Question 1

The overall objective in the audit of the acquisition and payment cycle is:

Accepted Answer

A)  to ensure the reliability of the affected accounts. 
B)  to ensure the accuracy of the affected accounts. 
C)  to evaluate whether the affected accounts are fairly stated in accordance with accounting standards. 
D)  to evaluate whether fraudulent payments were made.

Question 2

Auditors are normally more concerned about violations of the completeness objective for acquisitions than about violations of the occurrence objective for acquisitions.

Accepted Answer

A) True 
 B)False

Question 3

What are the three important controls over cash disbursements?

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The answer of What are the three important controls over...

Question 4

What typically ends the acquisitions and payment cycle?

Accepted Answer

A)  issuance of a purchase requisition or request for purchase of goods/services 
B)  issuance of a payment to a vendor 
C)  approval of a new vendor 
D)  purchase requisition

Question 5

Describe for each function below their role in the acquisition and payment cycle:
Purchasing
Invoice Processing
Accounts Payable

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Question 6

Auditor confirmation of accounts payable balances at the balance sheet date may not need to be performed by the auditor because:

Accepted Answer

A)  this is a duplication of cutoff tests. 
B)  there is likely to be other reliable external evidence available to support the balances. 
C)  accounts payable balances at the balance sheet date may not be paid before the audit is completed. 
D)  correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment.

Question 7

Which of the following is not a key control in the acquisition and payment cycle?

Accepted Answer

A)  Authorization of purchases 
B)  Authorization of credit 
C)  Timely recording and independent review of transactions 
D)  Authorization of payments

Question 8

Cutoff information for inventory acquisitions should be obtained during:

Accepted Answer

A)  the interim period prior to year-end. 
B)  the interim period immediately following year-end. 
C)  the physical observation of inventory. 
D)  either the interim period prior to or immediately following year-end.

Question 9

Proper authorization for acquisition is useful for management as an internal control procedure, because it:

Accepted Answer

A)  ensures that goods/services are used efficiently by company employees. 
B)  ensures that goods/services were purchased from approved vendors. 
C)  ensures that goods/services were purchased according to company policy. 
D)  ensures that goods/services were purchased at the lowest possible price.

Question 10

Auditors need to distinguish between accounts payable and accrued liabilities in designing the appropriate control and substantive tests. A liability is properly accounted for as an account payable if:

Accepted Answer

A)  the amount is known and owed as of the balance sheet date. 
B)  the amount can be estimated and is owed at the balance sheet date. 
C)  the amount is known at the balance sheet date and owed by the end of the next fiscal year. 
D)  the amount is estimated and owed within 90 days of the balance sheet date.

Question 11

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

Accepted Answer

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Question 12

Describe the methodology for designing tests of details of balances for accounts payable.

Accepted Answer

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Question 13

The acquisition and payment cycle is highly controlled and not well-structured in most companies.

Accepted Answer