Question 1

The processing of purchases transactions involves all of the following purchases functions except:

Accepted Answer

A)  preparing purchase invoices. 
B)  requisitioning goods and services. 
C)  receiving the goods. 
D)  preparing the payment voucher. 
E)  recording the liability. 
A)  preparing purchase invoices. 
B)  requisitioning goods and services. 
C)  receiving the goods. 
D)  preparing the payment voucher. 
E)  recording the liability.

Question 2

Controls over the recording of a liability and the specific audit objectives to which they can relate, include all of the following except:

Accepted Answer

A)  computer prepares a report of all goods received that have resulted in a voucher. 
B)  computer agreement of the details of the voucher with the vendors' invoices and the related receiving reports and purchase orders. 
C)  computer comparison of the receiving report date with the accounting period when the voucher is recorded. 
D)  computer check of the mathematical accuracy of each voucher and supporting vendors' invoices. 
E)  the supporting documents should be stamped, perforated, or otherwise canceled to prevent resubmission for duplicate payment. 
A)  computer prepares a report of all goods received that have resulted in a voucher. 
B)  computer agreement of the details of the voucher with the vendors' invoices and the related receiving reports and purchase orders. 
C)  computer comparison of the receiving report date with the accounting period when the voucher is recorded. 
D)  computer check of the mathematical accuracy of each voucher and supporting vendors' invoices. 
E)  the supporting documents should be stamped, perforated, or otherwise canceled to prevent resubmission for duplicate payment.

Question 3

An auditor might use a generalized audit software to perform sequence checks and print a list of purchase orders whose numbers are missing in a designated computer file.

Accepted Answer

A) True 
 B)False

Question 4

The accounts payable turn days is the mean number of days it takes to retire payables.

Accepted Answer

A) True 
 B)False

Question 5

The specific audit objective that recorded purchases represent goods, services, and productive assets received during the period relates to:

Accepted Answer

A)  rights and obligations. 
B)  completeness. 
C)  existence or occurrence. 
D)  presentation and disclosure. 
E)  valuation or allocation. 
A)  rights and obligations. 
B)  completeness. 
C)  existence or occurrence. 
D)  presentation and disclosure. 
E)  valuation or allocation.

Question 6

Accounts payable is normally the largest current liability in a balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

In the confirmation of accounts payable, which of the following accounts would be least likely to be selected by the auditor for confirmation?

Accepted Answer

A)  an account with high activity during the year, but a low balance at year end. 
B)  an account with a vendor who sends a monthly statement. 
C)  an account with a zero balance. 
D)  a major vendor used in the prior year, but not in the current year. 
E)  an account with a debit balance. 
A)  an account with high activity during the year, but a low balance at year end. 
B)  an account with a vendor who sends a monthly statement. 
C)  an account with a zero balance. 
D)  a major vendor used in the prior year, but not in the current year. 
E)  an account with a debit balance.

Question 8

The cash disbursement function usually involves simultaneously accruing the liability and recording the cash disbursement.

Accepted Answer

A) True 
 B)False

Question 9

Purchase orders should be prenumbered.

Accepted Answer

A) True 
 B)False

Question 10

Accounts payable turnover is a substantive test for:

Accepted Answer

A)  initial procedures. 
B)  analytical procedures. 
C)  test of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure. 
A)  initial procedures. 
B)  analytical procedures. 
C)  test of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure.

Question 11

A purchasing function is usually responsible for determining that unpaid vouchers are processed for payment on their due dates.

Accepted Answer

A) True 
 B)False

Question 12

Management's commitment to competence should be reflected in:

Accepted Answer

A)  hiring assignment. 
B)  training of personnel. 
C)  maintaining custody of purchased assets 
D)  reporting on expenditure cycle activities. 
E)  all of the above 
A)  hiring assignment. 
B)  training of personnel. 
C)  maintaining custody of purchased assets 
D)  reporting on expenditure cycle activities. 
E)  all of the above

Question 13

The search for unrecorded accounts payable relates to the completeness assertion for accounts payable.

Accepted Answer

A) True 
 B)False

Question 14

The net operating cycle represents the time from using cash to purchase goods or services to collecting cash from the sale of goods or services.

Accepted Answer

A) True 
 B)False

Question 15

Vendors usually provide monthly statements that are available in client files.

Accepted Answer

A) True 
 B)False

Question 16

Recent trends in accounts payable include all of the following except:

Accepted Answer

A)  increasing use of electronic invoicing. 
B)  improving efficiency, timeliness, and processes. 
C)  decreased use of imaging. 
D)  installing electronic payments. 
E)  cleaning up vendor files. 
A)  increasing use of electronic invoicing. 
B)  improving efficiency, timeliness, and processes. 
C)  decreased use of imaging. 
D)  installing electronic payments. 
E)  cleaning up vendor files.

Question 17

Consider the following procedures for the verification of accounts payable:
-The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year.
_____

Accepted Answer

A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP. 
A) Verify the accuracy of schedules and agreement with accounts payable balances. 
B) Apply analytical procedures. 
C) Vouch recorded payables. 
D) Confirm accounts payablE. 
E) Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Question 18

Monitoring activities about which the auditor should obtain knowledge include feedback from suppliers concerning future delivery problems.

Accepted Answer

A) True 
 B)False

Question 19

The expenditure cycle is especially prone to a risk of employee fraud through unauthorized disbursement of cash.

Accepted Answer

A) True 
 B)False

Question 20

A control to overcome submitting an invoice twice for payment requires that a voucher cannot be issued without original supporting documents.

Accepted Answer

A) True 
 B)False

Exam 15: Auditing the Expenditure Cycle

The processing of purchases transactions involves all of the following purchases functions except:

Controls over the recording of a liability and the specific audit objectives to which they can relate, include all of the following except:

An auditor might use a generalized audit software to perform sequence checks and print a list of purchase orders whose numbers are missing in a designated computer file.

The accounts payable turn days is the mean number of days it takes to retire payables.

The specific audit objective that recorded purchases represent goods, services, and productive assets received during the period relates to:

Accounts payable is normally the largest current liability in a balance sheet.

In the confirmation of accounts payable, which of the following accounts would be least likely to be selected by the auditor for confirmation?

The cash disbursement function usually involves simultaneously accruing the liability and recording the cash disbursement.

Purchase orders should be prenumbered.

Accounts payable turnover is a substantive test for:

A purchasing function is usually responsible for determining that unpaid vouchers are processed for payment on their due dates.

Management's commitment to competence should be reflected in:

The search for unrecorded accounts payable relates to the completeness assertion for accounts payable.

The net operating cycle represents the time from using cash to purchase goods or services to collecting cash from the sale of goods or services.

Vendors usually provide monthly statements that are available in client files.

Recent trends in accounts payable include all of the following except:

Consider the following procedures for the verification of accounts payable: -The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year. _____

Monitoring activities about which the auditor should obtain knowledge include feedback from suppliers concerning future delivery problems.

The expenditure cycle is especially prone to a risk of employee fraud through unauthorized disbursement of cash.

A control to overcome submitting an invoice twice for payment requires that a voucher cannot be issued without original supporting documents.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters