Audit Chapter 14 Pre-work/HW

Ordinarily, the most significant assertion relating to accounts payable is: A) Completeness B) Existence C) Presentation D) Valuation

A) Completeness

Which of the following account balances reported on Hermida Co.'s balance sheet dated December 31, year 1 is most likely to rely on management estimates? A) Deferred income taxes of $30,000 B) Cash of $10,000 C) Investment in Gruler Co., accounted for under the equity method D) Accounts payable of $7,000

A) Deferred income taxes of $30,000

An audit of the balance in the accounts payable account is ordinarily not designed to: A) Detect A/P that are Substantially Past Due B) Verify that A/P were Properly Authorized C) Ascertain the Reasonableness of Recorded Liabilities D) Determine that all Existing Liabilities at the B/S Date have been Recorded

A) Detect A/P that are Substantially Past Due

For effective internal control, the accounts payable department should compare the information on each vendors' invoice with the: A) Receiving report and the purchase order B) Receiving report and the voucher C) Vendors' packing slip and the purchase order D) Vendors' packing slip and the voucher

A) Receiving report and the purchase order

The least likely approach in auditing management's estimate relating to an accrued liability is to: A) Independently develop an estimate of the amount to compare to management's estimate B) Review and test management's process of developing the estimate C) Review subsequent events or transactions bearing on the estimate D) Send confirmations relating to the estimate

A) Send confirmations relating to the estimate

When unrecorded liabilities are discovered by the auditors, they should evaluate whether the omission is sufficiently material to warrant ________

An adjusting journal entry

In performing a test of controls, the auditors vouch a sample of entries in the purchases journal to the supporting documents. Which assertion would this test of controls most likely test? A) Completeness B) Existence C) Valuation D) Rights

B) Existence

Because the auditors are primarily concerned with the _______ of recorded payables, much of the audit work on accounts payable is performed after the year-end date

Completeness

When observing the taking of a physical inventory at year-end, the auditors will record the serial number of the last _____ issued to verify the accuracy of the cutoff of accounts payable

Receiving Report

Auditors' often obtain written ________ from management regarding the existence of unrecorded payables

Representations

An ________ of liabilities will exaggerate the financial strength of a company:

Understatement

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? 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 confirmation to all vendors

B) Reconciling vendors' monthly statements with subsidiary payable ledger accounts

Which of the following procedures is least likely to be completed before the balance sheet date? A) Confirmation of Receivables B) Search for Unrecorded Liabilities C) Observation of Inventory D) Review of Internal Accounting Control over Cash Disbursements

B) Search for Unrecorded Liabilities

To determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be canceled by the: A) Authorized members of the audit committee B) Accounting department C) Individual who signs the checks D) Chief executive officer

C) Individual who signs the checks

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities? A) Examine confirmation requests returned by creditors whose accounts appear on a subsidiary trial balance of A/P B) Examine unusual relationships between monthly A/P and recorded purchases C) Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded D) Examine selected cash disbursements in the period subsequent to year-end

D) Examine selected cash disbursements in the period subsequent to year-end

Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because: A) This is a duplication of cutoff tests B) A/P balances at the B/S date may not be paid before the audit is completed C) Correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment D) There is likely to be other reliable external evidence available to support the balances

D) There is likely to be other reliable external evidence available to support the balances