Chat with AIExam 12: The Purchases, Payables, and Payments Process
A client maintains perpetual inventory records in both quantities and dollars.If the assessed level of control risk is high,an auditor would probably ________.
(36) 
VerifiedD
Explain why auditors must put greater emphasis on the completeness assertion when auditing accounts payable.Contrast this with the audit of assets.
(38) VerifiedAuditors are more concerned about overstatement of equity than understatement.As a result,auditors need to ensure that there are no unrecorded liabilities,that is,that the accounts payable records are complete.Controls over the timely recording of expenses and liabilities are not as stringent as controls over assets.Companies control their assets very closely but often rely on their suppliers for control over liabilities.Even as they send statements to their customers,they know that their suppliers will send statements to them.In contrast,the emphasis in the case of assets is the existence assertion-do all recorded assets exit.It is easier to verify existence than completeness.In verifying existence,the auditor is examining items that have been recorded-the population is known.In verifying completeness,however,the auditor is looking for items that are not recorded-the population is unknown.
If a client uses the cycle method of counting inventory and never takes "wall to wall" inventory on a single date,what must the auditor do in order to avoid requesting the client to take a full inventory count?
(38) VerifiedThe auditor must understand the cycle counts and evaluate the appropriateness of the client's methods.If the client has chosen this method,they are asserting that they have accurate perpetual inventory records and they are carrying out the inventory counts as a method of ensuring and maintaining the accuracy of their records.The auditor must be present during some of these counts to ensure that the plans are valid and to observe their execution.Test counts must be made and the audit team is responsible to draw a conclusion regarding the accuracy of the perpetual records and to ensure that sufficient appropriate audit evidence is gathered during these counts to ensure the existence and accuracy of the perpetual counts.
The statement that "all purchase orders must be supported by properly approved purchase requisitions" is a specific example of which general objective?
(43) Risk assessments and the results of any control testing are taken into account in selecting the nature,timing,and extent of further substantive procedures.
(41) An auditor should not be concerned if a cross-reference of vendor addresses with employee addresses reveals that there are matches.
(34) Identify the accounts payable audit objectives that the auditors must consider in determining the audit procedures to be performed.
(25) Rather than counting the entire inventory at year-end,a company may make periodic,or cycle counts,of selected inventory items at various times during the year.Which of the following is necessary if the auditor plans to observe inventories at interim dates?
(32) The statement that items on the accounts payable register must be supported by a completed voucher package containing a services purchase order and evidence the service was provided is a specific example of which control objective?
(30) When auditors trace the test counts they took at the physical inventory count to the final inventory summary,they are gathering evidence on the completeness assertion.
(43) The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.
(43) Brown CA was auditing her client Red Manufacturing Company.She selected a sample of inventory item recorded as issues in the perpetual records and vouched them to production requisitions.Brown's audit procedure was intended to satisfy which control objective?
(41) Comparing the results of a physical inventory count to the perpetual inventory records is considered a part of the recording function.
(40) A good environmental control over purchases and payables would be to have ________.
(37) What is the usual source of journal entries to record the purchase of inventory in the general ledger?
(42) When performing procedures to search for unrecorded liabilities,the auditor can obtain several sources of audit evidence,for example,documents,files,and enquiries of management and clerical personnel.
Required:
List at least five,but no more than eight,sources of audit evidence that could be accumulated in the search for unrecorded liabilities.(Do not write procedures or reasons for using the sources. )
(32) The accounts payable trial balance is a list of payable amounts by vendor.This total should equal the control account total in the general ledger.
(37) The auditor decided to test accounts payable by sending confirmations to selected vendors.The auditor's best approach in selecting the vendor accounts to confirm is to __________.
(29) A credit balance in a client's inventory records would suggest failure to record purchases.
(38) In "Retread Tires",J.Lock stole money by selling the company's new tires and replacing them with retread tires.The key weakness in the control system that failed to prevent or detect this scheme to continue was that ________.
(36) 
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