Auditing Chapter 14

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

Search for unrecorded liabilities

Identify three audit procedures that are concerned directly or indirectly with disclosing unrecorded accounts payable.

1. Reconcile liabilities with monthly statements from creditors 2. Confirm accounts payable 3. Analytical procedures

In an audit, the valuation of year-end accounts payable is most likely addressed by:

Confirmation

To determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be cancelled by the:

Individual who signs the checks

When confirming accounts payable, the approach is most likely to be one of:

Selecting accounts that the client has previously done the most business, plus a sample of their accounts

The least likely audit approach for a management's estimate relating to an accrued liability is to:

Send confirmations relating to the estimate.

Which is the more significant step in establishing strong internal control over accounts payable transactions: the approval of an invoice for payment, or the issuance of a check in payment of an invoice?

The approval of an invoice for payment, because no one hand-signs checks anymore.

Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because:

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

Why do auditors more frequently call for reducing recorded earnings?

1. Client is too optimistic 2. Auditors are rarely sued because statements are too low 3. Liabilities are understated 4. Assets are overstated

What substantive procedures are performed during the audit of accounts payable?

1. Obtain trial balance of payables and reconcile with the ledgers 2. Vouch balances payable to selected creditors by inspecting supporting documents 3. Reconcile liabilities with creditor's monthly statements 4. Confirm accounts payable 5. Perform analytical procedures 6. Search for unrecorded accounts payable 7. Perform procedures to identify accounts payable to related parties 8. Evaluate financial statement presentation and disclosure

What documentary evidence created by the client's organization is particularly important to the auditors in verifying accrued property taxes?

1. Property tax bills 2. Related paid bills

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

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

What are the major responsibilities of an accounts payable department?

1. Cash disbursement 2. Stamp forms with the date received 3. Verify invoices

Is confirmation presumptively required for accounts receivable, accounts payable, or both?

Accounts receivable

Ordinarily, the most significant assertion relating to accounts payable is:

Completeness

An audit of the balance in the accounts payable account is ordinarily not designed to:

Detect accounts payable that are substantially past due.

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?

Existence

Which assertion do confirmation results most directly address: existence or completeness?

Existence

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 payable ledger accounts.