Question 1

Describe the audit procedures typically used to test for out-of-period liabilities (also referred to as the search for unrecorded accounts payable).

Accepted Answer

The answer of Describe the audit procedures typically used to...

Question 2

The auditor has decided to use accounts payables confirmations when testing substantive testing for balances.Which two management assertions is she testing?

Accepted Answer

A) Existence and completeness 
B) Existence and occurrence 
C) Existence only 
D) Completeness only

Question 3

A document used by organizations to establish a formal means of recording and controlling acquisitions which usually contains a package of documents about the acquisition is the:

Accepted Answer

A) voucher. 
B) purchase order. 
C) receiving report. 
D) purchase requisition.

Question 4

The accounts payable department usually has responsibility for approving acquisitions for payment by comparing the details on the:

Accepted Answer

A) vendor's invoice and the receiving report. 
B) vendor's invoice and the purchase requisition. 
C) purchase order, receiving report, and vendor's invoice. 
D) purchase requisition, purchase order, and receiving report.

Question 5

Cutoff procedures for inventory purchased should be designed by companies to assure the company that:

Accepted Answer

A) inventory owned by the company has been received. 
B) inventory included in the year end inventory count has been paid. 
C) inventory received before year end was recorded before year end. 
D) inventory was correctly valued at year end.

Question 6

At what point do most companies recognize liabilities in the acquisition and payment cycle when the goods are shipped FOB destination?

Accepted Answer

A) When the purchase order is issued 
B) When the vendor acknowledges receipt of the order 
C) When the goods or services are received 
D) When the vendor invoice is received

Question 7

In searching for unrecorded liabilities the purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to:

Accepted Answer

A) uncover liabilities on the balance sheet which should not have been recorded until a subsequent period. 
B) find the documentation relating to a cash disbursement. 
C) uncover payments made in a subsequent accounting period for liabilities that existed at the balance sheet date. 
D) uncover cash disbursements recorded in a subsequent accounting period which should be recorded in this period.

Question 8

Peprah Company pays its accounts payable 45 days after receipt of the goods or services.In this case which audit procedure should be used to detect any unrecorded liabilities?

Accepted Answer

A) Examine cash disbursements for several weeks after the balance sheet date. 
B) Reconcile purchase orders to requisition orders. 
C) Reconcile purchase orders to receiving reports. 
D) Reconcile purchase orders to vendor invoices.

Question 9

Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash disbursements, it is common in this audit area to use:

Accepted Answer

A) block sampling. 
B) variables sampling. 
C) attributes sampling. 
D) probability proportional to size sampling.

Question 10

A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms, and date of billing is called the voucher.

Accepted Answer

A) True 
 B)False

Question 11

Match between columns
                        Premises: A document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition.
A document prepared by the purchasing department indicating the description quantity and related information for goods and services that the company intends to purchase.
A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted.
A document used to establish a formal means of recording and controlling acquisitions; it includes a cover sheet and a package of relevant documents.
A listing of the amount owed to each vendor at a point in time.
A document used to request goods and services by an authorized employee.
The listing or report that includes all cash payments for a given period.

Accepted Answer

The Answer of Check and Accounts payable trial balance and is...

Question 12

Explain why auditors should compare current year expense totals with prior year expense totals as an analytical procedure for accounts payable.

Accepted Answer

The answer of Explain why auditors should compare current year...

Question 13

Which of the following business functions is not considered to be part of the acquisitions class of transactions?

Accepted Answer

A) Processing purchase orders 
B) Recognizing liabilities 
C) Receiving goods and services 
D) Processing cash disbursements

Question 14

The auditor's ultimate substantive tests depend on the relative effectiveness of internal controls related to accounts payable.

Accepted Answer

A) True 
 B)False

Question 15

Discuss the key internal controls that should be present in the receiving goods and services function in the acquisitions and payment cycle.

Accepted Answer

The answer of Discuss the key internal controls that should...

Question 16

When an acquisition is on an FOB origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were:

Accepted Answer

A) received prior to the balance sheet date. 
B) shipped on or before the balance sheet date. 
C) both shipped and received prior to the balance sheet date. 
D) paid for in advance.

Question 17

By tracing receiving reports issued at and before year-end to vendors' invoices and making sure they are included in accounts payable, the auditor is testing for:

Accepted Answer

A) theft of merchandise by employees. 
B) unrecorded obligations. 
C) lapping. 
D) kiting.

Question 18

Describe purchase requisitions and purchase orders.What is a key difference between the two documents?

Accepted Answer

The answer of Describe purchase requisitions and purchase orders.What is...

Question 19

Smaller privately held companies may not maintain an accounts payable master file by vendor.These companies pay on the basis of:

Accepted Answer

A) vendors' monthly statements. 
B) individual vendors' invoices. 
C) the accounts payable account in the general ledger. 
D) dunning letters.

Question 20

Auditors are especially concerned about the ________ and ________ balance-related audit objectives because of the potential for understatements in the account balance.

Accepted Answer

A) completeness, cutoff 
B) completeness, accuracy 
C) classification, realizable value 
D) classification, cutoff

Exam 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable