Matching
Consider the following procedures for the verification of accounts payable.For each of the following independent exceptions, indicate the most likely and efficient audit procedure that would have detected the error.
Premises:
Utility bills are never accrued.Instead, they are simply recorded and paid immediately upon receipt the first week of the next period.
A number of open vouchers were accidentally omitted from the list given to the auditor.
Goods are sometimes ordered by purchasing agents on their own initiative to fill secret agreements with certain vendors.
A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated.
Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion.
The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year.
A number of checks were written and recorded on the last day of the year, but were not mailed until several days later.
Invoices on disputed orders are routinely held in a “pending” file in vouchers payable until the dispute is resolved.
Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became “past due.”
Goods in transit shipped FOB-shipping point were not recorded as purchases in the current period.
Numerous debit balances exist in vendor accounts from multiple payments on invoices.
Purchases are often recorded for goods that are never received.
Responses:
Verify the accuracy of schedules and agreement with accounts payable balances.
Apply analytical procedures.
Vouch recorded payables.
Confirm accounts payable.
Perform purchases cutoff test.
Perform cash disbursements cutoff test.
Examine subsequent payments.
Search for unrecorded accounts payable.
Compare statement presentation with GAAP.
Correct Answer:
Premises:
Responses:
Utility bills are never accrued.Instead, they are simply recorded and paid immediately upon receipt the first week of the next period.
A number of open vouchers were accidentally omitted from the list given to the auditor.
Goods are sometimes ordered by purchasing agents on their own initiative to fill secret agreements with certain vendors.
A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated.
Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion.
The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year.
A number of checks were written and recorded on the last day of the year, but were not mailed until several days later.
Invoices on disputed orders are routinely held in a “pending” file in vouchers payable until the dispute is resolved.
Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became “past due.”
Goods in transit shipped FOB-shipping point were not recorded as purchases in the current period.
Numerous debit balances exist in vendor accounts from multiple payments on invoices.
Purchases are often recorded for goods that are never received.
Premises:
Utility bills are never accrued.Instead, they are simply recorded and paid immediately upon receipt the first week of the next period.
A number of open vouchers were accidentally omitted from the list given to the auditor.
Goods are sometimes ordered by purchasing agents on their own initiative to fill secret agreements with certain vendors.
A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated.
Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion.
The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year.
A number of checks were written and recorded on the last day of the year, but were not mailed until several days later.
Invoices on disputed orders are routinely held in a “pending” file in vouchers payable until the dispute is resolved.
Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became “past due.”
Goods in transit shipped FOB-shipping point were not recorded as purchases in the current period.
Numerous debit balances exist in vendor accounts from multiple payments on invoices.
Purchases are often recorded for goods that are never received.
Responses:
Related Questions
Q20: Consider the following procedures for the verification
Q21: A valid purchase requisition represents the authorization
Q22: Discuss the confirmation of accounts payable in
Q23: Shown below is a partial flowchart of
Q24: The employee most likely to be involved
Q26: Examining <b>subsequent payments</b> consists of examining the
Q27: Central Meat Inc. buys and processes livestock
Q28: Cost of Goods Sold divided by Accounts
Q29: The specific audit objective that<b> all purchase
Q30: The specific audit objective that<b> the entity