Exam 11: Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

When testing a standard cost system,the auditor does not normally make which of the following inquiries?

Inventory may become obsolete because of technological advances even though there are no signs of physical wear.

Auditing accounts payable What are the procedures available to auditors in auditing accounts payable and what level of assurance is obtained by each? Describe at least three.Which primary assertion is tested through these approaches?

An indication of potential inventory fraud is that inventory levels are growing faster than sales.

Which of the following might an auditor do in testing for the existence of accounts payable?

The acquisition and payment cycle includes processes for identifying products or services to be acquired,purchasing goods and services,receiving the goods,approving payments,and paying for goods and services received.

Approval of items for payment usually involves a three-way match among the vendor invoice,the purchase order,and the receiving report.

Which of the following is a required disclosure for inventory?

A purchase order identifies the quantity and description of products that have been received.

Accounting for inventories is a major consideration for many companies because of its significance to which of the following financial statements?

Which of the following is not a management assertion relevant to inventory?

Auditors should consider the inherent risk that management is more likely to understate,rather than overstate,accounts payable and expenses.

A new vendor should be added to an authorized vendor database by an individual in the purchasing department.

The cash account is not part of the acquisition and payment cycle.

The major accounts in the acquisition and payment cycle are inventory,cost of goods sold,accounts payable,and other expense accounts.

Which of the following accounts is not a major account in the acquisition and payment cycle?

Comparison of Controls in Traditional and Automated Systems Discuss the differences between a traditional receiving system and an automated integrated receiving system.

The lower of cost or market assumption is not important to valuation of inventory.

The acquisition process begins with a purchase of goods or services.

When auditing accounts payable,the auditor would most likely review a sample of cash disbursements throughout the year to determine whether disbursements for goods and services are applicable to the subsequent year.