531 Ch 11

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

tolerable qualify

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be Multiple Choice 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. amounts recorded in the accounts payable subsidiary ledger.

vendors with whom the entity has previously done business.

Effectively identify 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 ______. substantive analytical procedures reperformance tests on transactions tests of controls

substantive analytical procedures

Accounts payable confirmations may be used as an important source of evidence if ______. the auditor is also sending receivable confirmations the entity has weak internal control vendor statements are available

the entity has weak internal control Rationale: Confirmations may be important if vendor statements are not available.

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

completeness

True or false: Substantive analytical procedures are rarely used to evaluate the reasonableness of accounts payable and accrued expenses.

False They can be useful in identifying misstatements and provide evidence regarding the fairness of the recorded accounts.

A purchase order is created to ______ goods and services, and indicated the ---- to purchase purchase goods/services,

It is created to order the goods or services

when cash disbursements are recorded but were not made? assertion?

Occurrence

a --- is created to order goods and services, and indicated the authorization to purchase purchase goods/services,

PO

An authorized person in a department requests goods with a ______.

purchase req

The beginning step in the purchase process is usually ______.

purchase req

Which of the following control activities is not usually performed in the accounts payable department? Determining the mathematical accuracy of the vendor's invoice. Having an authorized person approve the voucher. Controlling the mailing of the check and remittance advice. Matching the receiving report with the purchase order.

Controlling the mailing of the check and remittance advice.

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

Search for unrecorded liabilities.

True or false: The purchasing system includes returns of goods to suppliers for cash or credit.

T

Purchase cutoff procedures should be designed to test whether all inventory Multiple Choice ordered before the end of the year was received. owned by the entity is in the possession of the entity at the end of the year. purchased and received before the end of the year was recorded. purchased and received before the end of the year was paid for.

all inventory ..purchased and received before the end of the year was recorded.

Organizations can control requisitioning authorization by ______. allowing all individuals in the organization to request goods and services having functional areas submit requests to the purchasing department authorization dollar limits for different levels of employees

authorization dollar limits for different levels of employees`

A receiving report ______. (which are true) ? begins the purchases process is sent to a vendor contains the date and description of goods records the receipt of goods

contains the date and description of goods records the receipt of goods

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.

If purchase transactions that do not occur are recorded ______.. which? expenses may be overstated a liability will be recorded assets may be understated an incorrect payment will be made

expenses may be overstated a liability will be recorded an incorrect payment will be made assets may be OVERstated?

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 bc Individuals who can requisition goods should not receive them.

A vendor invoice ______.(which are true) ? begins the purchases process is the bill from the supplier contains the quantity shipped and price is sent to a vendor

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

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

less

Factors particularly important when the auditor considers the control environment and the purchasing process are ______...? number of vendors that supply the purchasing process methods of assigning authority and responsibility. organizational structure whether prices are significantly affected by swings

methods of assigning authority and responsibility. organizational structure

In the purchasing process, substantive tests of transactions focus mainly on the ______. purchases and cash disbursement transactions presentation and disclosures related to accounts payable transactions management assertions regarding internal control over purchases detailed amounts that make up the ending balance for accounts payable

purchases and cash disbursement transactions

The receiving function is responsible for ______ goods. which items? counting paying for authorizing ordering of receiving inspecting

receiving counting inspecting

Proper segregation of duties for purchasing include ______... which are true? cash receipts from general ledger requisitioning from invoice processing receiving from invoice processing invoice processing from shipping requisitioning from general ledger

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

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 ______..? and what are they called typically? that is unique and therefore must be audited separately similar to the processing of a vendor invoice similar to the processing of a customer sale

similar to the processing of a vendor invoice, ..simple and few of these so auditor doesnt have to pay much attention to them (SubAP) debit memo

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: Multiple Choice improper materials handling. unauthorized persons issuing purchase orders. mispostings of purchase returns. excessive shrinkage or spoilage.

unauthorized persons issuing purchase orders.

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

vendor shipping document and the purchase order.

When searching for unrecorded liabilities at year-end, the population identified for sampling would be: Multiple Choice cash receipts from related parties recorded before year-end. creditors whose accounts appear on a subsidiary trial balance of accounts payable. cash disbursements recorded in the period subsequent to year-end. invoices dated a few days before and after year-end.

? cash disbursements recorded in the period subsequent to year-end.

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

Accounting for unused prenumbered purchase orders and receiving reports.

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? Multiple Choice Accounts payable are not materially understated. Authority to incur liabilities is restricted to one designated person. Acquisition of materials is not made from one vendor or one group of vendors. Commitments for all purchases are made only after established competitive bidding procedures are followed.

Accounts payable are not materially understated.

Which of the following audit procedures is best for identifying unrecorded trade accounts payable? Multiple Choice 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. 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.

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

Treasurer.

Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue. T/F

True

Substantive analytical procedures are used to examine plausible relationships among -- -- and accrued expenses.

accounts payable

The main accounts affected by the auditor's achieved control risk for the purchasing process include ______. accounts receivable cash accounts payable accrued expenses

accounts payable accrued expenses

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 auditor should analyze accounts payable misstatements discovered through the application of substantive procedures because these misstatement may provide additional evidence as to the --- ---

control risk

The receiving function is responsible for receiving, ______ goods received from vendors. authorizing, and paying for recording and requisitioning counting, and inspecting

counting, and inspecting

Regarding purchase returns, the auditor normally ______. does not test controls of these transactions tests the controls of the transactions to reduce control risk relies on the internal audit of these transactions

does not test controls of these transactions

The accounts payable department receives the purchase order form to accomplish all of the following except to: Multiple Choice compare invoice price to purchase order price. ensure that the purchase had been properly authorized. ensure that the goods had been received by the party requesting the goods. compare quantity ordered to quantity purchased.

ensure that the goods had been received by the party requesting the goods.

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: Multiple Choice inquiry and analytical procedures. confirmation and observation. observation and inquiry. analytical procedures and confirmation.

observation and inquiry.

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

occurrence

The ______ is not usually processed through the purchasing process.... payment of the liabilities arising from purchases purchase of goods and services for credit return of goods to suppliers for cash purchase of equipment for credit

purchase of equipment for credit

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

receiving dept

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 Multiple Choice vendor invoices. purchase orders. canceled checks. receiving reports.

receiving reports.

In a properly designed purchasing process, the same employee most likely would match vendors' invoices with receiving reports and also Multiple Choice recompute the calculations on vendors' invoices. post the detailed accounts payable records. cancel vendors' invoices after payment. reconcile the accounts payroll ledger.

recompute the calculations on vendors' invoices.

When auditing the purchasing process, the auditor should consider important industry-related factors in assessing inherent risk including ______.. which are true?? whether customers will pay on time at invoice whether employees have opportunity for theft whether the supply of raw materials is adequate how volatile raw material prices are

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