chapter 14 - Accounts Payable and Other Liabilities

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

1. Completeness

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

1. Confirmation

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

1. Detect accounts payable that are substantially past due

f. For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the :

1. Receiving report and the purchase order.

l. 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?

2. Existence

e. A client is 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?

2. Reconciling vendors' monthly statement with subsidiary payable ledger accounts.

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

2. Search for unrecorded liabilities

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

2. selecting the accounts of companies with whom the client has previously done the most business plus a sample of other accounts.

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

3. Individual who signs the checks

c. Which of the following is the best audit procedures for determining the existence of unrecorded liabilities?

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

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

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

j. The least likely approach in auditing managements estimate relating to an accrued liability is to

4. send confirmations relating to the estimate

b. Proper authorization of requisitions by department head is required before purchase orders are prepared.

Agree

e. The adequacy of each vendor's past record as a supplier is verified.

Agree

i. The requisition department head independently verifies the quantity and quality of the goods received.

Agree

j. Requisitions, purchase orders, and receiving reports are matched with vendor invoices as to quantity and price.

Agree

k. Accounts payable department personnel recompute the mathematical accuracy of each invoice.

Agree

Nancy Howe, your staff assistant on the April 30, 20X2, audit of Wilcox Company, was transferred to another audit engagement before she could complete the audit of unrecorded accounts. Prepare a proposed adjusting journal entry for the unrecorded accounts payable of Wilcox Company at April 30, 20X2. The amounts are material. (Do not deal with income taxes.)

Dr: Professional fees expense - $1,000 Dr: Insurance expense - $1,800 Dr: unexpired insurance - $1650* Dr: Marketable securities - $2,125 Dr: COGS - $5,863 Cr: accounts payable - $10,788 * (11/12 x 1800) = 1650

d. Purchasing department assure that requisitions are within budget limits before purchase orders are prepared.

agree

f. Secure facilities limit access to the goods during the receiving activity

agree

n. All supporting documentation is required for payment and is made available to the treasurer.

agree

o. The purchasing, receiving, and accounts payable functions are segregated.

agree

g. Receiving department compares its count of the quantity of goods received with that listed on its copy of the purchase order.

disagree - a comparison of quantities is not possible because the quantity is blacked out on the purchase order provided to receiving

m. All supporting documentation is marked "paid" by accounts payable immediately prior to making it available to the treasurer.

disagree - documentation should be parked paid by the individual making the payment

h. A receiving report is required for all purchases, including purchases of services

disagree - no receiving report is necessary for purchases of services

a. The department head of the requisitioning department selects the appropriate supplier.

disagree - only approve not select supplier

c. Purchasing department makes certain that a low-cost supplier is always chosen.

disagree - other factors in addition to cost are considered such as quality

l. The voucher register is independently reconciled to the control accounts monthly by the originators of the related vouchers.

disagree - the reconciliation should be performed by an independent party