The form typically used to confirm accounts payable:
A) Does not require a response from the vendor.
B) Confirms the balance recorded by the client at year-end.
C) Requires the vendor to indicate the amount of the payable.
D) Is the same as the form used to confirm accounts receivable. |
|
Requires the vendor to indicate the amount of the payable. |
| |
To assure that all purchases are authorized before payment is made, accounting department personnel should match the vendor's invoice to:
A) The purchase requisition.
B) The receiving report.
C) The purchase order.
D) The voucher. |
|
The purchase order. |
| |
A "bill and hold" scheme is most likely to include:
A) Shipment of items to a customer beyond what the customer has ordered.
B) Recording as sales items that the company retains as of year-end.
C) Billing of items that are held by customers for future revenue production purposes.
D) Selling items at substantial discounts near year-end. |
|
Recording as sales items that the company retains as of year-end. |
| |
Which of the following is least likely to be accurate statement concerning characteristics of an audit?
A) An analysis of inventory turnover addresses whether the proper method of determining inventory costs--as contrasted to market values--is being applied.
B) Characteristics of the double entry bookkeeping system make it possible to test for overstated sales when tests of accounts receivable are being performed.
C) The direction of tests for overstatement errors is generally directed from the recorded entry to source documents.
D) Use of a perpetual rather than a periodic inventory system is likely to affect the nature of cutoff errors made at year-end. |
|
An analysis of inventory turnover addresses whether the proper method of determining inventory costs--as contrasted to market values--is being applied.
|
| |
Which of the following is not true relating to the auditors' observation of the client's physical inventory?
A) The auditors should evaluate the client's planning of the physical inventory.
B) The auditors should make certain that consigned items from suppliers are included in physical inventory totals.
C) The auditors should evaluate the adequacy of the client's counting procedures.
D) The auditors should take test counts of the client's inventory. |
|
The auditors should make certain that consigned items from suppliers are included in physical inventory totals. |
| |
When the auditors select a sample of items from the vouchers payable register for the last month of the period under audit and trace these items to underlying documents, the auditors are gathering evidence primarily in support of the assertion that:
A) Recorded obligations were paid.
B) Incurred obligations were recorded in the correct period.
C) Recorded obligations occurred prior to year-end.
D) Cash disbursements were recorded as incurred obligation. |
|
Recorded obligations occurred prior to year-end. |
| |
When the auditors discover an understatement of liabilities, they would most likely also expect to find an:
A) Understatement of assets.
B) Understatement of owners' equity.
C) Overstatement of expenses.
D) Understatement of revenues. |
|
Understatement of assets. |
| |
Tracing copies of computer-prepared sales invoices to copies of the corresponding computer-prepared shipping documents provides evidence that:
A) Shipments to customers were properly billed.
B) Entries in the accounts receivable subsidiary ledger were for sales actually shipped.
C) Sales billed to customers were actually shipped.
D) No duplicate shipments to customers were made. |
|
Sales billed to customers were actually shipped. |
| |
Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company") is involved with counting a client's inventory?
A) The auditor should consider the company a specialist, and follow the procedures outlined for addressing an auditor's specialist.
B) The auditor should not consider the counts by the company, by themselves, sufficient appropriate audit evidence.
C) The auditor must observe all inventory counts taken by the company.
D) The auditor should observe a letter of representations form the company. |
|
The auditor should not consider the counts by the company, by themselves, sufficient appropriate audit evidence. |
| |
After accounting for a sequence of inventory tags, an auditor traces a sample of tags to the physical inventory listing to obtain evidence that all items:
A) Included in the listing have been counted.
B) Represented by inventory tags are included in the listing.
C) Included in the listing are represented by inventory tags.
D) Represented by inventory tags are bona fide. |
|
Represented by inventory tags are included in the listing. |
| |
Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?
A) Supplies of relatively little value are expensed when purchased.
B) The cycle basis is used for physical counts.
C) The storekeeper is responsible for maintenance of perpetual inventory records.
D) Perpetual inventory records are maintained only for items of significant value. |
|
The storekeeper is responsible for maintenance of perpetual inventory records. |
| |
A client's physical count of inventories was higher than the inventory quantities per the perpetual records. This situation could be the result of the failure to record:
A) Sales.
B) Sales discounts.
C) Purchases.
D) Purchase returns. |
|
Purchases. |
| |
Auditors may choose not to confirm accounts payable because:
A) Confirmation obtains evidence identical to that obtained by cutoff tests.
B) Other reliable external evidence to support the balances is likely to be available.
C) A reading of the corporate minutes reveals that confirmation is unnecessary.
D) The balances due will have changed between the year-end and the date of confirmation. |
|
Other reliable external evidence to support the balances is likely to be available. |
| |
The accuracy of perpetual inventory records may be established, in part, by comparing perpetual inventory records with:
A) Purchase requisitions.
B) Receiving reports.
C) Purchase orders.
D) Vendor payments. |
|
Receiving reports. |
| |
Which of the following is an auditor least likely to consider a departure from U.S. generally accepted accounting principles?
A) Valuing inventory at cost.
B) Including in inventory items that are consigned out to vendors, but not yet sold.
C) Using standard cost as the measure of inventory cost.
D) Including in inventory items shipped subsequent to year-end, but for which valid orders did exist at year-end. |
|
Including in inventory items that are consigned out to vendors, but not yet sold. |
| |
To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditors should review and test the:
A) Terms of the open purchase orders.
B) Purchase cutoff procedures.
C) Contractual commitments made by the purchasing department.
D) Purchase invoices received on or around year end. |
|
Purchase cutoff procedures. |
| |
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 prior period.
B) Investigating payables recorded just prior to and just subsequent to 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 vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date. |
|
Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period. |
| |
Which of the following is an effective control that encourages receiving department personnel to count and inspect all merchandise received?
A) Quantities ordered are excluded from the receiving department copy of the purchase order.
B) Vouchers are prepared by accounts payable department personnel only after they match item counts on the receiving report with the purchase order.
C) Receiving department personnel are expected to match and reconcile the receiving report with the purchase order.
D) Internal auditors periodically examine, on a surprise basis, the receiving department copies of receiving reports. |
|
Quantities ordered are excluded from the receiving department copy of the purchase order. |
| |
The auditor will most likely perform extensive tests for possible understatement of:
A) Revenues.
B) Assets.
C) Liabilities.
D) Capital |
|
Liabilities. |
| |
A client recorded a payable for a large purchase twice. Which of the following controls would be most likely to detect this error in a timely and efficient manner?
A) Footing the purchases journal.
B) Reconciling vendors' monthly statements with subsidiary payable ledger accounts.
C) Tracing totals from the purchases journal to the ledger accounts.
D) Sending written quarterly confirmations to all vendors. |
|
Reconciling vendors' monthly statements with subsidiary payable ledger accounts. |
| |
Which of the following best describes the reason that the auditors record their inventory test counts in the working papers?
A) To document every test count.
B) For subsequent comparison with the completed inventory listing.
C) To document compliance with generally accepted accounting principles.
D) For use in subsequent audits. |
|
For subsequent comparison with the completed inventory listing. |
| |
Which of the following procedures is least likely to be completed before the balance sheet date?
A) Observation of inventory.
B) Review of internal control over cash disbursements.
C) Search for unrecorded liabilities.
D) Confirmation of receivables. |
|
Search for unrecorded liabilities. |
| |
Unrecorded liabilities are most likely to be found during the review of which of the following documents?
A) Unpaid bills.
B) Shipping records.
C) Bills of lading.
D) Unmatched sales invoices. |
|
Unpaid bills. |
| |
Which of the following best describes a voucher prepared under good internal control?
A) A document prepared by Stores that indicates amount to be purchased.
B) A document prepared by Receiving that indicates the quantity received and approves payment.
C) A document prepared by Accounts Payable authorizing a cash disbursement.
D) A document received by Purchasing, from a supplier, indicating quantity of goods purchased and amount due. |
|
A document prepared by Accounts Payable authorizing a cash disbursement. |
| |
A receiving department compares inventory items received with copies of purchase orders. The purchase orders list the name of the vendor and do not list the quantities of the material ordered. Using the purchase orders, the receiving department is most likely to detect:
A) Deliveries for which no purchase order was issued.
B) Unapproved sales orders.
C) Partial deliveries.
D) Deliveries of a greater quantity of items than those ordered. |
|
Deliveries for which no purchase order was issued. |
| |
