chapter 15

Approval of expenditures for purchase transactions should best be performed by whom in a good internal control system?

Treasurer

Which of the following documents would not be included in typical purchase adjustment transaction?

Vendor's debit memo

A confirmation of the balance in a vendor's accounts payable account is ordinarily not designed to:

Verify that accounts payable were properly authorized.

To strengthen the internal controls over merchandise purchases, a company=s receiving department should

Accept merchandise only if a purchase order or approval granted by the purchasing department is on hand

In a properly designed accounts payable system, a voucher is prepared after the invoice, purchase order, requisition, and receiving report are verified. The next step in the system is to

Approve the voucher for payment.

To avoid potential misstatements, a well designed internal control structure in the accounts payable area should include a separation of which of the following functions?

Cash disbursements and invoice verification.

In order to efficiently establish the correctness of the accounts payable cutoff, an auditor will be most likely to:

Coordinate cutoff tests with physical inventory observation

Only one of the following four statements, which compare confirmation of accounts payable with suppliers and confirmation of accounts receivable with debtors, is true. The true statement is that:

It is less likely that the confirmation request sent to the supplier will show the amount owed him than the request sent to the debtor will show the amount due from him

A major control environment factor for the expenditure cycle is the threat of

Kiting

Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received?

Match purchase order, receiving report, and vendor's invoice for each voucher in accounts payable department.

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

Monthly creditor statements are not available and detection risk is low.

An auditor compares information on cancelled checks with information contained in the cash disbursement journal. The objective of this test of controls is to determine that:

No discrepancies exist between the data on the check and the data in the journal

During an inventory observation, an auditor obtains information about the last inventory receipts before year-end in order to perform which of these?

Payables cutoff test

Which of the following internal control procedures is effective in preventing duplicate payment of vendors' invoices?

Properly authorized and approved vouchers with appropriate documentation should be the basis for check preparation.

Which of the following is an effective internal control measure that encourages receiving department personnel to count and inspect all merchandise received?

Quantities ordered are excluded from the receiving department copy of the purchase order

For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the

Receiving report and the purchase order

A client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner?

Reconciling vendors' monthly statements with subsidiary accounts payable ledger.

When an auditor selects a sample of items from the vouchers payable register for the last month of the period under audit and traces these items to underlying documents, the auditor is gathering evidence primarily in support of the assertion that

Recorded obligations were valid.

An effective internal control measure that protects against the preparation of improper or inaccurate disbursements would be to require that all checks be:

Signed by an officer after necessary supporting evidence has been examined.

Which of the following is an effective internal control over cash payments?

Signed checks should be mailed under the supervision of the check signer