Question 1

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 2

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

Accepted Answer

Auditors should compare current year exp...

Question 3

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

Accepted Answer

Purchase requisitions represent requests...

Question 4

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 5

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

Question 6

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 7

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 8

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 9

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 10

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 11

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 12

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 13

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 14

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 15

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 16

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 17

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 audit procedures typically used to t...

Question 18

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 19

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

Accepted Answer

For good internal control over the recei...

Question 20

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.

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

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:

Correct Answer
verified

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

Correct Answer
verified
For good internal control over the recei...
View Answer

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:

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified
Auditors should compare current year exp...
View Answer

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.

Correct Answer
verified

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:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified
The audit procedures typically used to t...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified
Purchase requisitions represent requests...
View Answer

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:

Correct Answer
verified

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

Correct Answer
verified

Match seven of the terms for documents and records (a-m)used in the acquisitions and cash disbursement cycle with the descriptions provided below (1-7):

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

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFor good internal control over the recei...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAuditors should compare current year exp...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe audit procedures typically used to t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedPurchase requisitions represent requests...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match seven of the terms for documents and records (a-m)used in the acquisitions and cash disbursement cycle with the descriptions provided below (1-7):

Correct Answer
verified

Correct Answer
verified
For good internal control over the recei...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Auditors should compare current year exp...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The audit procedures typically used to t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Purchase requisitions represent requests...
View Answer

Correct Answer
verified

Correct Answer
verified