Chapter #11 Quiz

Chapter 11 Name: Date: [1] In an audit of a purchasing department, which of the following usually is considered a risk factor? A. Purchase specifications are developed by the department requesting the material. B. Purchases are made against blanket or open purchase orders for certain types of items. C. Purchases are made from parties related to buyers or other company officials. D. Purchases are not rotated among suppliers included on an approved vendor list. [2] Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence and valuation assertions about recorded accounts payable? A. Investigating the open purchase order file to ascertain that prenumbered purchase orders are used and accounted for. B. Receiving the client's mail, unopened, for a reasonable period of time after year end to search for unrecorded vendor's invoices. C. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports. D. Confirming accounts payable balances with known suppliers who have zero balances. [3] 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. [4] In regard to an auditor's primary concern in an audit of liabilities, tracing vendor invoices to the accounts payable ledger is most useful in detecting A. Unsupported entries in the accounts payable ledger. B. Overstatement of purchases. C. Overstatement of accounts payable. D. Understatement of trade payables. [5] Which of the following procedures would an auditor most likely perform in searching for unrecorded payables? A. Reconcile receiving reports with related cash payments made just prior to the year end. B. Review the responses of accounts receivable confirmations for indications of disputes with customers. C. Compare cash payments made after the balance sheet date with the accounts payable trial balance. D. Examine a sample of creditor balances to supporting invoices, receiving reports, and purchase orders. [6] An appropriate audit procedure for testing the year-end cutoff for unrecorded purchases is A. Tracing recorded liabilities to supporting documents. B. Preparing an aging schedule for accounts payable. C. Reviewing the general journal for unusual entries recorded immediately prior to year end. D. Examining shipment date and terms of shipment on vendor invoices received prior and subsequent to year end. [7] To minimize the risk that agents in the purchasing department will use their positions for personal gain, the organization should A. Require competitive bidding. B. Request internal auditors to confirm selected purchases and accounts payable. C. Specify that all items purchased must pass value-per-unit-of-cost reviews. D. Direct the purchasing department to maintain records on purchase prices paid, with review of such records required every 6 months. [8] An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all A. Merchandise received. B. Vendors' invoices. C. Canceled checks. D. Receiving reports. [9] The document generated by the inventory control department to initiate the purchasing process is a A. Purchase order. B. Purchase requisition. C. Materials and supplies requisition. D. Bill of materials and supplies. [10] In auditing accounts payable, an auditor's procedures most likely will focus primarily on the relevant assertion about A. Existence. B. Classification and understandability. C. Completeness. D. Valuation and allocation. [11] To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is A. Supported by a vendor's invoice. B. Stamped "paid" by the check signer. C. Prenumbered and accounted for. D. Approved for authorized purchases. [12] Audit procedures applied to purchase transactions at year end address the cutoff assertion. An entity should include goods in its inventory if it A. Has sold the goods. B. Holds legal title to the goods. C. Has physical possession of the goods. D. Has paid for the goods. [13] An auditor discovered that a calendar-year client's cash payments increased from January 1 to February 15. The auditor matched the checks with the payables and vouchers and determined the purpose of each payment. The auditor was most likely attempting to determine whether A. The client's controls were working effectively. B. Management's policies and procedures for purchases were being followed. C. Accounts payable may have been understated. D. The client failed to take allowed discounts. [14] Auditors document their understanding of management's internal control with questionnaires, flowcharts, and narrative descriptions. A questionnaire consists of a series of questions concerning controls that auditors consider necessary to prevent or detect errors and fraud. The most appropriate question designed to contribute to the auditors' understanding of the completeness of the expenditure cycle concerns the [14] Auditors document their understanding of management's internal control with questionnaires, flowcharts, and narrative descriptions. A questionnaire consists of a series of questions concerning controls that auditors consider necessary to prevent or detect errors and fraud. The most appropriate question designed to contribute to the auditors' understanding of the completeness of the expenditure cycle concerns the A. Internal verification of quantities, prices, and mathematical accuracy of sales invoices. B. Use and accountability of prenumbered checks. C. Disposition of cash receipts. D. Qualifications of accounting personnel. [15] A purchasing agent places an order for inventory whenever a requisition is received from the warehouse. The warehouse clerk issues requisitions based on periodic physical counts because no perpetual records are maintained. Numerous duplicate orders have been placed for goods previously ordered but not received. To prevent this excess ordering, the firm should A. Keep an adequate record of open purchase orders and review it before ordering. B. Count goods in the warehouse less often. C. Use prenumbered purchase orders. D. Not use purchase requisitions.