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| 1 | |
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 |
| | A) | Cancelation of the supporting documents. |
| | B) | Payment for goods or services. |
| | C) | Entering of the voucher into the voucher register. |
| | D) | Approval of the voucher for payment. |
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| 2 | |
When goods are received, the receiving clerk should match the goods with |
| | A) | The purchase order and the requisition form. |
| | B) | The vendor invoice and the purchase order. |
| | C) | The vendor shipping document and the purchase order. |
| | D) | The vendor invoice and the vendor shipping document. |
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| 3 | |
Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the |
| | A) | Department that initiated the requisition. |
| | B) | Receiving department. |
| | C) | Purchasing agent. |
| | D) | Accounts payable department. |
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| 4 | |
Which of the following does not represent a major accounting transaction type processed in the purchasing cycle? |
| | A) | Requisition of goods. |
| | B) | Purchase of goods and services. |
| | C) | Payment of liabilities. |
| | D) | Return of goods to suppliers. |
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| 5 | |
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? |
| | A) | Purchase requisitions. |
| | B) | Payment vouchers. |
| | C) | Vendor invoices. |
| | D) | Receiving reports. |
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| 6 | |
Which of the following control activities is not usually performed in the accounts payable department? |
| | A) | Matching the vendor’s invoice with the related receiving report. |
| | B) | Approving vouchers for payment by having an authorized employee sign the vouchers. |
| | C) | Indicating the asset and expense accounts to be debited. |
| | D) | Accounting for unused prenumbered purchase orders and receiving reports. |
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| 7 | |
In a properly designed purchasing process, the same employee most likely would match vendors’ invoices with receiving reports and |
| | A) | Post the detailed accounts payable records. |
| | B) | Recompute the calculations on vendors’ invoices. |
| | C) | Reconcile the accounts payroll ledger. |
| | D) | Cancel vendors’ invoices after payment. |
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| 8 | |
Which of the following procedures involved in processing accounts payable and cash disbursements should not be performed by the accounts payable department? |
| | A) | Counting and inspection of purchased materials. |
| | B) | Updating of accounts payable records. |
| | C) | Determining appropriate account distribution. |
| | D) | Comparing the vendor’s invoice against information on the receiving report. |
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| 9 | |
All of the following are inherent risk factors for the purchasing process except: |
| | A) | Whether the supply of raw materials is adequate. |
| | B) | How volatile raw material prices are. |
| | C) | Misstatements detected in prior audits. |
| | D) | A new IT system placed in operation during the year. |
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| 10 | |
Which of the following is not one of the major steps in setting control risk for the purchasing process? |
| | A) | Understand and document the purchasing process. |
| | B) | Plan and perform analytical procedures on accounts used in the purchasing process. |
| | C) | Plan and perform tests of controls on purchase transactions. |
| | D) | Set and document the control risk for the purchasing process. |
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| 11 | |
Which of the following controls would most effectively ensure that recorded purchases are free of material misstatements? |
| | A) | The receiving department compares the quantity ordered on purchase orders with the quantity received on receiving reports. |
| | B) | Vendor invoices are compared with purchase orders by an employee who is independent of the receiving department. |
| | C) | Receiving reports require the signature of the individual who authorized the purchase. |
| | D) | Purchase orders, receiving reports and vendor invoices are independently matched when preparing vouchers. |
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| 12 | |
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? |
| | A) | Periodically tracing the purchases journal daily totals to the applicable postings in the general ledger. |
| | B) | Sending quarterly confirmations to all vendors. |
| | C) | Reconciling monthly statement received from the vendor with the accounts payable subsidiary ledger. |
| | D) | Tracing the totals from the purchases journal to the various general ledger accounts. |
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| 13 | |
Which of the following audit procedures is best for identifying unrecorded trade accounts payable? |
| | A) | Examination of unusual relationships between monthly accounts payable balances and recorded cash payments. |
| | B) | Reconciliation of vendors’ statements to the fi le of receiving reports to identify items received just prior to the balance sheet date. |
| | C) | Investigation of payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports. |
| | D) | Review of cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period. |
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| 14 | |
Purchase cut-off procedures should be designed to test whether all inventory |
| | A) | Purchased and received before the end of the year was paid for. |
| | B) | Ordered before the end of the year was received. |
| | C) | Purchased and received before the end of the year was recorded. |
| | D) | Owned by the entity is in the possession of the entity at the end of the year. |
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| 15 | |
Identify the assertion that is represented by the following statement: 'Accounts payable and accrued expenses are included in the financial statements at appropriate amounts.' |
| | A) | Existence. |
| | B) | Completeness. |
| | C) | Valuation and allocation. |
| | D) | Rights and Obligations. |
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| 16 | |
Which of the following audit procedures is best for identifying unrecorded trade accounts payable? |
| | A) | 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. |
| | B) | Investigating payables recorded just before and after the balance sheet date to determine whether they are supported by receiving reports. |
| | C) | Examining unusual relationships between monthly accounts payable balances and recorded cash payments. |
| | D) | Reconciling monthly vendor statements to the receiving report file to identify items received just before the balance sheet date. |
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| 17 | |
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 |
| | A) | Valuation or allocation. |
| | B) | Existence or occurrence. |
| | C) | Authorization. |
| | D) | Cut-off. |
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| 18 | |
Which of the following procedures is least likely to be performed before the balance sheet date? |
| | A) | Test of internal control over cash. |
| | B) | Confirmation of receivables. |
| | C) | Search for unrecorded liabilities. |
| | D) | Observation of inventory. |
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| 19 | |
When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be |
| | A) | Vendors with whom the entity has previously done business. |
| | B) | Amounts recorded in the accounts payable subsidiary ledger. |
| | C) | Electronic funds transfers in the month after year-end. |
| | D) | Invoices filed in the entity’s open invoice file. |
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| 20 | |
Accounts payable (A/P) confirmations are generally used less frequently than accounts receivable confirmations since |
| | A) | Other procedures such as the search for unrecorded liabilities are generally very effective. |
| | B) | A/P confirmations generally have lower response rates than accounts receivable confirmations. |
| | C) | A/P confirmations do not address the existence assertion. |
| | D) | A/P confirmations do not address specific audit assertions. |
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| 21 | |
Which of the following best represents a situation in which an auditor would use a tax specialist for the audit of the tax provision? |
| | A) | The company has several temporary differences. |
| | B) | The company has several permanent differences. |
| | C) | The company has deferred tax liabilities. |
| | D) | The company does business overseas. |
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