Audit HW 5

Which of the following procedures relating to the examination of accounts payable could the auditor delegate entirely to the client's employees?

Prepare a schedule of accounts payable.

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

Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

Which of the following internal control activities is not usually performed in the CFO's department?

Approving vendors' invoices for payment.

Which of the following internal control activities is not usually performed in the vouchers payable department?

Accounting for unused prenumbered purchase orders and receiving reports.

Which of the following audit procedures is least likely to detect an unrecorded liability?

Analysis and recomputation of depreciation expense.

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively? Select and examine

Canceled checks and ascertain that the related receiving reports are dated no later than the checks.

Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department?

Canceling supporting documentation after payment.

As an in-charge auditor, you are reviewing a communication about significant deficiencies and material weaknesses related to internal control over cash receipts and disbursements. Which of the following conditions, standing alone, should cause you the least concern?

Checks are signed by only one person.

Which of the following is a standard control over cash disbursements?

Checks should be sequentially numbered and the numerical sequence should be accounted for by the person preparing bank reconciliations.

Which of the following control activities is not usually performed with regard to vouchers payable in the accounting department?

Controlling the mailing of the check and remittance advice.

Confirmation of accounts payable with creditors is most appropriate when

Creditor statements are not available, and internal control over accounts payable is unsatisfactory.

For effective internal control, which of the following functions should not be the responsibility of the CFO's department?

Data processing.

When the shipping department returns nonconforming goods to a vendor, the purchasing department should send to the accounting department the

Debit memo.

An audit assistant found a purchase order for a regular supplier in the amount of $5,500. The purchase order was dated after receipt of the goods. The purchasing agent had forgotten to issue the purchase order. Also, a disbursement of $450 for materials did not have a receiving report. The assistant wanted to select additional purchase orders for investigation but was unconcerned about the lack of a receiving report. The audit director should

Disagree with the assistant because the lack of a receiving report has a greater risk of loss associated with it.

For effective internal control purposes, the vouchers payable department ordinarily should

Establish the agreement of the vendor's invoice with the receiving report and purchase order.

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also

Is responsible for mailing the checks.

Effective controls relevant to purchasing of raw materials should usually include all of the following except

Obtaining third-party written quality and quantity reports prior to payment for the raw materials.

In assessing risks of material misstatement for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support?

Occurrence.

Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the

Receiving department.

Which of the following internal control activities most likely addresses the completeness assertion for inventory?

Receiving reports are prenumbered and periodically reconciled.

In a properly designed internal control system, the same employee most likely would match vendors' invoices with receiving reports and also

Recompute the calculations on vendors' invoices.

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

Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

Which of the following procedures is least likely to be performed before the balance sheet date?

Search for unrecorded liabilities.

If internal control is properly designed, the same employee may be permitted to

Sign checks and also cancel supporting documents.

Which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity's financial statements?

Significant differences between the physical inventory count and the accounting records are not investigated.

Mailing disbursement checks and remittance advices should be controlled by the employee who

Signs the checks last.

Which of the following controls should prevent an invoice for the purchase of merchandise from being paid twice?

The check signer reviews and cancels the voucher packets.

A client's program that recorded receiving report information entered directly by the receiving department on vendor shipment receipt included a reasonableness or limit test. Which of the following errors would this test likely detect?

The receiving department clerk entered the quantity of the product received as 0.

Operating control of the check-signing machine normally should be the responsibility of the

Treasury function.

The primary audit procedure to determine whether accounts payable are valued properly is

Vouching accounts payable to supporting documentation.

A client's procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?

Accounts payable are not materially understated.

The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because

Accrued liabilities usually pertain to services of a continuing nature whereas accounts payable are the result of completed transactions.

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for?

An entity's internal control requires that an approved voucher, a prenumbered purchase order, and a prenumbered receiving report accompany every check request. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all

Canceled checks.

An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to

Determine that purchases were properly recorded.

A client's materials purchasing cycle begins with requisitions from user departments and ends with the receipt of materials and the recognition of a liability. An auditor's primary objective in reviewing this cycle is to

Evaluate the reliability of information generated by the purchasing process.

In an audit of a purchasing department, which of the following usually is considered a risk factor?

Purchases are made from parties related to buyers or other company officials.

For several years a client's physical inventory count has been lower than what was shown on the books at the time of the count, and downward adjustments of the inventory account have been required. Contributing to the inventory problem could be material weaknesses in internal control that led to the failure to record some

Purchases returned to vendors.

In planning to assess control risk for purchasing and disbursement procedures, the auditor will be least influenced by

The strength or weakness of internal control in other areas, e.g., sales and accounts receivable.

Effective controls relevant to the efficiency of purchases will result in proper evaluation of the time for ordering merchandise. When making this evaluation, the purchasing company should give primary consideration to

The trade-off between the cost of owning and storing excess merchandise and the risk of loss by not having merchandise on hand.