whether all accounts payable are recorded in the proper period. 
D)  determining whether all accounts payable are properly classified in the financial statements.

Question 2

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.

Accepted Answer

The auditor uses substantive procedures

Question 3

Which of the following accounts is not affected by cash disbursement transactions?

Accepted Answer

A)  Cash. 
B)  Accounts payable. 
C)  Purchase discounts. 
D)  Purchase returns. 
A)  Cash. 
B)  Accounts payable. 
C)  Purchase discounts. 
D)  Purchase returns.

Question 4

As an in-charge auditor,you are reviewing a summary of control weaknesses in cash disbursement procedures.Which one of the following weaknesses,standing alone,should cause you the least concern?

Accepted Answer

A)  Checks are signed by only one person. 
B)  Signed checks are distributed by the controller to approved payees. 
C)  Treasurer fails to establish validity of names and addresses of check payees. 
D)  Cash disbursements are made directly out of cash receipts. 
A)  Checks are signed by only one person. 
B)  Signed checks are distributed by the controller to approved payees. 
C)  Treasurer fails to establish validity of names and addresses of check payees. 
D)  Cash disbursements are made directly out of cash receipts.

Question 5

Which of the following control activities is not usually performed in the accounts payable department?

Accepted Answer

A)  Determining the mathematical accuracy of the vendor's invoice. 
B)  Having an authorized person approve the voucher. 
C)  Controlling the mailing of the check and remittance advice. 
D)  Matching the receiving report with the purchase order. 
A)  Determining the mathematical accuracy of the vendor's invoice. 
B)  Having an authorized person approve the voucher. 
C)  Controlling the mailing of the check and remittance advice. 
D)  Matching the receiving report with the purchase order.

Question 6

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

Accepted Answer

1.The first type of expense is a product

Question 7

To provide assurance that each voucher is submitted and paid only once,an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

Accepted Answer

A)  supported by a vendor's invoice. 
B)  stamped "paid" by the check signer. 
C)  prenumbered and accounted for. 
D)  approved for authorized purchases. 
A)  supported by a vendor's invoice. 
B)  stamped "paid" by the check signer. 
C)  prenumbered and accounted for. 
D)  approved for authorized purchases.

Question 8

Assertions about account balances at the period end include

Accepted Answer

A)  existence, completeness, and accuracy. 
B)  existence, completeness, and classification. 
C)  existence, rights and obligations, and completeness. 
D)  existence, rights and obligations, and classification. 
A)  existence, completeness, and accuracy. 
B)  existence, completeness, and classification. 
C)  existence, rights and obligations, and completeness. 
D)  existence, rights and obligations, and classification.

Question 9

If payables turnover has increased significantly since the prior year,this is an indication that which of the following assertions for accounts payable might be violated?

Accepted Answer

A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Valuation and allocation. 
A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Valuation and allocation.

Question 10

Accounts payable confirmations are used to test

Accepted Answer

A)  both the existence and completeness audit assertions. 
B)  only the existence audit assertion. 
C)  only the completeness audit assertion. 
D)  either existence or completeness, depending upon the response rate. 
A)  both the existence and completeness audit assertions. 
B)  only the existence audit assertion. 
C)  only the completeness audit assertion. 
D)  either existence or completeness, depending upon the response rate.

Question 11

Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

Accepted Answer

A) True 
 B)False

Question 12

An entity's procurement system ends with the assumption of a liability and the eventual payment of the liability.Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?

Accepted Answer

A)  Accounts payable are not materially understated. 
B)  Authority to incur liabilities is restricted to one designated person. 
C)  Acquisition of materials is not made from one vendor or one group of vendors. 
D)  Commitments for all purchases are made only after established competitive bidding procedures are followed. 
A)  Accounts payable are not materially understated. 
B)  Authority to incur liabilities is restricted to one designated person. 
C)  Acquisition of materials is not made from one vendor or one group of vendors. 
D)  Commitments for all purchases are made only after established competitive bidding procedures are followed.

Question 13

Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence of recorded accounts payable?

Accepted Answer

A)  Investigating the open purchase order file to ascertain that prenumbered purchase orders are used and accounted for. 
B)  Receiving the entity's mail, unopened, for a reasonable period of time after the year-end to search for unrecorded vendor's invoices. 
C)  Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports. 
D)  Confirming accounts payable balances with known suppliers who have zero balances. 
A)  Investigating the open purchase order file to ascertain that prenumbered purchase orders are used and accounted for. 
B)  Receiving the entity's mail, unopened, for a reasonable period of time after the year-end to search for unrecorded vendor's invoices. 
C)  Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports. 
D)  Confirming accounts payable balances with known suppliers who have zero balances.

Question 14

Identify whether the following tests are substantive analytical procedures,tests of details of transactions,or tests of details of account balances:
1)Test a sample of purchase requisitions for proper authorization.
2)Test transactions around year-end to determine if they are recorded in the proper period.
3)Review results of confirmation of selected accounts payable.
4)Compare payables turnover to previous years' data.
5)Obtain selected vendors' statements and reconcile to vendor accounts.
6)Compare purchase returns and allowances as a percentage of revenue or cost of sales to industry data.

Accepted Answer

1)Tests of details of transactions.
2)Te

Question 15

There are several important disclosure items to consider when auditing the purchasing process.Discuss what they are and why they are important.

Accepted Answer

1.Payables by type.This allows the user

Question 16

Purchase cutoff procedures should be designed to test whether or not all inventory

Accepted Answer

A)  purchased and received before the year-end was recorded before year-end. 
B)  on the year-end balance sheet was carried at lower of cost or market. 
C)  on the year-end balance sheet was paid for by the company. 
D)  owned by the company is in the possession of the company. 
A)  purchased and received before the year-end was recorded before year-end. 
B)  on the year-end balance sheet was carried at lower of cost or market. 
C)  on the year-end balance sheet was paid for by the company. 
D)  owned by the company is in the possession of the company.

Question 17

Which of the following is an internal control that would prevent a paid disbursement voucher from being presented for payment a second time?

Accepted Answer

A)  Vouchers should be prepared by individuals who are responsible for signing disbursement checks. 
B)  Disbursement vouchers should be approved by at least two responsible management officials. 
C)  The date on a disbursement voucher should be within a few days of the date the voucher is presented for payment. 
D)  The official signing the check should compare the check with the voucher and should "cancel" the voucher documents by marking them "paid." 
A)  Vouchers should be prepared by individuals who are responsible for signing disbursement checks. 
B)  Disbursement vouchers should be approved by at least two responsible management officials. 
C)  The date on a disbursement voucher should be within a few days of the date the voucher is presented for payment. 
D)  The official signing the check should compare the check with the voucher and should "cancel" the voucher documents by marking them "paid."

Question 18

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

Accepted Answer

A)  inquiry and analytical procedures. 
B)  confirmation and observation. 
C)  observation and inquiry. 
D)  analytical procedures and confirmation. 
A)  inquiry and analytical procedures. 
B)  confirmation and observation. 
C)  observation and inquiry. 
D)  analytical procedures and confirmation.

Question 19

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

Accepted Answer

A)  Counting of goods upon receipt in the storeroom. 
B)  Matching of purchase order, receiving report, and vendor invoice for each voucher in the accounts payable department. 
C)  Comparison of goods received with goods requisitioned in the receiving department. 
D)  Verification of vouchers for accuracy and approval in the internal audit department. 
A)  Counting of goods upon receipt in the storeroom. 
B)  Matching of purchase order, receiving report, and vendor invoice for each voucher in the accounts payable department. 
C)  Comparison of goods received with goods requisitioned in the receiving department. 
D)  Verification of vouchers for accuracy and approval in the internal audit department.

Question 20

Which of the following describes a permanent difference?

Accepted Answer

A)  A difference that will be corrected in an amended tax return. 
B)  A difference arising from an uncertain tax position. 
C)  A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. 
D)  A timing difference between the recognition of revenue or expense under GAAP and tax purposes. 
A)  A difference that will be corrected in an amended tax return. 
B)  A difference arising from an uncertain tax position. 
C)  A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. 
D)  A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

The cutoff assertion for accounts payable includes

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.

Which of the following accounts is not affected by cash disbursement transactions?

As an in-charge auditor,you are reviewing a summary of control weaknesses in cash disbursement procedures.Which one of the following weaknesses,standing alone,should cause you the least concern?

Which of the following control activities is not usually performed in the accounts payable department?

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

To provide assurance that each voucher is submitted and paid only once,an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

Assertions about account balances at the period end include

If payables turnover has increased significantly since the prior year,this is an indication that which of the following assertions for accounts payable might be violated?

Accounts payable confirmations are used to test

Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

An entity's procurement system ends with the assumption of a liability and the eventual payment of the liability.Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?

Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence of recorded accounts payable?

There are several important disclosure items to consider when auditing the purchasing process.Discuss what they are and why they are important.

Purchase cutoff procedures should be designed to test whether or not all inventory

Which of the following is an internal control that would prevent a paid disbursement voucher from being presented for payment a second time?

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

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

Which of the following describes a permanent difference?

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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters

Exam 11: Auditing the Purchasing Process

The cutoff assertion for accounts payable includes

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.

Which of the following accounts is not affected by cash disbursement transactions?

As an in-charge auditor,you are reviewing a summary of control weaknesses in cash disbursement procedures.Which one of the following weaknesses,standing alone,should cause you the least concern?

Which of the following control activities is not usually performed in the accounts payable department?

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

To provide assurance that each voucher is submitted and paid only once,an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

Assertions about account balances at the period end include

If payables turnover has increased significantly since the prior year,this is an indication that which of the following assertions for accounts payable might be violated?

Accounts payable confirmations are used to test

Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

An entity's procurement system ends with the assumption of a liability and the eventual payment of the liability.Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?

Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence of recorded accounts payable?

There are several important disclosure items to consider when auditing the purchasing process.Discuss what they are and why they are important.

Purchase cutoff procedures should be designed to test whether or not all inventory

Which of the following is an internal control that would prevent a paid disbursement voucher from being presented for payment a second time?

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

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

Which of the following describes a permanent difference?

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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters