Exam 12: The Purchases, payables, and Payments Process

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 ________.

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

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

The procedure: "select a sample of 10 balances from the accounts payable trial balance and vouch to supplier statements" is a substantive test of which assertion(s)?

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?

Which of the following statements concerning auditor observation of the auditee's physical inventory count is FALSE?

When confirming accounts payable,emphasis should be put on what kind of accounts?

Determining useful life,salvage value and required provisions for future site restoration costs,all render valuation a high inherent risk assertion for the audit of PPE.What are the main reasons?

If an auditee never takes a complete inventory count on a single date,auditor observation of the inventory count is not required.

Quantities recorded during the physical count of inventories are greater than the quantities in the perpetual records.This could be the result of a failure to record ________.

Use of the revaluation model to present PPE at fair value increased the inherent risk of material misstatement.

An auditor should not be concerned if a cross-reference of vendor addresses with employee addresses reveals that there are matches.

The statement that "all purchase orders must be supported by properly approved purchase requisitions" is a specific example of which general control objective?

Auditors can perform tests of control audit procedures to determine whether the client throughout the period of intended reliance is actually performing controls that are said to be in place and operating.What two characteristics must a detail test of controls audit procedure have in order to be successful?

The accounts payable trial balance should not include vendors with nonzero balances.

ABC Co.has a calendar year-end.The final merchandise purchase recorded in the system was for PO #456,received January 3^rd.The ending inventory count excluded this shipment.Assuming shipping terms on PO #456 were FOB shipping point,what misstatement,if any,exists in ABC records?

If the auditor selects a sample of open accounts payable and vouches the details to supporting purchase documents,the auditor is testing the objective of validity.

Explain why auditors must put greater emphasis on the completeness assertion when auditing accounts payable.Contrast this with the audit of assets.

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

To determine whether accounts payable is complete,an auditor performs a test to verify that all merchandise received is recorded.The population of documents for this test consists of all ________.