Question 1

The form typically used to confirm accounts payable:

Accepted Answer

A)  Does not require a response from the vendor. 
B)  Confirms the balance recorded by the client at year-end. 
C)  Requires the vendor to indicate the amount of the payable. 
D)  Is the same as the form used to confirm accounts receivable. 
A)  Does not require a response from the vendor. 
B)  Confirms the balance recorded by the client at year-end. 
C)  Requires the vendor to indicate the amount of the payable. 
D)  Is the same as the form used to confirm accounts receivable. C

Question 2

An auditor wishes to perform tests of controls on a client's cash disbursements relating to accounts payable. If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

Accepted Answer

A)  Confirmation and observation. 
B)  Observation and inquiry. 
C)  Analytical procedures and confirmation. 
D)  Inquiry and analytical procedures. 
A)  Confirmation and observation. 
B)  Observation and inquiry. 
C)  Analytical procedures and confirmation. 
D)  Inquiry and analytical procedures. B

Question 3

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. A

Question 4

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 5

A client recorded a payable for a large purchase twice. Which of the following 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 6

Accounts payable from an officer should be classified separately from other accounts payable.

Accepted Answer

A) True 
 B)False

Question 7

Accrued liabilities generally differ from accounts payable in that accrued liabilities:

Accepted Answer

A)  Accumulate over time. 
B)  Are usually confirmed at year-end. 
C)  Depend upon the existence of a transaction for original recording of the account. 
D)  Are never included in cost of goods sold. 
A)  Accumulate over time. 
B)  Are usually confirmed at year-end. 
C)  Depend upon the existence of a transaction for original recording of the account. 
D)  Are never included in cost of goods sold.

Question 8

For effective internal control over accounts payable, the purchasing department should approve invoices for payment.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

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 12

Most of the audit work on accounts payable is typically performed:

Accepted Answer

A)  Before the balance sheet date. 
B)  At the balance sheet date in conjunction with inventory cutoff tests. 
C)  After the balance sheet date. 
D)  Simultaneously with the audit of accrued liabilities. 
A)  Before the balance sheet date. 
B)  At the balance sheet date in conjunction with inventory cutoff tests. 
C)  After the balance sheet date. 
D)  Simultaneously with the audit of accrued liabilities.

Question 13

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 14

Which of the following is a control procedure that is usually applied to accounts payable?

Accepted Answer

A)  Periodic confirmation of accounts payable. 
B)  Mailing statements to vendors detailing their account. 
C)  Periodic aging of accounts payable. 
D)  Reconciliation of vendor statements with accounts payable. 
A)  Periodic confirmation of accounts payable. 
B)  Mailing statements to vendors detailing their account. 
C)  Periodic aging of accounts payable. 
D)  Reconciliation of vendor statements with accounts payable.

Question 15

Which of the following is the best control procedure to prevent the payment of an invoice twice?

Accepted Answer

A)  Review of supporting documentation by the person signing the check. 
B)  Requiring dual signatures on checks. 
C)  Use of a check protector. 
D)  Reconciliation of vendor statements to accounts payable. 
A)  Review of supporting documentation by the person signing the check. 
B)  Requiring dual signatures on checks. 
C)  Use of a check protector. 
D)  Reconciliation of vendor statements to accounts payable.

Question 16

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 17

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 18

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.

Question 19

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 20

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.

Exam 14: Accounts Payable and Other Liabilities

The form typically used to confirm accounts payable:

An auditor wishes to perform tests of controls on a client's cash disbursements relating to accounts payable. If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

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

The confirmation of accounts payable is most closely associated with:

A client recorded a payable for a large purchase twice. Which of the following controls would be most likely to detect this error in a timely and efficient manner?

Accounts payable from an officer should be classified separately from other accounts payable.

Accrued liabilities generally differ from accounts payable in that accrued liabilities:

For effective internal control over accounts payable, the purchasing department should approve invoices for payment.

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:

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

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

Most of the audit work on accounts payable is typically performed:

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

Which of the following is a control procedure that is usually applied to accounts payable?

Which of the following is the best control procedure to prevent the payment of an invoice twice?

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

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

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

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

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

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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

Filters