Question 1

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

Accepted Answer

A) The method for developing standard costs. 
B) The method for identifying components of overhead and of allocating overhead to products. 
C) The method for identifying sales cutoff. 
D) The method used for allocating variances to inventory and cost of goods sold.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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?

Accepted Answer

The answer of Auditing accounts payable What are the procedures...

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) Review client's financial statement disclosure. 
B) Review long-term purchase commitments. 
C) Perform a cutoff test of purchases and cash disbursements. 
D) Perform analytical review of related expense accounts.

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a required disclosure for inventory?

Accepted Answer

A) Inventory valuation method used (FIFO,LIFO,moving average)and percentage of inventory valued under each method. 
B) LIFO or current cost if the inventory is valued using FIFO. 
C) Type of inventory system used (periodic or perpetual). 
D) All of the above.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) Balance sheet. 
B) Income statement. 
C) Statement of cash flows. 
D) Both A and B.

Question 11

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

Accepted Answer

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

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) Inventory. 
B) Cost of goods sold. 
C) Accounts payable. 
D) All of the above are major accounts.

Question 17

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

Accepted Answer

The answer of Comparison of Controls in Traditional and Automated...

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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.

Accepted Answer

A) True 
 B)False

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.