Chapter 11 MC RT

Which of the following procedures involved in processing accounts payable and cash disbursements should not be performed by the accounts payable department? A) counting and inspection of purchased material B) updating of accounts payable records C) determining appropriate account distribution D) comparing the vendor's invoice against information on the receiving report

A) counting and inspection of purchased material

Accounts payable (A/P) confirmations are generally used less frequently than accounts receivable confirmations since A) other procedures such as the search for unrecorded liabilities are generally very effective B) A/P confirmations generally have lower response rates than account receivables confirmations C) A/P confirmations do not address the existence assertion D) A/P confirmations do not address specific audit assertions

A) other procedures such as the search for unrecorded liabilities are generally very effective

Which of the following does not represent a major accounting transaction type processed in the purchasing cycle? A) requisition of goods B) purchase of goods and services C) payment of liabilities D) return of goods to suppliers

A) requisition of goods

Which of the following audit procedures is best for identifying unrecorded trade accounts payable? A) reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the period before the balance sheet date and whether it was recorded B) investigating payables recorded just before and after 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 monthly vendor statements to the receiving report file to identify items received just before the balance sheet date

A) reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the period before the balance sheet date and whether it was recorded

Which of the following is not considered an important element of segregation of duties in the purchasing process? A) separating the check signing and check mailing functions B) separate the accounts payable and check signing functions C) separate the accounts payable and receiving functions D) separate the purchasing function from the receiving function

A) separating the check signing and check mailing functions

Which of the following does not represent a major classification of expenses identified by FASB concept statement no. 5? A) product costs B) functional costs C) period costs D) allocable costs

B) functional costs

Which of the following is not one of the major steps in setting control risk for the purchasing process? A) understand and document the purchasing process B) plan and perform analytical procedures on accounts used in the purchasing process C) plan and perform tests of controls on purchase transactions D) set and document the control risk for the purchasing process

B) plan and perform analytical procedures on accounts used in the purchasing process

An entity erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this in a timely, efficient manner? A) periodically tracing the purchases journal daily totals to the applicable postings in the general ledger B) sending quarterly confirmations to all vendors C) reconciling monthly statement received from the vendor with the accounts payable subsidiary ledger D) tracing the totals from the purchases journal to the various general ledger accounts

C) reconciling monthly statement received from the vendor with the accounts payable subsidiary ledger

Identify the assertion that is represented by the following statement: " accounts payable and accused expenses are included in the financial statements at appropriate amounts" A) existence B) completeness C) valuation and allocation D) rights and obligations

C) valuation and allocation

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population would most likely be A) payees of checks written in the month after year-end B) those vendors with balances in the year-end accounts payable subsidiary ledger C) vendors with whom the entity has done business with during the year D) invoices filed in the entity's open (unpaid) invoice file at the year-end

C) vendors with whom the entity has done business with during the year

Which of the following are inherent risk factors for the purchasing process except: A) whether the supply of raw materials is adequate B) how volatile raw material prices are C) misstatements detected in prior audits D) a new it system placed in operation during the year

D) a new it system placed in operation during the year

An auditor gathers receiving reports from the few days before and after year-end to determine that purchases made before the end of the current year have not been recorded in the following year to provide assurance about management's assertion of A) valuation or allocation B) existence or occurence C) authorization D) cutoff

D) cutoff

Which of the following controls would most effectively ensure that recorded purchases are free of material misstatements? A) the receiving department compares the quantity ordered on the purchase orders with the quantity received on receiving reports B) vendor invoices are compared with purchase orders by an employee who is independent of the receiving department C) receiving reports require the signature of the individual who authorized the purchase D) purchase orders, receiving reports, and vendor invoices are independently matched when preparing vouchers

D) purchase orders, receiving reports, and vendor invoices are independently matched when preparing vouchers

Auditors perform a test to verify that all merchandise received has been recorded, in part, to satisfy the completeness assertion with regard to accounts payable. Which of the following would represent the population of documents for this test? A) purchase requisition B) payment vouchers C) vendor invoices D) receiving reports

D) receiving reports

Which of the following best represents a situation in which an auditor would use a tax specialist for the audit of the tax provision? A) the company has several temporary differences B) the company has several permanent differences C) the company has deferred tax liabilities D) the company does business overseas

D) the company does business overseas