Question 1

Which type of confirmation is used more frequently by auditors―accounts receivable confirmations or accounts payable confirmations? Why?

Accepted Answer

Auditors typically use confirmations for

Question 2

Identify the primary functions in the purchases cycle and describe each function.
Functions in the purchasing process include:

Accepted Answer

Requisitioning.Initiation and approval o

Question 3

An auditor performs a test to determine whether all merchandise was received for which the entity was billed.The population for this test consists of all

Accepted Answer

A)  merchandise received. 
B)  vendors' invoices. 
C)  canceled checks. 
D)  receiving reports. 
A)  merchandise received. 
B)  vendors' invoices. 
C)  canceled checks. 
D)  receiving reports.

Question 4

In testing controls over cash disbursements,an auditor most likely would determine that the person who signs the checks also

Accepted Answer

A)  reviews the monthly bank reconciliation. 
B)  returns the checks to accounts payable. 
C)  is denied access to the supporting documents. 
D)  is responsible for mailing the checks. 
A)  reviews the monthly bank reconciliation. 
B)  returns the checks to accounts payable. 
C)  is denied access to the supporting documents. 
D)  is responsible for mailing the checks.

Question 5

If completeness is a concern for accounts payable,auditors will send accounts payable confirmations to

Accepted Answer

A)  primarily vendors with large accounts payable balances. 
B)  primarily vendors with small or zero accounts payable balances. 
C)  all vendors. 
D)  a random sample of all vendors. 
A)  primarily vendors with large accounts payable balances. 
B)  primarily vendors with small or zero accounts payable balances. 
C)  all vendors. 
D)  a random sample of all vendors.

Question 6

Substantive procedures to examine the completeness assertion for accounts payable include

Accepted Answer

A)  selecting a sample of vouchers and agreeing them to authorized purchase orders. 
B)  selecting a sample of vouchers and tracing them to the purchases journal. 
C)  comparing dates on vouchers to dates in the purchases journal. 
D)  recomputing the mathematical accuracy of a sample of vendor invoices. 
A)  selecting a sample of vouchers and agreeing them to authorized purchase orders. 
B)  selecting a sample of vouchers and tracing them to the purchases journal. 
C)  comparing dates on vouchers to dates in the purchases journal. 
D)  recomputing the mathematical accuracy of a sample of vendor invoices.

Question 7

Which of the following test(s)of details of transactions can be used as a dual-purpose test in conjunction with tests of controls?

Accepted Answer

A)  Test a sample of purchase requisitions for proper authorization. 
B)  Obtain selected vendors' statements and reconcile to vendor accounts. 
C)  Obtain listing of accounts payable and compare total to general ledger. 
D)  Review results of confirmations of selected accounts payable. 
A)  Test a sample of purchase requisitions for proper authorization. 
B)  Obtain selected vendors' statements and reconcile to vendor accounts. 
C)  Obtain listing of accounts payable and compare total to general ledger. 
D)  Review results of confirmations of selected accounts payable.

Question 8

An examination of the balance in the accounts payable account is ordinarily not designed to

Accepted Answer

A)  determine that the amounts represent obligations of the company. 
B)  verify that accounts payable were properly authorized. 
C)  ascertain the reasonableness of recorded liabilities. 
D)  determine that all existing liabilities at the balance sheet date have been recorded. 
A)  determine that the amounts represent obligations of the company. 
B)  verify that accounts payable were properly authorized. 
C)  ascertain the reasonableness of recorded liabilities. 
D)  determine that all existing liabilities at the balance sheet date have been recorded.

Question 9

An entity erroneously recorded a large purchase twice.Which of the following internal controls would be most likely to detect this error in a timely and efficient manner?

Accepted Answer

A)  Footing the purchases journal. 
B)  Reconciling vendors' monthly statements with subsidiary payable ledger accounts. 
C)  Tracing totals from the purchases journal to the ledger accounts. 
D)  Sending written quarterly confirmations to all vendors. 
A)  Footing the purchases journal. 
B)  Reconciling vendors' monthly statements with subsidiary payable ledger accounts. 
C)  Tracing totals from the purchases journal to the ledger accounts. 
D)  Sending written quarterly confirmations to all vendors.

Question 10

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

Accepted Answer

A)  Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher? 
B)  Are purchase requisitions prenumbered and independently matched with vendor invoices? 
C)  Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions? 
D)  Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for? 
A)  Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher? 
B)  Are purchase requisitions prenumbered and independently matched with vendor invoices? 
C)  Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions? 
D)  Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for?

Question 11

For effective internal control,the accounts payable department should compare the information on each vendor's invoice with the

Accepted Answer

A)  receiving report and the purchase order. 
B)  receiving report and the voucher. 
C)  vendor's packing slip and the purchase order. 
D)  vendor's packing slip and the voucher. 
A)  receiving report and the purchase order. 
B)  receiving report and the voucher. 
C)  vendor's packing slip and the purchase order. 
D)  vendor's packing slip and the voucher.

Question 12

Because of the low volume of purchase return transactions,the auditor normally does not test the controls associated with these transactions.

Accepted Answer

A) True 
 B)False

Question 13

Substantive procedures to examine the cutoff assertion for accounts payable include

Accepted Answer

A)  selecting a sample of vouchers and agreeing them to authorized purchase orders. 
B)  selecting a sample of vouchers and agreeing them to the purchases journal. 
C)  selecting a sample of receiving reports around year-end and comparing dates on related vouchers to dates in the purchases journal. 
D)  recomputing the mathematical accuracy of a sample of vendor invoices. 
A)  selecting a sample of vouchers and agreeing them to authorized purchase orders. 
B)  selecting a sample of vouchers and agreeing them to the purchases journal. 
C)  selecting a sample of receiving reports around year-end and comparing dates on related vouchers to dates in the purchases journal. 
D)  recomputing the mathematical accuracy of a sample of vendor invoices.

Question 14

The authority to accept incoming goods in receiving should be based on a(an)

Accepted Answer

A)  vendor's invoice. 
B)  materials requisition. 
C)  bill of lading. 
D)  approved purchase order. 
A)  vendor's invoice. 
B)  materials requisition. 
C)  bill of lading. 
D)  approved purchase order.

Question 15

An auditor compares information on canceled checks with information contained in the cash disbursements journal.The objective of this test is to determine that

Accepted Answer

A)  recorded cash disbursement transactions are properly authorized. 
B)  proper cash purchase discounts have been recorded. 
C)  cash disbursements are for goods and services actually received. 
D)  no discrepancies exist between the data on the checks and the data in the journal. 
A)  recorded cash disbursement transactions are properly authorized. 
B)  proper cash purchase discounts have been recorded. 
C)  cash disbursements are for goods and services actually received. 
D)  no discrepancies exist between the data on the checks and the data in the journal.

Question 16

With respect to a small company's system of purchasing supplies,an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

Accepted Answer

A)  requested and approved by authorized individuals who have no incompatible duties. 
B)  received, counted, and checked to quantities and amounts on purchase orders and invoices. 
C)  properly recorded as assets and systematically amortized over the estimated useful life of the supplies. 
D)  used in the course of business and solely for business purposes during the year under audit. 
A)  requested and approved by authorized individuals who have no incompatible duties. 
B)  received, counted, and checked to quantities and amounts on purchase orders and invoices. 
C)  properly recorded as assets and systematically amortized over the estimated useful life of the supplies. 
D)  used in the course of business and solely for business purposes during the year under audit.

Question 17

A voucher

Accepted Answer

A)  is a bill from the vendor. 
B)  is a document that records the receipt of goods. 
C)  is a document that requests goods from an authorized individual in the entity. 
D)  serves as the basis for recording a vendor's invoice in the purchases journal. 
A)  is a bill from the vendor. 
B)  is a document that records the receipt of goods. 
C)  is a document that requests goods from an authorized individual in the entity. 
D)  serves as the basis for recording a vendor's invoice in the purchases journal.

Question 18

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 19

An important primary purpose of the auditor's review of the entity's procurement system should be to determine the effectiveness of the activities to protect against

Accepted Answer

A)  improper materials handling. 
B)  unauthorized persons issuing purchase orders. 
C)  mispostings of purchase returns. 
D)  excessive shrinkage or spoilage. 
A)  improper materials handling. 
B)  unauthorized persons issuing purchase orders. 
C)  mispostings of purchase returns. 
D)  excessive shrinkage or spoilage.

Question 20

Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses.

Accepted Answer

A) True 
 B)False

Exam 11: Auditing the Purchasing Process

Which type of confirmation is used more frequently by auditors―accounts receivable confirmations or accounts payable confirmations? Why?

Identify the primary functions in the purchases cycle and describe each function. Functions in the purchasing process include:

An auditor performs a test to determine whether all merchandise was received for which the entity was billed.The population for this test consists of all

In testing controls over cash disbursements,an auditor most likely would determine that the person who signs the checks also

If completeness is a concern for accounts payable,auditors will send accounts payable confirmations to

Substantive procedures to examine the completeness assertion for accounts payable include

Which of the following test(s)of details of transactions can be used as a dual-purpose test in conjunction with tests of controls?

An examination of the balance in the accounts payable account is ordinarily not designed to

An entity erroneously recorded a large purchase twice.Which of the following internal controls would be most likely to detect this error in a timely and efficient manner?

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

For effective internal control,the accounts payable department should compare the information on each vendor's invoice with the

Because of the low volume of purchase return transactions,the auditor normally does not test the controls associated with these transactions.

Substantive procedures to examine the cutoff assertion for accounts payable include

The authority to accept incoming goods in receiving should be based on a(an)

An auditor compares information on canceled checks with information contained in the cash disbursements journal.The objective of this test is to determine that

With respect to a small company's system of purchasing supplies,an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

A voucher

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

An important primary purpose of the auditor's review of the entity's procurement system should be to determine the effectiveness of the activities to protect against

Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

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