chapter 11

The main accounts affected by the auditor's achieved control risk for the purchasing process include ______.

- accrued expenses - accounts payable

A vendor invoice ______.

- contains the quantity shipped and price - is the bill from the supplier

If purchase transactions that do not occur are recorded ______.

- expenses may be overstated - an incorrect payment will be made - a liability will be recorded

A purchase order _____

- includes the description, quality and quantity of the goods being purchased - indicates the authorization to purchase the goods or services

Factors particularly important when the auditor considers the control environment and the purchasing process are ______.

- organizational structure - methods of assigning authority and responsibility

Proper segregation of duties for purchasing include ______.

- receiving from invoice processing - requisitioning from general ledger - requisitioning from invoice processing

A receiving report ______.

- records the receipt of goods - normally has quantities omitted - contains the date and description of goods

Transactions processed through the purchasing process are the ______.

- return of goods to suppliers for cash or credit - purchase of goods and services for cash or credit - payment of the liabilities arising from purchases

Which of the following control activities is not usually performed in the accounts payable department? - Matching the vendor's invoice with the related receiving report. - Accounting for unused prenumbered purchase orders and receiving reports. - Approving vouchers for payment by having an authorized employee sign the vouchers. - Indicating the asset and expense accounts to be debited.

Accounting for unused prenumbered purchase orders and receiving reports.

Obtaining a listing of accounts payable, footing the listing, and agreeing it to the general ledger control account determines the ______ of accounts payable.

completeness

Obtaining a listing of accounts payable, footing the listing, and agreeing it to the general ledger control account is done to determine the ______ of accounts payable.

completeness

The entity's organizational structure and its methods of assigning authority and responsibility are two factors that are particularly important when the auditor considers the ______ _______ and the purchasing process.

control environment

The receiving function is responsible for receiving, ______ goods received from vendors.

counting, and inspecting

Regarding purchase returns, the auditor normally ______.

does not test controls of these transactions

The auditor is concerned with a misstatement caused by a cash disbursement being recorded in the entity's records when no payment has actually been made when considering the ______ assertion.

occurrence

If purchase transactions that do not occur are recorded, assets or expenses will be ______.

overstated

The person who approved the purchase and the authorization to buy a good or service is included on the _____ _____.

purchase order

The purchasing department prepares a(n) ______ for the purchase of goods or services from a vendor.

purchase order

A purchase transaction usually begins with a(n) ______ ______ being generated by a department or support function.

purchase requisition

Purchase cutoff procedures should be designed to test whether all inventory

purchased and received before the end of the year was recorded

In the purchasing process, substantive tests of transactions focus mainly on the ______.

purchases and cash disbursement transactions

Counting and inspecting goods delivered from vendors is the responsibility of the function.

receiving

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

receiving department

To ensure an independent count of goods, the _____ _____ is normally a copy of the purchase order with quantities omitted.

receiving report

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

receiving reports

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

recompute the calculations on vendors' invoices.

Purchase transactions for the acquisition of equipment are subject to the controls included in the purchasing process. If those controls are reliable, the auditor may be able to increase the detection risk for the affected financial statement accounts and therefore ______ the number of substantive procedures needed.

reduce

That the request meets the authorization procedures implemented by the entity is the important issue in the _____ function of the purchasing process.

requisitioning

Effectively identifying accounts payable and accrual accounts that are misstated and providing evidence regarding the fairness of recorded accounts can be done using ______ ______ procedures.

substantive analytical

To test the reasonableness of purchase returns, the auditor generally performs ______. Multiple choice question.

substantive analytical procedures

Accounts payable confirmations may be used as an important source of evidence if ______.

the entity has weak internal control

The beginning step in the purchase process is usually ______.

the purchase requisition

When goods are received, the receiving clerk should match the goods with

the vendor shipping document and purchase order

The bill from the supplier is called a ______.

vendor invoice

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be

vendors with whom the entity has previously done business.

Companies control payment with a ______.

voucher

To control payment for acquired goods and services, entities frequently use a(n) _____

voucher

Whether the supply of raw materials is adequate and how volatile raw material prices are two important industry-related factors in assessing ______ risk when auditing the purchasing process.

inherent

Which of the following is NOT usually processed through the purchasing process? - Return of goods to suppliers for cash. - Payment of the liabilities arising from purchases. - Purchase of equipment for credit. - Purchase of goods and services for credit.

Purchase of equipment for credit.

To request goods or services, an authorized individual completes a(n) ______ ______

purchase requisition

Which of the following audit procedures is best for identifying unrecorded trade accounts payable? - Investigation of payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports. - Reconciliation of vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date. - Examination of unusual relationships between monthly accounts payable balances and recorded cash payments. - Review of cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

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

A voucher is ______.

- the basis for recording a vendor's invoice - attached to the purchase requisition, PO, receiving report, and invoice - used to control payment for purchases

When auditing the purchasing process, the auditor should consider important industry-related factors in assessing inherent risk including ______.

- whether the supply of raw materials is adequate - how volatile raw material prices are

Which of the following is not a SFAC 5 expense category? - Product costs - Period costs - Systematic expenses - Amortized expenses

Amortized expenses

T/F: Proper segregation of duties for purchasing mean that the individual who can requisition goods should receive the goods but not be responsible for invoice processing.

F

T/F: Substantive analytical procedures are rarely used to evaluate the reasonableness of accounts payable and accrued expenses.

F

Which of the following procedures is least likely to be performed before the balance sheet date? - Test of internal control over cash. - Search for unrecorded liabilities. - Confirmation of receivables. - Observation of inventory.

Search for unrecorded liabilities.

T/F: The purchasing system includes returns of goods to suppliers for cash or credit.

T

For effective internal control purposes, which of the following individuals should be responsible for mailing signed checks?

Treasurer

Organizations can control the requisitioning process by ______.

authorization dollar limits for different levels of employees

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

entering of the voucher into the voucher register

When compared to accounts receivable confirmations, accounts payable confirmations are used ______ frequently by auditors.

less

Proper segregation of duties, independent reconciliation and review of vendor statements and monthly bank reconciliations are control activities related to the ______ assertion.

occurrence

Expenses that can be matched directly with specific transactions or events and are recognized upon recognition of revenue are referred to as ______ costs

product

An entity usually prepares a document for purchase returns that reduces the amount of the vendor's accounts payable. This document is processed through the purchasing process in a manner ______.

similar to the processing of a vendor invoice

If the evidence does not support fair presentation, the auditor can adjust the accounts to reduce the misstatement to an amount less than the ______ misstatement or _____ the audit report.

tolerable; qualify