Chapter 11 set
14. In assessing control risk 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? A. Completeness. B. Occurrence. C. Accuracy. D. Classification.
B
When a voucher register system is utilized, the accounts payable ______________,________ is a listing of unpaid vouchers.
Blank 1: subsidiary Blank 2: ledger
The entity verifies the accuracy of its records by comparing _______,______ with the accounts payable records. (
Blank 1: vendor Blank 2: statements
The purchasing function can achieve its objectives by using multiple _________ and requiring competitive ___________.
Blank 1: vendors Blank 2: bidding or bids
To control payment for acquired goods and services, entities frequently use a(n
Blank 1: voucher
The auditor develops an understanding of the purchasing process by conducting a(n)
Blank 1: walkthrough
The auditor develops an understanding of the purchasing process by conducting a(n) ______________-
Blank 1: walkthrough
11. A product cost is A. an expense allocated by a systematic procedure. B. recognized during the period in which a liability is incurred. C. recognized in the period during which related revenue is recognized. D. recognized in the period in which cash is spent.
C
16. The cutoff assertion for accounts payable includes A. determining whether all accounts payable are recorded. B. determining whether all accounts payable actually are liabilities. C. determining whether all accounts payable are recorded in the proper period. D. determining whether all accounts payable are properly classified in the financial statements.
C
True or false: 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
False
True or false: The main objective of the general ledger function for the purchasing process is to ensure that all vendor invoices, cash disbursements, and adjustments are recorded in the accounts payable records.
False
True or false: The purchasing process is generally a source of contentious accounting issues.
False
The invoice processing function is responsible for ______.
comparing account distributions with established account classifications matching purchase orders to receiving reports purchased goods returned to vendors
The invoice processing function is responsible for ______.
comparing account distributions with established account classifications purchased goods returned to vendors matching purchase orders to receiving reports
The auditor develops an understanding of the purchasing process by ______.
conducting a walkthrough reviewing prior year documentation
A voucher register normally ______.
contains a column for a credit to accounts payable
If purchase transactions that do not occur are recorded ______.
expenses may be overstated a liability will be recorded an incorrect payment will be made
True or false: The main objective of the general ledger function for the purchasing process is to ensure that all vendor invoices, cash disbursements, and adjustments are recorded in the accounts payable records.
False Reason: This is the responsibility of accounts payable. The GL function is responsible to ensure amounts are properly accumulated, classified and summarized in the accounts.
Factors particularly important when the auditor considers the control environment and the purchasing process are ______.
methods of assigning authority and responsibility. organizational structure
An authorized person in a department requests goods with a ______.
purchase requisition
The principal business objectives of the purchasing process are ______.
acquiring goods and services at the desired quality acquiring goods and services at the lowest cost effectively using cash resources to pay for goods and services
13. A debit memo A. reduces the amount of accounts payable due to a vendor. B. reduces accounts payable when payment is made. C. is used by vendors to record cash payments received. D. authorizes a debit to purchases when goods are received.
A
32. For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the A. receiving report and the purchase order. B. receiving report and the voucher. C. vendor's packing slip and the purchase order. D. vendor's packing slip and the voucher.
A
38. As an in-charge auditor, you are reviewing a summary of control weaknesses in cash disbursement procedures. Which one of the following weaknesses, standing alone, should cause you the least concern? A. Checks are signed by only one person. B. Signed checks are distributed by the controller to approved payees. C. Treasurer fails to establish validity of names and addresses of check payees. D. Cash disbursements are made directly out of cash receipts.
A
47. Substantive procedures to examine the occurrence assertion for accounts payable include A. selecting a sample of vouchers and agreeing them to authorized purchase orders. B. selecting a sample of vouchers and tracing them to the purchases journal. C. comparing dates on vouchers to dates in the purchases journal. D. recomputing the mathematical accuracy of a sample of vendor invoices.
A
Which of the following accounts is affected by all types of purchasing process transactions?
Accounts payable
54. Which of the following procedures would an auditor least likely perform before the balance sheet date? A. Assessment of inherent risk. B. Observation of merchandise inventory. C. Assessment of control risk. D. Identification of related parties.
B
46. 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 procedure most likely was to A. identify unusually large purchases that should be investigated further. B. verify that cash disbursements were for goods actually received. C. determine that purchases were properly recorded. D. test whether payments were for goods actually ordered.
C
36. In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the checks also A. reviews the monthly bank reconciliation. B. returns the checks to accounts payable. C. is denied access to the supporting documents. D. is responsible for mailing the checks.
D
39. Tests of controls for the occurrence assertion for purchases include all of the following except: A. evaluating proper segregation of duties. B. testing a sample of vouchers for an authorized purchase order. C. testing a sample of vouchers for matching receiving reports. D. tracing a sample of vouchers to purchases journal.
D
1. Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue. True False
TRUE
10. Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations. True False
TRUE
5. The principal business objectives of the purchasing process are acquiring goods and services and paying for those goods and services. True False
TRUE
6. The accounts payable department is responsible for ensuring that all vendor invoices, cash disbursements, and adjustments are recorded in the accounts payable records. True False
TRUE
7. After the controls are tested, the auditor sets the achieved level of control risk. True False
TRUE
8. Because of the low volume of purchase return transactions, the auditor normally does not test the controls associated with these transactions. True False
TRUE
9. Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses. True False
TRUE
True or false: The major difference between a voucher register and a purchases journal is the way individual vouchers or vendor invoices are summarized.
True
True or false: The purchasing system includes returns of goods to suppliers for cash or credit.
True
For a disbursement, adequate supporting documentation must verify that the ______.
account distribution is appropriate transaction was properly authorized disbursement is for a legitimate business purpose
If purchase transactions that do not occur are recorded ______.
an incorrect payment will be made a liability will be recorded expenses may be overstated
Generally, the purchasing process and its related accounts ______.
are not difficult to audit do not result in contentious accounting issues
The auditor must understand how management weighs the risks that are relevant to the purchasing process, estimates their significance, assess the likelihood of occurrence and decides what actions to take to address them in order to understand the entity's risk ________
assessment
Organizations can control requisitioning authorization by ______.
authorization dollar limits for different levels of employees
Disbursements made by check or EFT are recorded in the ______.
cash disbursements journal
A vendor invoice ______.
contains the quantity shipped and price is the bill from the supplier
The cash disbursements journal usually has columns for ______.
credits to cash debits to accounts payable
To understand the entity's risk assessment process, the auditor must understand how management ______.
decides what actions to take to address purchasing process risks estimates purchasing process risk significance assesses the likelihood of purchasing process risk occurrence weighs the risks that are relevant to the purchasing process
The accounts payable department ______.
ensures that all goods received are recorded as assets or expenses ensures that an appropriate liability is recognized processes invoices
The accounts payable department ______.
ensures that an appropriate liability is recognized processes invoices ensures that all goods received are recorded as assets or expenses
When the tests of controls do not support the planned level of control risk, the auditor must set a ______ level of control risk and a ______ level of detection risk.
higher, lower
When a reliance strategy is adopted for the purchasing process, the auditor needs to ______.
identify controls that assure assertions are met
A purchase order ______
indicates the authorization to purchase the goods or services includes the description, quality and quantity of the goods being purchased
A purchase order ______.
indicates the authorization to purchase the goods or services includes the description, quality and quantity of the goods being purchased
The receiving function is responsible for ______ goods.
inspecting receiving counting
The purchasing department prepares a(n) ______ for the purchase or goods or services from a vendor.
purchase order
If the auditor decides to rely on controls to reduce control risk for the authorization assertion, then to verify that this control is operating effectively the auditor must ______.
perform tests of controls
Expenses that are recognized when cash is spent or liabilities incurred for goods and services that are used up at that time or shortly thereafter are referred to as
period cost
Categories of expenses classified in SFAC 5 are ______.
product costs period costs systematic expenses
Transactions processed through the purchasing process are the ______.
purchase of goods and services for cash or credit return of goods to suppliers for cash or credit payment of the liabilities arising from purchases
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 contains the date and description of goods
Proper segregation of duties for purchasing include ______.
requisitioning from general ledger requisitioning from invoice processing receiving from invoice processing
The major control for preventing fictitious purchases is proper ______.
segregation of duties
The beginning step in the purchase process is usually ______.
the purchase requisition
The vendor's statement may differ from the entity's records because of:
timing differences in supplier recording cash receipts timing differences in shipping goods errors
If the entity fails to record a purchase that has been made, assets or expenses will be ______, and accounts payable will be ______.
understated; understated
The purchasing function can achieve its objectives by ______.
using multiple vendors requiring competitive bidding
The bill from the supplier is called a ______.
vendor invoice
Companies control payment with a ______.
voucher
To understand the entity's risk assessment process, the auditor must understand how management ______.
weighs the risks that are relevant to the purchasing process assesses the likelihood of purchasing process risk occurrence estimates purchasing process risk significance decides what actions to take to address purchasing process risks
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
18. Unrecorded liabilities are most likely to be found during the review of which of the following documents? A. Unpaid bills. B. Shipping records. C. Bills of lading. D. Unmatched sales invoices.
A
27. The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because A. accrued liabilities usually pertain to services of a continuing nature, while accounts payable are the result of completed transactions. B. accrued liability balances are less material than accounts payable balances. C. evidence supporting accrued liabilities is nonexistent, while evidence supporting accounts payable is readily available. D. accrued liabilities at year-end will become accounts payable during the following year.
A
28. The auditor is most likely to verify accrued commissions payable in conjunction with the A. sales cutoff review. B. verification of employees. C. review of post balance sheet date disbursements. D. examination of trade accounts payable.
A
31. An entity'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? A. Accounts payable are not materially understated. B. Authority to incur liabilities is restricted to one designated person. C. Acquisition of materials is not made from one vendor or one group of vendors. D. Commitments for all purchases are made only after established competitive bidding procedures are followed.
A
50. Purchase cutoff procedures should be designed to test whether or not all inventory A. purchased and received before the year-end was recorded before year-end. B. on the year-end balance sheet was carried at lower of cost or market. C. on the year-end balance sheet was paid for by the company. D. owned by the company is in the possession of the company.
A
56. Accounts payable confirmations are used to test A. both the existence and completeness audit assertions. B. only the existence audit assertion. C. only the completeness audit assertion. D. either existence or completeness, depending upon the response rate.
A
62. The mailing of disbursement checks and remittance advices should be controlled by the employee who A. signed the checks last. B. approved the vouchers for payment. C. matched the receiving reports, purchase orders and vendors' invoices. D. verified the mathematical accuracy of the vouchers and remittance advices.
A
65. Which of the following test(s) of details of transactions can be used as a dual-purpose test in conjunction with tests of controls? A. Test a sample of purchase requisitions for proper authorization. B. Obtain selected vendors' statements and reconcile to vendor accounts. C. Obtain listing of accounts payable and compare total to general ledger. D. Review results of confirmations of selected accounts payable.
A
15. The occurrence assertion for accounts payable includes A. determining whether all accounts payable are recorded. B. determining whether all accounts payable actually are liabilities. C. determining whether all accounts payable are recorded in the proper period. D. determining whether all accounts payable are properly classified in the financial statements.
B
19. 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 A. payment vouchers. B. receiving reports. C. purchase requisitions. D. vendors' invoices.
B
21. An important primary purpose of the auditor's review of the entity's procurement system should be to determine the effectiveness of the activities to protect against A. improper materials handling. B. unauthorized persons issuing purchase orders. C. mispostings of purchase returns. D. excessive shrinkage or spoilage.
B
22. An entity erroneously recorded a large purchase twice. Which of the following internal controls would be most likely to detect this error in a timely and efficient manner? A. Footing the purchases journal. B. Reconciling vendors' monthly statements with subsidiary payable ledger accounts. C. Tracing totals from the purchases journal to the ledger accounts. D. Sending written quarterly confirmations to all vendors.
B
23. An auditor performs a test to determine whether all merchandise was received for which the entity was billed. The population for this test consists of all A. merchandise received. B. vendors' invoices. C. canceled checks. D. receiving reports.
B
30. Which of the following audit procedures is least likely to detect an unrecorded liability? A. Analysis and recomputation of interest expense. B. Analysis and recomputation of depreciation expense. C. Mailing of standard bank confirmation forms. D. Reading of the minutes of meetings of the board of directors.
B
37. With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been A. requested and approved by authorized individuals who have no incompatible duties. B. received, counted, and checked to quantities and amounts on purchase orders and invoices. C. properly recorded as assets and systematically amortized over the estimated useful life of the supplies. D. used in the course of business and solely for business purposes during the year under audit.
B
42. An entity's internal control requires that for every check request there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all A. purchase orders. B. canceled checks. C. receiving reports. D. approved vouchers.
B
43. To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is A. supported by a vendor's invoice. B. stamped "paid" by the check signer. C. prenumbered and accounted for. D. approved for authorized purchases.
B
44. Which of the following is the most effective control activity to detect vouchers prepared for the payment of goods that were not received? A. Counting of goods upon receipt in the storeroom. B. Matching of purchase order, receiving report, and vendor invoice for each voucher in the accounts payable department. C. Comparison of goods received with goods requisitioned in the receiving department. D. Verification of vouchers for accuracy and approval in the internal audit department.
B
48. Substantive procedures to examine the completeness assertion for accounts payable include A. selecting a sample of vouchers and agreeing them to authorized purchase orders. B. selecting a sample of vouchers and tracing them to the purchases journal. C. comparing dates on vouchers to dates in the purchases journal. D. recomputing the mathematical accuracy of a sample of vendor invoices.
B
55. An examination of the balance in the accounts payable account is ordinarily not designed to A. determine that the amounts represent obligations of the company. B. verify that accounts payable were properly authorized. C. ascertain the reasonableness of recorded liabilities. D. determine that all existing liabilities at the balance sheet date have been recorded.
B
57. If completeness is a concern for accounts payable, auditors will send accounts payable confirmations to A. primarily vendors with large accounts payable balances. B. primarily vendors with small or zero accounts payable balances. C. all vendors. D. a random sample of all vendors.
B
67. If payables turnover has increased significantly since the prior year, this is an indication that which of the following assertions for accounts payable might be violated? A. Existence or occurrence. B. Completeness. C. Rights and obligations. D. Valuation and allocation.
B
Only the __________, _________ account is affected by all three types of purchase transactions
Blank 1: accounts Blank 2: payable
The auditor's test of controls for the ___________ assertion involves reperforming the accounts payable clerk's duties on a sample of voucher packets.
Blank 1: accuracy
The primary control to prevent misstatements due to improper _____________ is the use of a schedule or table that stipulates the amount that different levels of employees are allowed to purchase.
Blank 1: authorization
Controls that ensure the ________-assertion is being met for purchases include accounting for the numerical sequences of purchase orders, receiving reports, and vouchers and matching receiving reports with vendor invoices
Blank 1: completeness
The auditor analyzes the purchasing process in order to identify controls that ensure material misstatements that are prevented or detected or corrected as they can be relied upon by the auditor to reduce _________risk
Blank 1: control
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
Blank 1: control Blank 2: environment
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. (
Blank 1: control Blank 2: environment
When tests of controls support the planned level of control risk, no modifications are normally necessary to the planned level of _____,_______ and the auditor may proceed with the planned substantive procedures.
Blank 1: detection Blank 2: risk
Preparing and signing checks for paying vendors and authorizing electronic funds transfers is the responsibility of the
Blank 1: disbursement or disbursements
Outflows or other using up of assets from delivering or producing goods, rendering services, or carrying out other activities that constitute an entity's ongoing major or central operations are ___________
Blank 1: expenses
Ensuring that all purchases, cash disbursements, and payables are properly accumulated, classified and summarized in the accounts is the main objective of the _________,_____________ function for the purchasing process.
Blank 1: general Blank 2: ledger
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.
Blank 1: inherent
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. (Enter only one word per blank.)
Blank 1: inherent
"Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events." is the definition of ___________
Blank 1: liabilities or liability
Understanding how management assesses the design and operation of controls is part of understanding the entity's __________ processes over the purchasing process.
Blank 1: monitoring
Understanding how supervisory personnel within the purchasing process review the personnel who perform and controls and evaluating the performance of the entity's IT system is part of the auditor's understanding of the entity's ________ process over purchasing
Blank 1: monitoring
The person who approved the purchase and the authorization to buy a good or service is included on the
Blank 1: purchase Blank 2: order
A purchase transaction usually begins with a(n) _____<________ being generated by a department or support function.
Blank 1: purchase Blank 2: requisition
To request goods or services, an authorized individual completes a(n)
Blank 1: purchase Blank 2: requisition
Counting and inspecting goods delivered from vendors is the _______________-- responsibility of the function. (Enter only one word per blank.)
Blank 1: receiving
To ensure an independent count of goods, the ______.___________ is normally a copy of the purchase order with quantities omitted.
Blank 1: receiving Blank 2: report
The auditor needs to understand the controls that exist to assure that management's objectives are being met when a(n)____________ strategy is adopted for the purchasing process. (
Blank 1: reliance
The important issue in the __________ function of the purchasing process it that the request meets the authorization procedures implemented by the entity.
Blank 1: requisitioning or requisition
The critical segregation of duties for preventing fictitious purchases is the separation of the _________ and __________ functions from the accounts payable and disbursement functions.
Blank 1: requisitioning or requisition Blank 2: purchasing or purchase
When a purchase journal is utilized, the accounts payable _______,_________ records the transactions with, and the balances owed to, a vendor.
Blank 1: subsidiary Blank 2: ledger
17. The accounts payable department receives the purchase order form to accomplish all of the following except to: A. compare invoice price to purchase order price. B. ensure that the purchase had been properly authorized. C. ensure that the goods had been received by the party requesting the goods. D. compare quantity ordered to quantity purchased.
C
20. The cash disbursements journal is also called the A. voucher register. B. purchases journal. C. check register. D. accounts payable subsidiary ledger.
C
26. Tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion of A. accuracy. B. occurrence. C. cutoff. D. classification.
C
29. Which of the following procedures relating to the examination of accounts payable could the auditor delegate entirely to the entity's employees? A. Test footings in the accounts payable ledger. B. Reconcile unpaid invoices to vendors' statements. C. Prepare a schedule of accounts payable. D. Mail confirmations for selected account balances.
C
41. An auditor wishes to perform tests of controls on an entity's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by A. inquiry and analytical procedures. B. confirmation and observation. C. observation and inquiry. D. analytical procedures and confirmation.
C
45. 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 A. recorded obligations were paid. B. incurred obligations were recorded in the correct period. C. recorded obligations were valid. D. cash disbursements were recorded as incurred obligations.
C
49. Substantive procedures to examine the cutoff assertion for accounts payable include A. selecting a sample of vouchers and agreeing them to authorized purchase orders. B. selecting a sample of vouchers and agreeing them to the purchases journal. C. selecting a sample of receiving reports around year-end and comparing dates on related vouchers to dates in the purchases journal. D. recomputing the mathematical accuracy of a sample of vendor invoices.
C
51. When searching for unrecorded liabilities at year-end, the population identified for sampling would be A. cash receipts from related parties recorded before year-end. B. creditors whose accounts appear on a subsidiary trial balance of accounts payable. C. cash disbursements recorded in the period subsequent to year-end. D. invoices dated a few days before and after year-end.
C
52. Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence of recorded accounts payable? A. Investigating the open purchase order file to ascertain that prenumbered purchase orders are used and accounted for. B. Receiving the entity's mail, unopened, for a reasonable period of time after the year-end to search for unrecorded vendor's invoices. C. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports. D. Confirming accounts payable balances with known suppliers who have zero balances.
C
53. Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? A. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. C. Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices. D. Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions.
C
58. In auditing accounts payable, an auditor's procedures most likely would focus primarily on management's assertion of A. existence. B. rights and obligations. C. completeness. D. valuation and allocation.
C
60. Which of the following control activities is not usually performed in the accounts payable department? A. Determining the mathematical accuracy of the vendor's invoice. B. Having an authorized person approve the voucher. C. Controlling the mailing of the check and remittance advice. D. Matching the receiving report with the purchase order.
C
63. Assertions about classes of transactions and events for the period under audit include A. existence, completeness, and accuracy. B. existence, completeness, and classification. C. occurrence, completeness, and cutoff. D. occurrence, completeness, and valuation and allocation.
C
64. Assertions about account balances at the period end include A. existence, completeness, and accuracy. B. existence, completeness, and classification. C. existence, rights and obligations, and completeness. D. existence, rights and obligations, and classification.
C
69. Which of the following describes a permanent difference? A. A difference that will be corrected in an amended tax return. B. A difference arising from an uncertain tax position. C. A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. D. A timing difference between the recognition of revenue or expense under GAAP and tax purposes.
C
12. Which of the following accounts is not affected by cash disbursement transactions? A. Cash. B. Accounts payable. C. Purchase discounts. D. Purchase returns.
D
24. An auditor compares information on canceled checks with information contained in the cash disbursements journal. The objective of this test is to determine that A. recorded cash disbursement transactions are properly authorized. B. proper cash purchase discounts have been recorded. C. cash disbursements are for goods and services actually received. D. no discrepancies exist between the data on the checks and the data in the journal.
D
25. Which of the following procedures would an auditor most likely perform in searching for unrecorded payables? A. Reconcile receiving reports with related cash payments made just prior to year-end. B. Contrast the ratio of accounts payable to purchases with the prior year's ratio. C. Vouch a sample of creditor balances to supporting invoices, receiving reports and purchase orders. D. Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.
D
33. The authority to accept incoming goods in receiving should be based on a(an) A. vendor's invoice. B. materials requisition. C. bill of lading. D. approved purchase order.
D
34. A voucher A. is a bill from the vendor. B. is a document that records the receipt of goods. C. is a document that requests goods from an authorized individual in the entity. D. serves as the basis for recording a vendor's invoice in the purchases journal.
D
35. Operating control over the check signature plate normally should be the responsibility of the A. Secretary. B. Chief accountant. C. Vice President of Finance. D. Treasurer.
D
40. 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? A. Select and examine receiving reports and ascertain that the related canceled checks are dated no earlier than the receiving reports. B. Select and examine receiving reports and ascertain that the related canceled checks are dated no later than the receiving reports. C. Select and examine canceled checks and ascertain that the related receiving reports are dated no earlier than the checks. D. Select and examine canceled checks and ascertain that the related receiving reports are dated no later than the checks.
D
59. Budd, the purchasing agent for Lake Hardware Wholesalers, has a relative who owns a retail hardware store. Budd arranged for hardware to be delivered by manufacturers to the retail store on a C.O.D. basis, thereby enabling his relative to buy at Lake's wholesale prices. Budd was probably able to accomplish this because of Lake's poor internal control over A. purchase requisitions. B. cash receipts. C. perpetual inventory records. D. purchase orders.
D
61. Which of the following is an internal control that would prevent a paid disbursement voucher from being presented for payment a second time? A. Vouchers should be prepared by individuals who are responsible for signing disbursement checks. B. Disbursement vouchers should be approved by at least two responsible management officials. C. The date on a disbursement voucher should be within a few days of the date the voucher is presented for payment. D. The official signing the check should compare the check with the voucher and should "cancel" the voucher documents by marking them "paid."
D
66. Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases? A. Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher? B. Are purchase requisitions prenumbered and independently matched with vendor invoices? C. Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions? D. Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for?
D
68. Which of the following describes a temporary difference? A. A difference that will be corrected in an amended tax return. B. A difference arising from an uncertain tax position. C. A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. D. A timing difference between the recognition of revenue or expense under GAAP and tax purposes.
D
Which of the following is NOT a principal business objective of the purchasing process?
Efficiently using cash resources to pay for goods and services
2. A purchase transaction usually begins with the preparation of a purchase order. True False
FALSE
3. A receiving report is used to document the ordering of goods. True False
FALSE
4. The purchase journal is referred to as a check register. True False
FALSE
True or false: 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.
FALSE