Audit Exam 3
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| Which of the following procedures is least likely to be completed before the balance sheet date? | Search for unrecorded liabilities.
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| An audit of the balance in the accounts payable account is ordinarily not designed to: | Detect accounts payable that are substantially past due.
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| Which of the following is the best audit procedure for determining the existence of unrecorded liabilities? | Examine selected cash disbursements in the period subsequent to year-end.
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| 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 balances.
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| A client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner? | Reconciling vendors’ monthly statements with subsidiary payable ledger accounts.
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| For effective internal control, the accounts payable department should compare the information on each vendor’s invoice with the: | Receiving report and the purchase order.
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| When confirming accounts payable, the approach is most likely to be one of: | Selecting the accounts of companies with whom the client has previously done the most business, plus a sample of other accounts.
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| In an audit, the valuation of year-end accounts payable is most likely addressed by: | Confirmation.
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| Ordinarily, the most significant assertion relating to accounts payable is: | Completeness.
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| The least likely approach in auditing management’s estimate relating to an accrued liability is to: | Send confirmations relating to the estimate.
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| To determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be canceled by the: | Individual who signs the checks.
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| In performing a test of controls, the auditors vouch a sample of entries in the purchases journal to the supporting documents. Which assertion would this test of controls most likely test? | Existence.
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| The department head of the requisitioning department selects the appropriate supplier. | Weakness of Internal Control
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| Proper authorization of requisitions by department head is required before purchase orders are prepared. | Strength of Internal Control
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| Purchasing department makes certain that a low-cost supplier is always chosen. | Weakness of Internal Control
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| Purchasing department assures that requisitions are within budget limits before purchase orders are prepared. | Strength of Internal Control
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| The adequacy of each vendor’s past record as a supplier is verified. | Strength of Internal Control
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| Secure facilities limit access to the goods during the receiving activity. | Strength of Internal Control
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| Receiving department compares its count of the quantity of goods received with that listed on its copy of the purchase order. | Weakness of Internal Control
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| A receiving report is required for all purchases, including purchases of services. | Weakness of Internal Control
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| The requisitioning department head independently verifies the quantity and quality of the goods received. | Strength of Internal Control
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| Requisitions, purchase orders, and receiving reports are matched with vendor invoices as to quantity and price. | Strength of Internal Control
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| Accounts payable department personnel recompute the mathematical accuracy of each invoice. | Strength of Internal Control
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| The voucher register is independently reconciled to the control accounts monthly by the originators of the related vouchers. | Weakness of Internal Control
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| All supporting documentation is marked “paid” by accounts payable immediately prior to making it available to the treasurer. | Weakness of Internal Control
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| All supporting documentation is required for payment and is made available to the treasurer. | Strength of Internal Control
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| The purchasing, receiving, and accounts payable functions are segregated. | Strength of Internal Control
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| Determine the existence of year-end recorded accounts payable and that the client has obligations to pay these liabilities. | Confirm outstanding year-end balances of payables.
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| Establish the completeness of recorded accounts payable. | Vouch purchases recorded after year-end.
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| Determine that the presentation and disclosure of accounts payable are appropriate. | Inquire of management concerning the existence of related party transactions.
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| Determine that the valuation of warranty loss reserves is measured in accordance with GAAP. | Test the computations made by the client to set up the accrual.
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| In the audit of financial statements, the auditors are particularly concerned with possible understatement of liabilities and the possible overstatement of revenues. | True
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| To overstate net income requires the recording of an improper accounting entry. | False
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| A company's receiving department should be independent of its purchasing department. | True
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| On a monthly basis, companies typically send statements to vendors detailing their accounts payable to the vendors. | False
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| Vouching of selected accounts payable on the client's year-end trial balance is primarily a test of completeness of recorded accounts payable. | False
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| Auditors may discover unrecorded liabilities by reconciling vendors' statements with the accounts payable trial balance. | True
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| The audit procedure of confirmation by direct communication is just as important for accounts payable as it is for accounts receivable. | False
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| Auditors often confirm vendors' accounts with zero balances at year-end. | True
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| Accounts payable confirmation requests often ask the vendor to indicate the amount of the payable from the client. | True
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| Review of a client's cash payments subsequent to the balance sheet date is an important test of the completeness of recorded payables. | True
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| All unrecorded liabilities of the same dollar total have the same effect on the client's net income. | False
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| Auditors are concerned with the discovery of receivables from related parties, but not with the discovery of payables from related parties. | False
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| Accounts payable with debit balances should be reclassified as receivables. | True
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| Since it is difficult to detect unrecorded liabilities, auditors rely primarily on the client's representations that no unrecorded liabilities exist. | False
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| Confirmation of accrued liabilities is ordinarily a required audit procedure. | False
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| Unless the auditors are engaged to prepare the client's tax return, there is no need for the auditors to review the return. | False
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| The amount of accrued payroll is typically verified by confirmation with selected employees. | False
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| When testing the amount of pension liability, the auditors typically rely on a specialist. | True
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| Most of the audit work on liabilities is ordinarily performed during the interim period. | False
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| Unclaimed payroll checks should be voided and the amount should be recorded in a special liability account. | True
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| AP clerk has a brother who is a vendor. The brother invoice Bell 2x for the same delivery. Clerk removes receiving report for 1 invoice from paid voucher and uses it for support of pymt for other invoice. The most effective procedure for preventing: | cancel vouchers and supporting papers when payment is made.
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| 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 balances.
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| The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because: | accrued liabilities usually pertain to services of a continuing nature while accounts payable are the result of completed transactions.
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| To avoid potential errors and fraud, well-designed internal control in the accounts payable area should include a separation of which of the following functions? | Cash disbursements and invoice verification.
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| An audit of the balance in the accounts payable account is ordinarily not designed to: | detect accounts payable due to public versus non-public companies.
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| Which of the following procedures relating to the audit of accounts payable would the auditors be most likely to delegate entirely to the client's employees? | Prepare a schedule of accounts payable.
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| Which of following audit procedures is least likely to detect an unrecorded liability? | Analysis and recomputation of depreciation expense.
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| Which of the following procedures is least likely to be performed before the balance sheet date? | Search for unrecorded liabilities.
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| Under which of the following circumstances would it be advisable for the auditors to confirm accounts payable with creditors? | Creditor statements are not available and internal control over accounts payable is unsatisfactory.
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| Which of the following is the most efficient audit procedure for the detection of unrecorded liabilities? | Compare cash disbursements in the subsequent period with the accounts payable trial balance at year-end.
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| In order to efficiently establish the accuracy of the accounts payable cutoff, the auditors will be most likely to: | coordinate cutoff tests with physical inventory observation.
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| A client's procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditors' primary concern with respect to liabilities resulting from the procurement system? | Accounts payable are not materially understated.
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| The existence of unrecorded accounts payable. | Vouching cash disbursements recorded after year-end.
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| The existence of an unrecorded accrued payable not due for payment for several months. | Reviewing union contracts.
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| The existence of a fictitious account payable in an audit in which accounts payable are not confirmed. | Vouching selected accounts on the year-end trial balance of accounts payable.
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| A purchase was recorded after year-end which should have been recorded prior to year-end and payment of it has not yet occurred. | Reviewing receiving reports issued shortly before and after year-end.
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| The existence of related party payables. | Reviewing unusual transactions during the year.
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| A purchase was recorded before year-end which should have been recorded after year-end and payment of it has not yet occurred. | Reviewing receiving reports issued shortly before and after year-end.
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| A payment was made prior to year-end for goods received but not ordered. | Vouching cash disbursements recorded prior to year-end.
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| After year-end a payment was made for the amount on the purchase order, an amount higher than the billed amount. | Vouching cash disbursements recorded after year-end.
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| Shortly prior to year-end, an employee stole goods received from a vendor before a receiving report had been prepared; payment for the goods was made prior to year-end. | Vouching cash disbursements recorded prior to year-end.
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| Prior to year-end a bookkeeper, ordered goods, but had them delivered to her home. The company paid for these goods after year-end. | Vouching cash disbursements recorded after year-end.
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