Question 1

The use of statistical sampling is less common for the audit of accounts payable than for accounts receivable because it is more difficult to define the population and determine the population size in accounts payable.

Accepted Answer

A) True 
 B)False

Question 2

Authorization for accepting goods in the receiving department should be based on:

Accepted Answer

A)  Vendor Invoice. 
B)  Requisition Request. 
C)  Purchase order from the purchasing department. 
D)  Vendor Statement.

Question 3

When the client's physical inventory occurs before the last day of the year, it is still necessary to perform an accounts payable cutoff at the time of the count. In addition, the auditor must verify whether all acquisitions taking place between the count and the end of the year were added to:

Accepted Answer

A)  the physical inventory. 
B)  Accounts Payable. 
C)  Accounts Payable and Cost of Goods Sold. 
D)  the physical inventory and Accounts Payable.

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

Failure to record the acquisition of goods is a violation of which audit objective?

Accepted Answer

A)  Accuracy 
B)  Occurrence 
C)  Authorization 
D)  Completeness

Question 6

How do auditors determine the extent of testing of internal controls in the acquisition and payment cycle?

Accepted Answer

The answer of How do auditors determine the extent of...

Question 7

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

Accepted Answer

A)  Internal accounting control over accounts payable is adequate, and there is sufficient evidence on hand to minimize the risk of a material misstatement. 
B)  Confirmation response is expected to be favorable, and accounts payable balances are of immaterial amounts. 
C)  Creditor statements are not available and internal control over payables is unsatisfactory. 
D)  The majority of accounts payable balances are with associated companies.

Question 8

With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been:

Accepted Answer

A)  requested by and approved by authorized individuals who have no incompatible duties. 
B)  used in the course of business and solely for business purposes during the year under audit. 
C)  received, counted, and checked to quantities and amounts on purchase orders and invoices. 
D)  properly recorded as assets and systematically amortized over the estimated useful life of the supplies.

Question 9

During your audit of Williams Company you are trying to determine whether all accounts payable were recorded in the proper period. Which assertion are you gathering evidence for?

Accepted Answer

A)  Occurrence 
B)  Completeness 
C)  Cutoff 
D)  Rights and Obligations

Question 10

When auditing the acquisitions and cash disbursements cycle, it is usually more efficient for the auditor to reduce the extent of tests of controls and rely primarily on substantive tests of transactions and on tests of details of balances, provided the auditor has determined control risk low.

Accepted Answer

A) True 
 B)False

Question 11

A document review of which of the following is most likely to yield evidence of any unrecorded liabilities?

Accepted Answer

A)  Receiving reports 
B)  Vendor Memorandums 
C)  Unpaid accounts payable 
D)  Sales invoices out of sequence

Question 12

Which of the following documents is best for verifying the correct balance in accounts payable?

Accepted Answer

A)  Bills of lading 
B)  Confirmations 
C)  Vendors' invoices 
D)  Vendors' statements

Question 13

You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities. You have decided to vouch a sample of entries in the accounts payable master file to supporting documents. Which assertion is this test of controls most likely to support?

Accepted Answer

A)  Accuracy 
B)  Classification 
C)  Completeness 
D)  Occurrence

Question 14

Companies would normally recognize an account payable when the goods are received by the company.

Accepted Answer

A) True 
 B)False

Question 15

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods, the quantity received, the date received, and other relevant data.

Accepted Answer

A) True 
 B)False

Question 16

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 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

The acquisition and payment cycle typically begins with the initiation of purchase requisition for goods and services from an authorized individual.

Accepted Answer

A) True 
 B)False

Question 19

A substantive test for accounts payable that would be used to provide evidence regarding the occurrence assertion would be to:

Accepted Answer

A)  agree a sample of vouchers to authorized purchase orders. 
B)  recalculate the accuracy of the vouchers and the authorized purchase orders. 
C)  trace vouchers to the client's purchases journal. 
D)  vouch a sample of vouchers from the cash disbursements register to accounts payable.

Question 20

The auditor is performing tests of transactions for individual accounts payable transactions with vendors. Which document provides more reliable information about individual transactions with vendors?

Accepted Answer

A)  Receiving report 
B)  Vendors Invoices 
C)  Vendor Statements 
D)  Purchase Orders

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

The use of statistical sampling is less common for the audit of accounts payable than for accounts receivable because it is more difficult to define the population and determine the population size in accounts payable.

Authorization for accepting goods in the receiving department should be based on:

When the client's physical inventory occurs before the last day of the year, it is still necessary to perform an accounts payable cutoff at the time of the count. In addition, the auditor must verify whether all acquisitions taking place between the count and the end of the year were added to:

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

Failure to record the acquisition of goods is a violation of which audit objective?

How do auditors determine the extent of testing of internal controls in the acquisition and payment cycle?

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been:

During your audit of Williams Company you are trying to determine whether all accounts payable were recorded in the proper period. Which assertion are you gathering evidence for?

When auditing the acquisitions and cash disbursements cycle, it is usually more efficient for the auditor to reduce the extent of tests of controls and rely primarily on substantive tests of transactions and on tests of details of balances, provided the auditor has determined control risk low.

A document review of which of the following is most likely to yield evidence of any unrecorded liabilities?

Which of the following documents is best for verifying the correct balance in accounts payable?

You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities. You have decided to vouch a sample of entries in the accounts payable master file to supporting documents. Which assertion is this test of controls most likely to support?

Companies would normally recognize an account payable when the goods are received by the company.

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods, the quantity received, the date received, and other relevant data.

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?

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:

The acquisition and payment cycle typically begins with the initiation of purchase requisition for goods and services from an authorized individual.

A substantive test for accounts payable that would be used to provide evidence regarding the occurrence assertion would be to:

The auditor is performing tests of transactions for individual accounts payable transactions with vendors. Which document provides more reliable information about individual transactions with vendors?