SECTION L

Question 1

The purchases cutoff test involves determining that _______.

Answer 1

purchase transactions occurring near the balance sheet date are recorded in the proper period.

Question 2

The payroll process includes transactions and balances related to which of the following?

Answer 2

Commissions.

Question 3

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

Answer 3

Compare cash payments made after the balance sheet date with the accounts payable trial balance.

Question 4

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

Answer 4

Examine a sample of cash disbursements in the period subsequent to year-end.

Question 5

Which of the following procedures would best detect a liability omission by management?

Answer 5

Review purchase contracts and other legal documents.

Question 6

When auditors choose to send confirmations of accounts payable, accounts with _______.

Answer 6

zero or small balances should be among those selected for confirmation because they may be more understated than accounts with large balances.

Question 7

Understanding the significance of the purchasing cycle to the entity _______.

Answer 7

provides a context for important risk assessments.

Question 8

The auditor decided to test accounts payable by sending open-ended (blank) confirmations to selected vendors. The auditor’s best approach in selecting the vendor accounts to confirm is to

Answer 8

select vendor accounts based on the number of purchases from vendors during the year.

Question 9

Goods in transit shipped FOB (free-on-board) destination should _______.

Answer 9

remain in the inventory of the seller and be excluded from the purchaser’s inventory and accounts payable until arrival at the purchasing entity’s receiving department.

Question 10

To determine whether accounts payable are complete, auditors perform a test to verify that all merchandise received has been recorded. The population for this test consists of all

Answer 10

receiving reports.

Question 11

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be:

Answer 11

Vendors with whom the entity has previously done business.

Question 12

Vendors with whom the entity has previously done business.

Answer 12

Examine disbursements for the period immediately before the end of the period.

Question 13

Goods shipped FOB (free on board) shipping point should be _______.

Answer 13

included in the inventory and accounts payable of the purchasing entity upon shipment.

Question 14

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Answer 14

Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

Question 15

Which of the following consists of procedures designed specifically to detect significant unrecorded obligations at the balance sheet date?

Answer 15

Search for unrecorded liabilities.

Question 16

An audit team would most likely examine the detail support for charges to which of the following accounts?

Answer 16

Legal expense

Question 17

Substantive tests of account balances in the payroll cycle are likely to include the following procedures except

Answer 17

detail vouching of payroll expense entries.

Question 18

The purchase cutoff test involves determining that purchase transactions occurring near the balance sheet date are recorded in the proper period.

Answer 18

FALSE

Question 19

Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?

Answer 19

Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.

Question 20

Which of the following tests of details most likely would help an auditor determine whether accounts payable have been misstated?

Answer 20

Examining vendor statements for amounts not reported as purchases.

Question 21

What evidence is appropriate to determine whether recorded purchase transactions are valid and the vendors charged the correct prices?

Answer 21

Receiving reports and purchase orders.

Question 22

Which of the following procedures would an auditor least likely perform before the balance sheet date?

Answer 22

Confirmation of accounts payable.

Question 23

Which of the following risks are included in procurement fraud risks?

Answer 23

Kickbacks and bid rigging.

Question 24

In which of the following fraud risks is the payment usually made to an employee who submitted a fake invoice?

Answer 24

Fictitious invoices.

Question 25

An auditor traces a sample of purchase orders and the related receiving reports to the purchases journal. The purpose of this substantive audit procedure most likely was to

Answer 25

determine that purchases were properly recorded.