Audit - Transaction Cycles MCQ Flashcards
In auditing accounts payable, an auditor’s procedures most likely would focus primarily on management’s assertion of:
Completeness
The authority to accept incoming goods in received should be based on an:
Approved purchased order
Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because:
There is likely to be other reliable external evidence available to support the balance.
In searching for unrecorded liabilities, an auditor most likely would examine:
the receiving reports for items received before year-end, but not yet recorded.
Or they will voucher a sample of cash disbursement recorded just after year end to receiving reports and vendor invoices.
For effective internal accounting control, the accounts payable department should compare the information on each vendor’s invoice with the:
Receiving report and the purchase order to assure that goods were received and the purchase order was properly authorized.
NOT Vendors packing slips and internally generated voucher, as they do not provide assurance.
For effective internal control, the accounts payable department generally should:
Establish the agreement of the vendor’s invoice with the receiving report and purchase order.
Ensure that supporting documents (invoice, receiving report, and purchase order) are in agreement before the voucher is submitted for payment.
When using confirmations to provide evidence about the “completeness” assertion for accounts payable, the appropriate population most likely will be:
Vendors with whom the entity has previously done business.
Whereas, confirming amounts recorded in the accounts payable would test the existence assertion, rather than completion.
Which of the following procedures would be most appropriate for testing the “completeness” assertion as it applies to inventory?
Performing cutoff procedures for shipping and receiving.
This provides assurance that goods in transit (shipped or received) are appropriately included or excluded from inventory and this procedure is most appropriate for testing the completeness assertion.
In order to maintain accurate perpetual inventory records, periodic inventory counts should be:
used to adjusted perpetual records
An insignificant portion of client’s inventory is in public warehouse. Evidence of the existence of this merchandise can most efficiently be acquired through:
Confirmation
What can help an auditor obtain assurance that slow-moving and obsolete items included in inventories are properly identified?
Examining an analysis of inventory turnover.
The purpose of tracing a sample of inventory tags to a client’s computerized listing of inventory items is to determine whether the inventory items:
Represented by tags were included on the listing.
To obtain assurance that all inventory items in a client’s inventory listing are valid, an auditor most likely would trace:
Items in the inventory listing to inventory tags and the auditor’s recorded count sheet.
What assertion an auditor most likely testing if the audit objective states that all inventory on hand is reflected int he ending inventory balance?
Inventory is complete.
In order to determine whether the actual inventory on hand is reflected int he ending inventory balance by the client, the auditor would test the completeness of inventory. This is done in conjunction with inventory observation, through testing the physical inventory report by tracing tests counts to the report to verify that reported inventory is complete.
An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s assertions about:
Valuation and allocation.
An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s assertions about valuation and allocation. (if the inventory is becoming older, an obsolescence reserve might be required).
