Question 1

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is ________.

Accepted Answer

A)  accuracy
B)  completeness
C)  validity
D)  classification

Question 2

The accounts payable trial balance should not include vendors with nonzero balances.

Accepted Answer

A) True 
 B)False

Question 3

"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test which control objective?

Accepted Answer

A)  Environment.
B)  Accuracy.
C)  Accounting and posting.
D)  Proper period recording.

Question 4

If the auditor traces a sample of receiving reports to the perpetual inventory records,the auditor is testing the control of validity.

Accepted Answer

A) True 
 B)False

Question 5

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

Accepted Answer

In general,the auditors are not required...

Question 6

The requirement that "perpetual inventory records must be updated as of the date goods are received" is an example of a control that satisfies the "proper period" internal control objective.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following procedures is an auditor most likely to perform in searching for unrecorded payables?

Accepted Answer

A)  Reconcile receiving reports with related cash payments made just prior to year-end.
B)  Compare the ratio of accounts payable to purchases with the prior year's ratio.
C)  Vouch a sample of creditor balances to supporting invoices,receiving reports,and purchase orders.
D)  Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

Question 8

When auditing merchandise inventory at year-end,the auditor performs a purchase cutoff test to obtain evidence that ________.

Accepted Answer

A)  all goods purchased before year-end are received before the physical inventory count
B)  goods held on consignment for customers are not included in the inventory balance
C)  the stock of inventory on hand at year-end is neither pledged nor sold
D)  all goods owned at year-end are included in the inventory balance

Question 9

Which control objective is associated with observing the inventory record-keeping personnel as they perform their work?

Accepted Answer

A)  Authorization.
B)  Completeness.
C)  Environment.
D)  Accuracy.

Question 10

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Accepted Answer

To test for completeness,the auditor's t...

Question 11

When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items in the inventory warehouse,the auditor is collecting evidence to support which assertion?

Accepted Answer

A)  Presentation.
B)  Valuation.
C)  Completeness.
D)  Existence.

Question 12

In "Amortize the 'Drum' Slowly",Candid Production overvalued net assets by taking too little amortization.Which of the following was the lesson for the auditors in this case?

Accepted Answer

A)  Check the client's calculations regardless of how simple they appear.
B)  Understand special industry accounting before accepting an engagement.
C)  Maintain professional skepticism when evaluating a client's accounting estimates.
D)  Always investigate a client's background before accepting an engagement.

Question 13

Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.

Accepted Answer

A)  has been paid for
B)  is physically present in the warehouse
C)  is owned by the company (legal title has been transferred) 
D)  relates to the shipping documents for the merchandise issued in the company's name

Question 14

Why are payables vouchers marked "paid" after cheques have been issued in payment of vendor invoices?

Accepted Answer

To show that they have been pr...

Question 15

In assessing control risk for purchases,an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents.Which account assertion would this test of controls most likely support?

Accepted Answer

A)  Completeness.
B)  Existence or occurrence.
C)  Valuation or allocation.
D)  Presentation

Question 16

Quantities recorded during the physical count of inventories are greater than the quantities in the perpetual records.This could be the result of a failure to record ________.

Accepted Answer

A)  sales
B)  sales discounts
C)  purchases
D)  purchase discounts

Question 17

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Accepted Answer

The auditor must determine where the inv...

Exam 12: The Purchases, Payables, and Payments Process

Why are payables vouchers marked "paid" after cheques have been issued in payment of vendor invoices?

Correct Answer
verified
To show that they have been pr...
View Answer

In assessing control risk for purchases,an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents.Which account assertion would this test of controls most likely support?

Correct Answer
verified

When auditing merchandise inventory at year-end,the auditor performs a purchase cutoff test to obtain evidence that ________.

Correct Answer
verified

Which control objective is associated with observing the inventory record-keeping personnel as they perform their work?

Correct Answer
verified

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is ________.

Correct Answer
verified

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Correct Answer
verified
The auditor must determine where the inv...
View Answer

The accounts payable trial balance should not include vendors with nonzero balances.

Correct Answer
verified

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Correct Answer
verified
To test for completeness,the auditor's t...
View Answer

When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items in the inventory warehouse,the auditor is collecting evidence to support which assertion?

Correct Answer
verified

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

Correct Answer
verified
In general,the auditors are not required...
View Answer

"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test which control objective?

Correct Answer
verified

Which of the following procedures is an auditor most likely to perform in searching for unrecorded payables?

Correct Answer
verified

Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.

Correct Answer
verified

The requirement that "perpetual inventory records must be updated as of the date goods are received" is an example of a control that satisfies the "proper period" internal control objective.

Correct Answer
verified

Quantities recorded during the physical count of inventories are greater than the quantities in the perpetual records.This could be the result of a failure to record ________.

Correct Answer
verified

In "Amortize the 'Drum' Slowly",Candid Production overvalued net assets by taking too little amortization.Which of the following was the lesson for the auditors in this case?

Correct Answer
verified

If the auditor traces a sample of receiving reports to the perpetual inventory records,the auditor is testing the control of validity.

Correct Answer
verified

Exam 12: The Purchases, Payables, and Payments Process

Why are payables vouchers marked "paid" after cheques have been issued in payment of vendor invoices?

Correct AnswerverifiedTo show that they have been pr...View AnswerShow Answer

In assessing control risk for purchases,an auditor vouches a sample of entries in the accounts payable trial balance to the supporting documents.Which account assertion would this test of controls most likely support?

Correct AnswerverifiedShow Answer

When auditing merchandise inventory at year-end,the auditor performs a purchase cutoff test to obtain evidence that ________.

Correct AnswerverifiedShow Answer

Which control objective is associated with observing the inventory record-keeping personnel as they perform their work?

Correct AnswerverifiedShow Answer

The control objective associated with selecting a sample of receiving reports and tracing them to the perpetual inventory records is ________.

Correct AnswerverifiedShow Answer

What issues must the auditor consider if the client has inventory located away from the client's place of business?

Correct AnswerverifiedThe auditor must determine where the inv...View AnswerShow Answer

The accounts payable trial balance should not include vendors with nonzero balances.

Correct AnswerverifiedShow Answer

Briefly explain why the auditor's inventory tests counts are conducted in two directions.

Correct AnswerverifiedTo test for completeness,the auditor's t...View AnswerShow Answer

When the auditor selects a sample of inventory items from the perpetual inventory master file then searches out these items in the inventory warehouse,the auditor is collecting evidence to support which assertion?

Correct AnswerverifiedShow Answer

Identify situations when the auditor should use accounts payable confirmations and discuss whether they are required to use them.

Correct AnswerverifiedIn general,the auditors are not required...View AnswerShow Answer

"Observe if personnel in the purchasing department are following company policies" is an audit procedure intended to test which control objective?

Correct AnswerverifiedShow Answer

Which of the following procedures is an auditor most likely to perform in searching for unrecorded payables?

Correct AnswerverifiedShow Answer

Purchase cutoff procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company ________.

Correct AnswerverifiedShow Answer

The requirement that "perpetual inventory records must be updated as of the date goods are received" is an example of a control that satisfies the "proper period" internal control objective.

Correct AnswerverifiedShow Answer

Quantities recorded during the physical count of inventories are greater than the quantities in the perpetual records.This could be the result of a failure to record ________.

Correct AnswerverifiedShow Answer

In "Amortize the 'Drum' Slowly",Candid Production overvalued net assets by taking too little amortization.Which of the following was the lesson for the auditors in this case?

Correct AnswerverifiedShow Answer

If the auditor traces a sample of receiving reports to the perpetual inventory records,the auditor is testing the control of validity.

Correct AnswerverifiedShow Answer

Correct Answer
verified
To show that they have been pr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The auditor must determine where the inv...
View Answer

Correct Answer
verified

Correct Answer
verified
To test for completeness,the auditor's t...
View Answer

Correct Answer
verified

Correct Answer
verified
In general,the auditors are not required...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified