ch. 14

For good internal control, a copy of a receiving report should be sent to all of the following departments except: A. Accounts payable. B. Purchasing. C. Stores. D. Shipping.

D. Shipping.

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

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

The assertion most directly addressed when performing the search for unrecorded liabilities is: A. Completeness. B. Existence. C. Presentation. D. Rights.

A. Completeness.

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

Which of the following best describes the auditors' approach to the audit of accrued liabilities? A. Test computations. B. Confirmation. C. Observation. D. A low planned assessed level of control risk.

A. Test computations.

When the auditors discover an understatement of liabilities, they would most likely also expect to find an: A. Understatement of assets. B. Understatement of owners' equity. C. Overstatement of expenses. D. Understatement of revenues.

A. Understatement of assets.

35. Auditors should be aware that a voucher system may result in which of the following at year-end: A. Understatement of liabilities. B. Overstatement of assets. C. Understatement of owners' equity. D. Overstatement of expenses.

A. Understatement of liabilities.

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable? A. Existence. B. Completeness. C. Valuation. D. Authorization.

B. Completeness.

The confirmation of accounts payable is most closely associated with: A. Assertion risk. B. Detection risk. C. Inherent risk. D. Relative risk.

B. Detection risk.

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

B. Examining underlying documentation for cash disbursements in the period after year-end.

Auditors may choose not to confirm accounts payable because: A. Confirmation obtains evidence identical to that obtained by cutoff tests. B. Other reliable external evidence to support the balances is likely to be available. C. A reading of the corporate minutes reveals that confirmation is unnecessary. D. The balances due will have changed between the year-end and the date of confirmation.

B. Other reliable external evidence to support the balances is likely to be available.

Which of the following best describes the specific accounts payable that are selected for confirmation? A. Accounts with large balances. B. Accounts with zero balances. C. Accounts with a large amount of activity regardless of their balance. D. Accounts for which vendor statements are available.

C. Accounts with a large amount of activity regardless of their balance.

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

C. After the balance sheet date.

Which of the following procedures for detecting unrecorded transactions at the client's December 31 year-end is least likely to result in discovery of an unrecorded year-end account payable? A. Examination of invoices received after year-end. B. Examination of vouchers payable entered in the January voucher register. C. Examination of January receiving reports prepared for goods shipped FOB destination in December to the client. D. Confirmation of year-end accounts payable.

C. Examination of January receiving reports prepared for goods shipped FOB destination in December to the client.

20. A likely analytical procedure to test the accuracy of purchase discounts would be to compute the ratio of cash discounts earned to A. Accounts payable. B. Notes payable. C. Purchases. D. Sales discounts.

C. Purchases.

37. The form typically used to confirm accounts payable: 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. Requires the vendor to indicate the amount of the payable.

40. The auditors' search for unrecorded liabilities is completed: 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.

C. Subsequent to the balance sheet date.

Which of the following manipulations would understate accounts payable on the financial statements? A. Overstatement of purchases B. Closing the cash disbursements journal prior to year-end C. Leaving the cash receipts journal open after year-end D. Overstating purchase returns.

D. Overstating purchase returns.

38. Which of the following is a control procedure that is usually applied to 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

D. Reconciliation of vendor statements with accounts payable.

Which statement is correct with respect to accounts payable confirmations? A. The negative form is used in most circumstances B. Accounts with new suppliers are always confirmed C. They are a required auditing procedure D. They are more frequently used in situations in which some vendors don't send monthly statements.

D. They are more frequently used in situations in which some vendors don't send monthly statements.