Exam 11: Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Which of the following is NOT a procedure that the auditor should perform related to the physical inventory count?

An indication of potential inventory fraud is that inventory levels are growing faster than sales.

Physical inventory procedures. Discuss the procedures that the audit team will most likely perform upon arrival at each site right before physical inventory is taken.

Analytical review of related expense accounts when auditing accounts payable would be used when control risk is assessed as low.

Valuation is the most complex assertion related to inventory.

The acquisition cycle begins with the receipt of goods and services and ends with their payment as reflected in cash disbursements.

Which of the following would meet the need for additional control procedures when using computer-generated purchase orders?

Acquisition and payment processes. What are the five major phases of the acquisition and payment process?

Which of the following signals a potential fraud that may occur for the overstatement of inventory accounts?

Inventory controls. What are some of the important controls that are expected to be included in a well-conceived inventory control system?

Proper internal control over the inventory account would require that inventory items should be reviewed for obsolescence and proper accounting treatment.

Which of the following is a reason why an automated purchasing system is beneficial?

The acquisition cycle begins with which of the following?

Physical inventory procedures. Discuss the procedures the audit team will most likely perform during the physical observation of inventory.

When a purchasing agent benefits personally by accepting payment from a vendor, the purchasing agent is guilty of which of the following?

In observing the client's inventory at year-end the auditor makes test counts that are later traced into the client's inventory compilation.

A major control benefit of a centralized purchasing department is the segregation of the authorization function from the custody and recording functions.

During your audit of Brown Company you are trying to determine whether all accounts payable were recorded. Which assertion are you gathering evidence for?

The purchasing department should make sure that only authorized goods are received, the goods meet order specifications, an accurate count of the goods received is taken, and that accountability is established to assure that all receipts are recorded.

A perpetual inventory system is preferable to a periodic system if adequately controlled and maintained because of which of the following?