Question 1

Vendors' statements and vendors' invoices are both relatively reliable evidence because they:

Accepted Answer

A)  come directly to the auditor without being in client's possession.
B)  originate from a third party.
C)  validate the effectiveness of the control system.
D)  are compared to and reconciled with sales invoices. B

Question 2

You are the in-charge auditor and are designing audit procedures for accounts payable.Which of the following management assertions would you normally be most concerned about?

Accepted Answer

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

Question 3

Significant audit efficiencies can be achieved on many audits when controls are operating effectively.

Accepted Answer

A) True 
 B)False  True

Question 4

When testing the controls for the completeness transaction-related audit objectives:

Accepted Answer

A)  failure to record the acquisition of goods or services will generally understate net income.
B)  failure to record the acquisition of goods or services has no impact on the balance sheet.
C)  it is generally easy for the auditor to determine whether unrecorded transactions exist.
D)  the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls.

Question 5

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 presented in accordance with accounting standards.
D)  to evaluate whether fraudulent payments were made.

Question 6

Discuss each of the four business functions that comprise the acquisition and payment cycle.

Accepted Answer

The four business functions that compris...

Question 7

What typically initiates the acquisitions and payment cycle?

Accepted Answer

A)  Issuance of a purchase requisition or request for purchase of goods/services
B)  Issuance of payment to vendor
C)  Approval of a new vendor
D)  Purchase requisition

Question 8

Receiving reports are normally only used to document the receipt of goods and are not used to document the receipt of services.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

When auditors intend to rely on controls...

Question 10

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 11

A key internal control over the acquisition cycle is to ensure that the company requires recording transactions as soon as possible after the goods and services have been received.This satisfies the transaction-related audit objective of:

Accepted Answer

A)  accuracy.
B)  completeness.
C)  timing.
D)  occurrence.

Question 12

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 the same individual.
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 13

The test of transactions which requires one to "reconcile recorded cash disbursements with the cash disbursements on the bank statement" satisfies the objective of:

Accepted Answer

A)  occurrence.
B)  completeness.
C)  accuracy.
D)  posting and summarization.

Question 14

Auditing the acquisition and payment cycle often takes more time than any other cycle.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following should sign checks under conditions of effective internal control?

Accepted Answer

A)  Treasurer
B)  Purchasing agent
C)  Accounts payable clerk
D)  Person preparing the checks

Question 16

When verifying the correct balance in accounts payable, vendors' invoices are more useful than vendors' statements.

Accepted Answer

A) True 
 B)False

Question 17

When assets are being verified, auditors focus much of their attention on making sure that the accounts are not overstated.Alternatively, auditors focus their efforts on understatement when auditing liabilities.What is the primary reason for this difference in focus?

Accepted Answer

A)  Auditors' legal liability
B)  GAAP
C)  GAAS requirements
D)  All of the above

Question 18

It is common in the acquisition and payment cycle for transactions to require significant judgment.

Accepted Answer

A) True 
 B)False

Question 19

An auditor is using audit sampling to test transactions in the acquisition and payment cycle.She would normally set the tolerable exception rate at what level?

Accepted Answer

A)  Low
B)  Medium
C)  High
D)  Indeterminate

Question 20

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.

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

Vendors' statements and vendors' invoices are both relatively reliable evidence because they:

Correct AnswerverifiedB

You are the in-charge auditor and are designing audit procedures for accounts payable.Which of the following management assertions would you normally be most concerned about?

Correct AnswerverifiedC

Significant audit efficiencies can be achieved on many audits when controls are operating effectively.

Correct AnswerverifiedTrue

When testing the controls for the completeness transaction-related audit objectives:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Discuss each of the four business functions that comprise the acquisition and payment cycle.

Correct AnswerverifiedThe four business functions that compris...View AnswerShow Answer

What typically initiates the acquisitions and payment cycle?

Correct AnswerverifiedShow Answer

Receiving reports are normally only used to document the receipt of goods and are not used to document the receipt of services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedWhen auditors intend to rely on controls...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A key internal control over the acquisition cycle is to ensure that the company requires recording transactions as soon as possible after the goods and services have been received.This satisfies the transaction-related audit objective of:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

The test of transactions which requires one to "reconcile recorded cash disbursements with the cash disbursements on the bank statement" satisfies the objective of:

Correct AnswerverifiedShow Answer

Auditing the acquisition and payment cycle often takes more time than any other cycle.

Correct AnswerverifiedShow Answer

Which of the following should sign checks under conditions of effective internal control?

Correct AnswerverifiedShow Answer

When verifying the correct balance in accounts payable, vendors' invoices are more useful than vendors' statements.

Correct AnswerverifiedShow Answer

When assets are being verified, auditors focus much of their attention on making sure that the accounts are not overstated.Alternatively, auditors focus their efforts on understatement when auditing liabilities.What is the primary reason for this difference in focus?

Correct AnswerverifiedShow Answer

It is common in the acquisition and payment cycle for transactions to require significant judgment.

Correct AnswerverifiedShow Answer

An auditor is using audit sampling to test transactions in the acquisition and payment cycle.She would normally set the tolerable exception rate at what level?

Correct AnswerverifiedShow Answer

Cutoff information for inventory acquisitions should be obtained during:

Correct AnswerverifiedShow Answer

Correct Answer
verified
B

Correct Answer
verified
C

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The four business functions that compris...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When auditors intend to rely on controls...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified