Question 1

The confirmation of accounts payable is most closely associated with:

Accepted Answer

A) Assertion risk. 
B) Detection risk. 
C) Inherent risk. 
D) Relative risk. 
A) Assertion risk. 
B) Detection risk. 
C) Inherent risk. 
D) Relative risk.

Question 2

Assume that the auditors are concerned about disbursement transactions that have been recorded for improper amounts.Which procedure(s)would possibly identify these transactions? $$\begin{array} { | l | c | c | } 
\hline \text { Item } & \begin{array} { c } 
\text { Trace from source } \
\text { documents to ioumals }
\end{array} & \begin{array} { c } 
\text { Vouch from journals } \
\text { to source documents }
\end{array} \
\hline \text { A. } & \text { No } & \text { No } \
\hline \text { B. } & \text { No } & \text { Yes } \
\hline \text { C. } & \text { Yes } & \text { No } \
\hline \text { D. } & \text { Yes } & \text { Yes } \
\hline
\end{array}$$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 3

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Accepted Answer

A) Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period. 
B) Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports. 
C) Examining unusual relationships between monthly accounts payable balances and recorded cash payments. 
D) Reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date. 
A) Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period. 
B) Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports. 
C) Examining unusual relationships between monthly accounts payable balances and recorded cash payments. 
D) Reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date.

Question 4

The auditors' search for unrecorded liabilities is completed:

Accepted Answer

A) During an interim period. 
B) At the balance sheet date. 
C) Subsequent to the balance sheet date. 
D) At any time during the examination. 
A) During an interim period. 
B) At the balance sheet date. 
C) Subsequent to the balance sheet date. 
D) At any time during the examination.

Question 5

The auditor will most likely perform extensive tests for possible understatement of:

Accepted Answer

A) Revenues. 
B) Assets. 
C) Liabilities. 
D) Capital. 
A) Revenues. 
B) Assets. 
C) Liabilities. 
D) Capital.

Question 6

Which of the following audit procedures is aimed most directly at testing the completeness assertion for accounts payable:

Accepted Answer

A) Footing the list of accounts payable. 
B) Examining underlying documentation for cash disbursements in the period after year-end. 
C) Tracing shipping reports issued on or before year-end to related customer purchase orders and invoices. 
D) Tracing shipping reports after year-end to related customer purchase orders and invoices. 
A) Footing the list of accounts payable. 
B) Examining underlying documentation for cash disbursements in the period after year-end. 
C) Tracing shipping reports issued on or before year-end to related customer purchase orders and invoices. 
D) Tracing shipping reports after year-end to related customer purchase orders and invoices.

Question 7

When the auditors select a sample of items from the vouchers payable register for the last month of the period under audit and trace these items to underlying documents,the auditors are gathering evidence primarily in support of the assertion that:

Accepted Answer

A) Recorded obligations were paid. 
B) Incurred obligations were recorded in the correct period. 
C) Recorded obligations occurred prior to year-end. 
D) Cash disbursements were recorded as incurred obligation. 
A) Recorded obligations were paid. 
B) Incurred obligations were recorded in the correct period. 
C) Recorded obligations occurred prior to year-end. 
D) Cash disbursements were recorded as incurred obligation.

Question 8

The confirmation of existing accounts payable does not prove the completeness of recorded accounts payable.

Accepted Answer

A) True 
 B)False

Question 9

When the auditors discover an understatement of liabilities,they would most likely also expect to find an:

Accepted Answer

A) Understatement of assets. 
B) Understatement of owners' equity. 
C) Overstatement of expenses. 
D) Understatement of revenues. 
A) Understatement of assets. 
B) Understatement of owners' equity. 
C) Overstatement of expenses. 
D) Understatement of revenues.

Question 10

When an auditor finds a debit to accounts payable,which of the following accounts is most likely to be credited?

Accepted Answer

A) Accounts Receivable. 
B) Accrued liabilities. 
C) Cash 
D) Cost of goods sold. 
A) Accounts Receivable. 
B) Accrued liabilities. 
C) Cash 
D) Cost of goods sold.

Question 11

The assertion most directly addressed when performing the search for unrecorded liabilities is:

Accepted Answer

A) Completeness. 
B) Existence. 
C) Presentation. 
D) Rights. 
A) Completeness. 
B) Existence. 
C) Presentation. 
D) Rights.

Question 12

For good internal control,a copy of a receiving report should be sent to all of the following departments except:

Accepted Answer

A) Accounts payable. 
B) Purchasing. 
C) Stores. 
D) Shipping. 
A) Accounts payable. 
B) Purchasing. 
C) Stores. 
D) Shipping.

Question 13

Auditors should be aware that a voucher system may result in which of the following at year-end:

Accepted Answer

A) Understatement of liabilities. 
B) Overstatement of assets. 
C) Understatement of owners' equity. 
D) Overstatement of expenses. 
A) Understatement of liabilities. 
B) Overstatement of assets. 
C) Understatement of owners' equity. 
D) Overstatement of expenses.

Question 14

Which of the following statements is correct regarding accounts payable and the auditor's procedures?

Accepted Answer

A) Because it is generally more difficult to discover a transaction that has not been recorded than to discover one that has been recorded incorrectly, the audit objective of completeness drives many of the substantive procedures applied to these balances. 
B) A judgment whether an unrecorded payable should be recorded before the financial statements are prepared depends entirely upon the source of the payable. 
C) The confirmation of accounts payable selected from the year-end trial balance of such accounts is most effective in discovering unrecorded liabilities. 
D) Unrecorded payables are often discovered through examining vouchers payable entered into the voucher register prior to the balance sheet date. 
A) Because it is generally more difficult to discover a transaction that has not been recorded than to discover one that has been recorded incorrectly, the audit objective of completeness drives many of the substantive procedures applied to these balances. 
B) A judgment whether an unrecorded payable should be recorded before the financial statements are prepared depends entirely upon the source of the payable. 
C) The confirmation of accounts payable selected from the year-end trial balance of such accounts is most effective in discovering unrecorded liabilities. 
D) Unrecorded payables are often discovered through examining vouchers payable entered into the voucher register prior to the balance sheet date.

Question 15

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable?

Accepted Answer

A) Existence. 
B) Completeness. 
C) Valuation. 
D) Authorization. 
A) Existence. 
B) Completeness. 
C) Valuation. 
D) Authorization.

Question 16

Unrecorded liabilities are most likely to be found during the review of which of the following documents?

Accepted Answer

A) Unpaid bills. 
B) Shipping records. 
C) Bills of lading. 
D) Unmatched sales invoices. 
A) Unpaid bills. 
B) Shipping records. 
C) Bills of lading. 
D) Unmatched sales invoices.

Question 17

Which of the following is an example of an accrued liability?

Accepted Answer

A) Accounts payable. 
B) Notes payable. 
C) Prepaid Insurance. 
D) Product warranty liability. 
A) Accounts payable. 
B) Notes payable. 
C) Prepaid Insurance. 
D) Product warranty liability.

Question 18

Based on the company and its environment,including its internal control,the auditors assessed the risk of material misstatements to the financial statements,whether due to error or fraud,and designed the nature,timing,and extent of further audit procedures to be performed.As a result of conducting the above risk assessment procedures,the audit program for year 2 includes the following changes from the audit program for year 1.The company has a calendar year end and operates only on weekdays.
In conducting the audit procedures for the search for unrecorded liabilities,the materiality/scope for this area was assessed by the auditors at $6,000.Adjustments are only recorded for items equal to,or exceeding materiality.The last day of fieldwork is estimated to be February 1,year 3.
For the items reflected in the following check register,which are not recorded in the accounts payable subsidiary ledger at December 31,year 2,determine if each potential liability is recorded in the proper accounting period and also determine the amount that should be journalized,if any.If no action is required,you must enter $0.
For each of the check numbers in the table below,double-click on each of the associated shaded cells and select from the lists provided if any action or adjustment is required,as well as the dollar value of the required adjustment.Each selection may be used once,more than once,or not at all.
Check Register

Accepted Answer

None

Question 19

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

Accepted Answer

A) Scan the sales journal for sequential and unusual entries. 
B) Examine shipping documents for matching sales invoices. 
C) Compare the accounts receivable ledger to daily sales summaries. 
D) Inspect unused sales invoices for consecutive pre-numbering. 
A) Scan the sales journal for sequential and unusual entries. 
B) Examine shipping documents for matching sales invoices. 
C) Compare the accounts receivable ledger to daily sales summaries. 
D) Inspect unused sales invoices for consecutive pre-numbering.

Question 20

Which of the following best describes a voucher prepared under good internal control?

Accepted Answer

A) A document prepared by Stores that indicates amount to be purchased. 
B) A document prepared by Receiving that indicates the quantity received and approves payment. 
C) A document prepared by Accounts Payable authorizing a cash disbursement. 
D) A document received by Purchasing, from a supplier, indicating quantity of goods purchased and amount due. 
A) A document prepared by Stores that indicates amount to be purchased. 
B) A document prepared by Receiving that indicates the quantity received and approves payment. 
C) A document prepared by Accounts Payable authorizing a cash disbursement. 
D) A document received by Purchasing, from a supplier, indicating quantity of goods purchased and amount due.

The confirmation of accounts payable is most closely associated with:

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

The auditors' search for unrecorded liabilities is completed:

The auditor will most likely perform extensive tests for possible understatement of:

Which of the following audit procedures is aimed most directly at testing the completeness assertion for accounts payable:

When the auditors select a sample of items from the vouchers payable register for the last month of the period under audit and trace these items to underlying documents,the auditors are gathering evidence primarily in support of the assertion that:

The confirmation of existing accounts payable does not prove the completeness of recorded accounts payable.

When the auditors discover an understatement of liabilities,they would most likely also expect to find an:

When an auditor finds a debit to accounts payable,which of the following accounts is most likely to be credited?

The assertion most directly addressed when performing the search for unrecorded liabilities is:

For good internal control,a copy of a receiving report should be sent to all of the following departments except:

Auditors should be aware that a voucher system may result in which of the following at year-end:

Which of the following statements is correct regarding accounts payable and the auditor's procedures?

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable?

Unrecorded liabilities are most likely to be found during the review of which of the following documents?

Which of the following is an example of an accrued liability?

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

Which of the following best describes a voucher prepared under good internal control?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters

Exam 14: Accounts Payable and Other Liabilities

The confirmation of accounts payable is most closely associated with:

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

The auditors' search for unrecorded liabilities is completed:

The auditor will most likely perform extensive tests for possible understatement of:

Which of the following audit procedures is aimed most directly at testing the completeness assertion for accounts payable:

When the auditors select a sample of items from the vouchers payable register for the last month of the period under audit and trace these items to underlying documents,the auditors are gathering evidence primarily in support of the assertion that:

The confirmation of existing accounts payable does not prove the completeness of recorded accounts payable.

When the auditors discover an understatement of liabilities,they would most likely also expect to find an:

When an auditor finds a debit to accounts payable,which of the following accounts is most likely to be credited?

The assertion most directly addressed when performing the search for unrecorded liabilities is:

For good internal control,a copy of a receiving report should be sent to all of the following departments except:

Auditors should be aware that a voucher system may result in which of the following at year-end:

Which of the following statements is correct regarding accounts payable and the auditor's procedures?

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable?

Unrecorded liabilities are most likely to be found during the review of which of the following documents?

Which of the following is an example of an accrued liability?

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

Which of the following best describes a voucher prepared under good internal control?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters