Question 1

An auditor most likely would extend substantive tests of payroll when

Accepted Answer

A)  Payroll is extensively audited by the state government. 
B)  Payroll expense is substantially higher than in the prior year. 
C)  Overpayments are discovered in performing tests of controls. 
D)  Employees complain to management about too much overtime. 
A)  Payroll is extensively audited by the state government. 
B)  Payroll expense is substantially higher than in the prior year. 
C)  Overpayments are discovered in performing tests of controls. 
D)  Employees complain to management about too much overtime.

Question 2

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

Accepted Answer

A)  Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable. 
B)  Examine a sample of cash disbursements in the period subsequent to year-end. 
C)  Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded. 
D)  Examine unusual relationships between monthly accounts payable and recorded purchases. 
A)  Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable. 
B)  Examine a sample of cash disbursements in the period subsequent to year-end. 
C)  Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded. 
D)  Examine unusual relationships between monthly accounts payable and recorded purchases.

Question 3

The inherent risk that accounts payable may be omitted or otherwise understated typically is

Accepted Answer

A)  Low. 
B)  High. 
C)  Moderate. 
D)  Indeterminate. 
A)  Low. 
B)  High. 
C)  Moderate. 
D)  Indeterminate.

Question 4

An auditor most likely would perform substantive procedures on payroll transactions and balances when

Accepted Answer

A)  Cutoff tests indicate a substantial amount of accrued payroll expense. 
B)  The assessed level of control risk relative to payroll transactions is low. 
C)  Analytical procedures indicate unusual fluctuations in recurring payroll entries. 
D)  Accrued payroll expense consists primarily of unpaid commissions. 
A)  Cutoff tests indicate a substantial amount of accrued payroll expense. 
B)  The assessed level of control risk relative to payroll transactions is low. 
C)  Analytical procedures indicate unusual fluctuations in recurring payroll entries. 
D)  Accrued payroll expense consists primarily of unpaid commissions.

Question 5

R.Budd,the purchasing agent of Lake Hardware Wholesalers,has a relative who owns a retail hardware store.Budd arranged for hardware to be delivered by manufacturers to the retail store on a cash-on-delivery (COD)basis,thereby enabling his relative to buy at Lake's wholesale prices.Budd was probably able to accomplish this because of Lake's poor internal control over

Accepted Answer

A)  Purchase requisitions. 
B)  Cash receipts. 
C)  Perpetual inventory records. 
D)  Purchase orders. 
A)  Purchase requisitions. 
B)  Cash receipts. 
C)  Perpetual inventory records. 
D)  Purchase orders.

Question 6

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Accepted Answer

A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Contrast the ratio of accounts payable to purchases with the prior year's ratio. 
C)  Vouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders. 
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance. 
A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Contrast the ratio of accounts payable to purchases with the prior year's ratio. 
C)  Vouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders. 
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

Question 7

When the _________________________________,______________________________ and _________________________ are in hand,the accountants can record the accounts payable.

Accepted Answer

purchase order; vend

Question 8

To determine whether accounts payable are complete,auditors perform a test to verify that all merchandise received has been recorded.The population for this test consists of all

Accepted Answer

A)  Vendors' invoices. 
B)  Purchase orders. 
C)  Receiving reports. 
D)  Canceled checks. 
A)  Vendors' invoices. 
B)  Purchase orders. 
C)  Receiving reports. 
D)  Canceled checks.

Question 9

Which of the following situations indicates a potential material weakness in internal control over acquisition and expenditure?

Accepted Answer

A)  Purchase orders are not prepared for services acquired directly under authorization of department heads. 
B)  The same person authorizes voucher packages and signs checks. 
C)  Unacceptable goods are not scheduled on receiving reports. 
D)  The same person signs checks and stamps vouchers PAID. 
A)  Purchase orders are not prepared for services acquired directly under authorization of department heads. 
B)  The same person authorizes voucher packages and signs checks. 
C)  Unacceptable goods are not scheduled on receiving reports. 
D)  The same person signs checks and stamps vouchers PAID.

Question 10

A _____________________________ is a cover sheet containing all supporting documentation for an acquisition.

Accepted Answer

The answer of A _____________________________ is a cover sheet containing...

Question 11

The main feature of custody in the payroll cycle is the possession of the payroll checks.

Accepted Answer

A) True 
 B)False

Question 12

Computer controls that might be found in an advanced on-line acquisition and expenditure system would not include

Accepted Answer

A)  All vendor invoices are prenumbered and the numbers accounted for. 
B)  Each terminal performs only designated functions. 
C)  An identification number and password are required to enter the nonautomatic purchase orders. 
D)  The check signature is printed using a signature plate that is installed on the computer printer only when checks are printed. 
A)  All vendor invoices are prenumbered and the numbers accounted for. 
B)  Each terminal performs only designated functions. 
C)  An identification number and password are required to enter the nonautomatic purchase orders. 
D)  The check signature is printed using a signature plate that is installed on the computer printer only when checks are printed.

Question 13

An auditor most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Accepted Answer

A)  Examining authorization forms for new employees. 
B)  Comparing payroll registers with original batch transmittal data. 
C)  Distribute payroll checks to all employees. 
D)  Hiring all subordinate payroll department employees. 
A)  Examining authorization forms for new employees. 
B)  Comparing payroll registers with original batch transmittal data. 
C)  Distribute payroll checks to all employees. 
D)  Hiring all subordinate payroll department employees.

Question 14

Improperly capitalizing an expense item results in.

Accepted Answer

A)  Understatement of profit in the current year and overstatement in future years. 
B)  Understatement of profit in the current year and in future years. 
C)  Overstatement of profit in the current year and understatement in future years. 
D)  Overstatement of profit in the current year and in future years. 
A)  Understatement of profit in the current year and overstatement in future years. 
B)  Understatement of profit in the current year and in future years. 
C)  Overstatement of profit in the current year and understatement in future years. 
D)  Overstatement of profit in the current year and in future years.

Question 15

Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?

Accepted Answer

A)  Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. 
B)  Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. 
C)  Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices. 
D)  Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. 
A)  Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. 
B)  Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. 
C)  Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices. 
D)  Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions.

Question 16

The basic acquisition and expenditure activities are (1)purchasing goods and services,(2)receiving the goods or services,(3)recording the asset or expense and related liability,and (4)paying the vendors.

Accepted Answer

A) True 
 B)False

Question 17

The ________________________________________ is a set of procedures designed to yield audit evidence of liabilities that were not recorded in the reporting period.

Accepted Answer

search for

Question 18

The internal control questionnaire for purchases and accounts payable includes the following questions.Next to each of the questions,indicate the letter of the related transaction assertion.
A. Occurrence
B. Completeness
C. Accuracy
D. Classification
E. Cutoff

Accepted Answer

1.C; 2.A;

Question 19

An audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Accepted Answer

A)  Examining authorization forms for new employees. 
B)  Comparing payroll registers with original batch transmittal data. 
C)  Authorizing payroll rate changes for all employees. 
D)  Hiring all subordinate payroll department employees. 
A)  Examining authorization forms for new employees. 
B)  Comparing payroll registers with original batch transmittal data. 
C)  Authorizing payroll rate changes for all employees. 
D)  Hiring all subordinate payroll department employees.

Question 20

F.Jack,CPA,is the auditor of Jill Corporation.Jack plans to follow last year's work papers in selecting accounts payable to be confirmed.Confirmations were mailed to 50 of Jill's 200 suppliers.The sample was designed to select accounts with the largest balances.Jack and Jill spent a lot of time reconciling minor differences between the confirmation amounts and the accounts payable trial balance.
Required:
Do you believe Jack should use the same sample design for accounts payable confirmations this year? If not,what suggestions can you give to improve the design?

Accepted Answer

Because of the concern for understatemen

An auditor most likely would extend substantive tests of payroll when

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

The inherent risk that accounts payable may be omitted or otherwise understated typically is

An auditor most likely would perform substantive procedures on payroll transactions and balances when

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

When the _______, and _ are in hand,the accountants can record the accounts payable.

To determine whether accounts payable are complete,auditors perform a test to verify that all merchandise received has been recorded.The population for this test consists of all

Which of the following situations indicates a potential material weakness in internal control over acquisition and expenditure?

A _____________________________ is a cover sheet containing all supporting documentation for an acquisition.

The main feature of custody in the payroll cycle is the possession of the payroll checks.

Computer controls that might be found in an advanced on-line acquisition and expenditure system would not include

An auditor most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Improperly capitalizing an expense item results in.

Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?

The basic acquisition and expenditure activities are (1)purchasing goods and services,(2)receiving the goods or services,(3)recording the asset or expense and related liability,and (4)paying the vendors.

The ________________________________________ is a set of procedures designed to yield audit evidence of liabilities that were not recorded in the reporting period.

The internal control questionnaire for purchases and accounts payable includes the following questions.Next to each of the questions,indicate the letter of the related transaction assertion. A. Occurrence B. Completeness C. Accuracy D. Classification E. Cutoff

An audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 8: Acquisition and Expenditure Cycle

An auditor most likely would extend substantive tests of payroll when

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

The inherent risk that accounts payable may be omitted or otherwise understated typically is

An auditor most likely would perform substantive procedures on payroll transactions and balances when

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

When the _________________________________,______________________________ and _________________________ are in hand,the accountants can record the accounts payable.

To determine whether accounts payable are complete,auditors perform a test to verify that all merchandise received has been recorded.The population for this test consists of all

Which of the following situations indicates a potential material weakness in internal control over acquisition and expenditure?

A _____________________________ is a cover sheet containing all supporting documentation for an acquisition.

The main feature of custody in the payroll cycle is the possession of the payroll checks.

Computer controls that might be found in an advanced on-line acquisition and expenditure system would not include

An auditor most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Improperly capitalizing an expense item results in.

Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?

The basic acquisition and expenditure activities are (1)purchasing goods and services,(2)receiving the goods or services,(3)recording the asset or expense and related liability,and (4)paying the vendors.

The ________________________________________ is a set of procedures designed to yield audit evidence of liabilities that were not recorded in the reporting period.

The internal control questionnaire for purchases and accounts payable includes the following questions.Next to each of the questions,indicate the letter of the related transaction assertion. A. Occurrence B. Completeness C. Accuracy D. Classification E. Cutoff

An audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

When the _______, and _ are in hand,the accountants can record the accounts payable.