Question 1

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

Accepted Answer

A) True 
 B)False

Question 2

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Accepted Answer

To test for completeness, the auditor's

Question 3

Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.

Accepted Answer

A)  has been paid for 
B)  is physically present in the warehouse 
C)  is owned by the company (legal title has been transferred) 
D)  relates to the shipping documents for the merchandise issued in the company's name 
A)  has been paid for 
B)  is physically present in the warehouse 
C)  is owned by the company (legal title has been transferred) 
D)  relates to the shipping documents for the merchandise issued in the company's name

Question 4

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Accepted Answer

The auditor must determine where the inv

Question 5

The statement that items on the accounts payable register must be supported by a completed voucher package containing a services purchase order and evidence the service was provided is a specific example of which control objective?

Accepted Answer

A)  Environment. 
B)  Validity. 
C)  Completeness. 
D)  Accuracy. 
A)  Environment. 
B)  Validity. 
C)  Completeness. 
D)  Accuracy.

Question 6

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is ________.

Accepted Answer

A)  accuracy 
B)  completeness 
C)  validity 
D)  classification 
A)  accuracy 
B)  completeness 
C)  validity 
D)  classification

Question 7

The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.

Accepted Answer

A) True 
 B)False

Question 8

What is the usual source of journal entries to record the purchase of inventory in the general ledger?

Accepted Answer

A)  Sales invoices updated with cost data from the inventory records department. 
B)  Purchase invoices updated with cost data from the inventory records department. 
C)  Bid quotes updated with cost data from the inventory records department. 
D)  Receiving reports updated with cost data from the accounts payable department. 
A)  Sales invoices updated with cost data from the inventory records department. 
B)  Purchase invoices updated with cost data from the inventory records department. 
C)  Bid quotes updated with cost data from the inventory records department. 
D)  Receiving reports updated with cost data from the accounts payable department.

Question 9

In "Retread Tires", J. Lock stole money by selling the company's new tires and replacing them with retread tires. The key weakness in the control system that failed to prevent or detect this scheme to continue was that ________.

Accepted Answer

A)  Lock often prepared purchase orders 
B)  Lock was the chief accountant 
C)  the president of the company signed cheques without reviewing any supporting documentation 
D)  no one noticed the invoices for the retread tires 
A)  Lock often prepared purchase orders 
B)  Lock was the chief accountant 
C)  the president of the company signed cheques without reviewing any supporting documentation 
D)  no one noticed the invoices for the retread tires

Question 10

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

Accepted Answer

A)  Purchase requisitions and accounts payable entries. 
B)  Receiving reports and purchase orders. 
C)  Purchase requisitions and purchases orders. 
D)  Purchase orders and bid quotes. 
A)  Purchase requisitions and accounts payable entries. 
B)  Receiving reports and purchase orders. 
C)  Purchase requisitions and purchases orders. 
D)  Purchase orders and bid quotes.

Question 11

In assessing control risk for purchases, an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents. Which account assertion would this test of controls most likely support?

Accepted Answer

A)  Completeness. 
B)  Existence or occurrence. 
C)  Valuation or allocation. 
D)  Presentation 
A)  Completeness. 
B)  Existence or occurrence. 
C)  Valuation or allocation. 
D)  Presentation

Question 12

Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the equipment (fixed asset) account are not understated?

Accepted Answer

A)  Amortization expense. 
B)  Gain on disposal of equipment. 
C)  Accounts payable. 
D)  Repairs and maintenance expense. 
A)  Amortization expense. 
B)  Gain on disposal of equipment. 
C)  Accounts payable. 
D)  Repairs and maintenance expense.

Question 13

Martinez CPA was auditing his client, Marvelous Retail Limited. He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports. This procedure was intended to satisfy which control objective?

Accepted Answer

A)  Authorization. 
B)  Completeness. 
C)  Validity. 
D)  Accuracy. 
A)  Authorization. 
B)  Completeness. 
C)  Validity. 
D)  Accuracy.

Question 14

If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of validity.

Accepted Answer

A) True 
 B)False

Question 15

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 payables apply to the prior period. 
B)  Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether receiving reports support them. 
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 payables apply to the prior period. 
B)  Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether receiving reports support them. 
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 16

Why are payables vouchers marked "paid" after cheques have been issued in payment of vendor invoices?

Accepted Answer

To show that they have been pr

Question 17

A good environmental control over purchases and payables would be to have ________.

Accepted Answer

A)  the accounting department independent of the sales department 
B)  the purchasing department independent of the receiving department 
C)  the information systems department independent of the accounting department 
D)  the sales department independent of the shipping department 
A)  the accounting department independent of the sales department 
B)  the purchasing department independent of the receiving department 
C)  the information systems department independent of the accounting department 
D)  the sales department independent of the shipping department

Question 18

A company's internal control system requires that an approved payables voucher, supported by a purchase order and a receiving report, accompany every cheque requisition. To determine whether cheques are being issued for unauthorized expenditures, an auditor is most likely to select items for testing from the population of all ________.

Accepted Answer

A)  purchase orders 
B)  cancelled cheques 
C)  receiving reports 
D)  approved vouchers 
A)  purchase orders 
B)  cancelled cheques 
C)  receiving reports 
D)  approved vouchers

Question 19

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

Accepted Answer

A)  Reconcile receiving reports with related cash payments made just prior to year-end. 
B)  Compare 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)  Compare 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 20

Risk assessments and the results of any control testing are taken into account in selecting the nature, timing, and extent of further substantive procedures.

Accepted Answer

A) True 
 B)False

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.

What issues must the auditor consider if the client has inventory located away from the client's place of business?

The statement that items on the accounts payable register must be supported by a completed voucher package containing a services purchase order and evidence the service was provided is a specific example of which control objective?

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is ________.

The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.

What is the usual source of journal entries to record the purchase of inventory in the general ledger?

In "Retread Tires", J. Lock stole money by selling the company's new tires and replacing them with retread tires. The key weakness in the control system that failed to prevent or detect this scheme to continue was that ________.

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

In assessing control risk for purchases, an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents. Which account assertion would this test of controls most likely support?

Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the equipment (fixed asset) account are not understated?

Martinez CPA was auditing his client, Marvelous Retail Limited. He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports. This procedure was intended to satisfy which control objective?

If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of validity.

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

Why are payables vouchers marked "paid" after cheques have been issued in payment of vendor invoices?

A good environmental control over purchases and payables would be to have ________.

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

Risk assessments and the results of any control testing are taken into account in selecting the nature, timing, and extent of further substantive procedures.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

Filters

Exam 12: The Purchases, Payables, and Payments Process

Employees in the receiving department should inspect materials received as to quality and quantity and prepare a receiving report.

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.

What issues must the auditor consider if the client has inventory located away from the client's place of business?

The statement that items on the accounts payable register must be supported by a completed voucher package containing a services purchase order and evidence the service was provided is a specific example of which control objective?

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is ________.

The requirement that supplier invoices in the accounts payable register be matched with purchase orders and receiving reports is an example that satisfies the "accounting and posting" internal control objective for purchases.

What is the usual source of journal entries to record the purchase of inventory in the general ledger?

In "Retread Tires", J. Lock stole money by selling the company's new tires and replacing them with retread tires. The key weakness in the control system that failed to prevent or detect this scheme to continue was that ________.

What documentary evidence is appropriate in attempting to determine if recorded purchase transactions are valid and prices on the vendors' invoices are correct?

In assessing control risk for purchases, an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents. Which account assertion would this test of controls most likely support?

Which of the following accounts would the auditor review in order to obtain reasonable assurance that additions to the equipment (fixed asset) account are not understated?

Martinez CPA was auditing his client, Marvelous Retail Limited. He selected a sample of inventory items from the perpetual records and vouched all additions to receiving reports. This procedure was intended to satisfy which control objective?

If the auditor traces a sample of receiving reports to the perpetual inventory records, the auditor is testing the control of validity.

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

Why are payables vouchers marked "paid" after cheques have been issued in payment of vendor invoices?

A good environmental control over purchases and payables would be to have ________.

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

Risk assessments and the results of any control testing are taken into account in selecting the nature, timing, and extent of further substantive procedures.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

Filters