Chapter 14 LS

Common payroll deductions include ______.

union dues savings bonds retirement plans

Auditors are most concerned with ______ unclaimed wages.

internal control over

Objectives of the audit of accounts payable include obtaining an understanding of __________ __________ over accounts payable.

internal controls

Items that would not be classified as current liabilities include ______.

prepaid expenses

The audit of accounts payable should include tests of controls and substantive procedures that verify the cutoff of ______ transactions.

purchase

A review of the procedures followed in accepting and returning deposits should be made by the auditors with a view to disclosing any shortcomings in ______.

internal control

Most of the audit work on accounts payable should be performed ______ the balance sheet date.

after

Short-time obligations for services of a continuing nature that accumulate over time are __________ liabilities.

accrued

A liability account that is most suited for preliminary audit work is the ______ account.

accrued property tax

In an effective purchasing system, copies of the purchase order should be sent to the ______ departments.

- accounts payable - receiving - stores

Basic auditing steps for accrued liabilities include ______.

- considering the need for accrual of other accrued liabilities not presently considered - identifying and evaluating the reasonableness of the assumptions that underlie the computation of the liability - examining contracts that provide the basis for accrual

Examples of tests of control for the verification of accounts payable include ______.

- testing IT application controls - vouching a sample of posts to the accounts payable control account

In addition to accounts payable, other items classified as current liabilities include ______.

- unclaimed wages - customers' deposits - sales tax payable

In the audit of accounts payable, an auditor may revise the risk of material misstatement based on the result of ______.

tests of controls

Auditors should review container deposits shown as refunded to customers to verify ______.

they were not stolen by employees

Principal working papers include ______.

lead schedule confirmation requests

Sales tax collected from customers constitute ______ of the business until they are remitted to the taxing authority.

current liabilities

Which of the following should not be included in accounts payable?

Interest-bearing obligation

Identify which of the following steps below are performed by the auditors in the verification of accounts payable is performed first.

Use the understanding of the client and its environment to consider inherent risks

Acquisition on credit of merchandise, raw materials, plant assets, and office supplies are typically recorded in ______.

accounts payable

The search for unrecorded liabilities must be made ______ the balance sheet date.

after

The auditing steps for accrued liabilities include performing a retrospective analysis of the ______ estimates for evidence of management bias for significant estimates.

prior year's

In an effective purchasing system, a stores or inventory control department will prepare and approve the issuance of a purchase requisition that will be sent to the ______ department

purchasing

For most accrued liabilities, the audit approach will emphasize a(n) ______.

review and test of management's process of developing the estimates

Auditors should test the reasonableness of sales tax payable by ______.

- examining sales invoices to confirm customers are being charged the correct amount of tax - applying the sales tax rate to total taxable sales

In an effective purchasing system, receiving reports should be sent to the ______ departments.

- stores - accounts payable - purchasing

Which of the following is not an accrued expense?

Profit

The audit of accounts payable should include test of controls and substantive procedures that establish the ______ of recorded accounts payable.

completeness

Accrued expenses including interest, taxes, rent, and wages appear in the ______ section of the balance sheet.

current liabilities

Income taxes withheld from employees' pay and not remitted as of the balance sheet date constitute a(n) ______ to be verified by the auditors.

liability

Auditors analyze the Unclaimed Wages account for the purpose of determining that __________ represent unclaimed wages after payroll distribution and __________ represent only authorized payments to employees, remittances to the state under unclaimed property laws, or transfers back to general cash funds.

credits; debits

The principal working papers for accounts payable include all of the following except ______.

purchase requisitions