Chapter 11 Practice Quiz

All of the following are inherent risk factors for the purchasing process except:

A new IT system placed in operation during the year.

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. 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.

Accounting for unused prenumbered purchase orders and receiving reports

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

Counting and inspection of purchased materials.

An auditor gathers receiving reports from the few days before and after year-end to determine that purchases made before the end of the current year have not been recorded in the following year to provide assurance about management's assertion of

Cutoff.

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 Cancellation of the supporting documents. Entry of the check amount in the check register. Entering of the voucher into the voucher register. Approval of the voucher for payment

Entering of the voucher into the voucher register.

Which of the following does not represent a major classification of expenses identified by FASB Concept Statement No. 5?

Functional costs.

Accounts payable (A/P) confirmations are generally used less frequently than accounts receivable confirmations since

Other procedures such as the search for unrecorded liabilities are generally very effective.

Which of the following is not one of the major steps in setting control risk for the purchasing process?

Plan and perform analytical procedures on accounts used in the purchasing process.

Which of the following controls would most effectively ensure that recorded purchases are free of material misstatements?

Purchase orders, receiving reports, and vendor invoices are independently matched when preparing vouchers.

Purchase cutoff procedures should be designed to test whether all inventory Purchased and received before the end of the year was paid for. Ordered before the end of the year was received. Purchased and received before the end of the year was recorded. Owned by the company is in the possession of the company at the end of the year.

Purchased and received before the end of the year was recorded

Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the Department that initiated the requisition. Receiving department. Purchasing agent. Accounts payable department

Receiving Department

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 Vendor invoices. Purchase orders. Receiving reports. Canceled checks.

Receiving Reports

Auditors perform a test to verify that all merchandise received has been recorded, in part, to satisfy the completeness assertion with regard to accounts payable. Which of the following would represent the population of documents for this test?

Receiving reports.

In a properly designed purchasing process, the same employee most likely would match vendors' invoices with receiving reports and also Post the detailed accounts payable records. Recompute the calculations on vendors' invoices. Reconcile the accounts payroll ledger. Cancel vendors' invoices after payment

Recompute the calculations on vendors' invoices.

An entity erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this in a timely, efficient manner?

Reconciling monthly statement received from the vendor with the accounts payable subsidiary ledger.

Which of the following does not represent a major accounting transaction type processed in the purchasing cycle?

Requisition of goods.

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

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 payable applies to the period before the balance sheet date and whether it was recorded.

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

Search for unrecorded liabilities.

Which of the following is not considered an important element of segregation of duties in the purchasing process?

Separating the check signing and check mailing functions.

Which of the following best represents a situation in which an auditor would use a tax specialist for the audit of the tax provision?

The company does business overseas.

When goods are received, the receiving clerk should match the goods with The purchase order and the requisition form. The vendor invoice and the purchase order. The vendor shipping document and the purchase order. The vendor invoice and the vendor shipping document.

The vendor shipping document and the purchase order

For effective internal control purposes, which of the following individuals should be responsible for mailing signed checks? Receptionist. Treasurer. Accounts payable clerk. Payroll clerk

Treasurer

Identify the assertion that is represented by the following statement: "Accounts payable and accrued expenses are included in the financial statements at appropriate amounts."

Valuation and allocation

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. Amounts recorded in the accounts payable subsidiary ledger. Payees of checks drawn in the month after year-end. Invoices filed in the entity's open invoice file.

Vendors with whom the entity has previously done business.