Chapter 11 Final Audit

32. For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the A. Receiving report and the purchase order. B. Receiving report and the voucher. C. Vendor's packing slip and the purchase order. D. Vendor's packing slip and the voucher.

A. Receiving report and the purchase order.

54. Which of the following procedures would an auditor least likely perform before the balance sheet date? A. Assessment of inherent risk. B. Observation of merchandise inventory. C. Assessment of control risk. D. Identification of related parties.

B. Observation of merchandise inventory.

52. Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence of recorded accounts payable? A. Investigating the open purchase order file to ascertain that prenumbered purchase orders are used and accounted for. B. Receiving the client's mail, unopened, for a reasonable period of time after the year-end to search for unrecorded vendor's invoices. C. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports. D. Confirming accounts payable balances with known suppliers who have zero balances.

C. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports.

30. Which of the following audit procedures is least likely to detect an unrecorded liability? A. Analysis and recomputation of interest expense. B. Analysis and recomputation of depreciation expense. C. Mailing of standard bank confirmation forms. D. Reading of the minutes of meetings of the board of directors.

B. Analysis and recomputation of depreciation expense.

42. An entity's internal control requires that for every check request there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all A. Purchase orders. B. Canceled checks. C. Receiving reports. D. Approved vouchers.

B. Canceled checks.

22. A client erroneously recorded a large purchase twice. Which of the following internal controls 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 confirmations to all vendors.

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

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

C. Controlling the mailing of the check and remittance advice.

68. Which of the following describes a temporary difference? A. A difference that will be corrected in an amended tax return. B. A difference arising from an uncertain tax position. C. A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes. D. A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

D. A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

36. In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the checks also A. Reviews the monthly bank reconciliation. B. Returns the checks to accounts payable. C. Is denied access to the supporting documents. D. Is responsible for mailing the checks.

D. Is responsible for mailing the checks

24. An auditor compares information on canceled checks with information contained in the cash disbursements journal. The objective of this test is to determine that A. Recorded cash disbursement transactions are properly authorized. B. Proper cash purchase discounts have been recorded. C. Cash disbursements are for goods and services actually received. D. No discrepancies exist between the data on the checks and the data in the journal.

D. No discrepancies exist between the data on the checks and the data in the journal.

40. An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively? A. Select and examine receiving reports and ascertain that the related canceled checks are dated no earlier than the receiving reports. B. Select and examine receiving reports and ascertain that the related canceled checks are dated no later than the receiving reports. C. Select and examine canceled checks and ascertain that the related receiving reports are dated no earlier than the checks. D. Select and examine canceled checks and ascertain that the related receiving reports are dated no later than the checks.

D. Select and examine canceled checks and ascertain that the related receiving reports are dated no later than the checks.

34. A voucher A. Is a bill from the vendor. B. Is a document that records the receipt of goods. C. Is a document that requests goods from an authorized individual in the entity. D. Serves as the basis for recording a vendor's invoice in the purchases journal.

D. Serves as the basis for recording a vendor's invoice in the purchases jour