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Questions and Answers
Tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion regarding:
Tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion regarding:
In auditing accounts payable, an auditor's procedures most likely would focus primarily on management's assertion of:
In auditing accounts payable, an auditor's procedures most likely would focus primarily on management's assertion of:
The authority to accept incoming goods in receiving should be based on a:
The authority to accept incoming goods in receiving should be based on a:
Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because:
Auditor confirmation of accounts payable balances at the balance sheet date may be unnecessary because:
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Who should be responsible for preparing a purchase order, matching the receiving report and invoice with the purchase order, and paying for the related purchase?
Who should be responsible for preparing a purchase order, matching the receiving report and invoice with the purchase order, and paying for the related purchase?
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Which of the following control activities is not usually performed in the vouchers payable department?
Which of the following control activities is not usually performed in the vouchers payable department?
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In searching for unrecorded liabilities, an auditor most likely would examine the:
In searching for unrecorded liabilities, an auditor most likely would examine the:
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Mailing disbursement checks and remittance advices should be controlled by the employee who:
Mailing disbursement checks and remittance advices should be controlled by the employee who:
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Which of the following internal control activities is not usually performed in the vouchers payable department?
Which of the following internal control activities is not usually performed in the vouchers payable department?
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In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also:
In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also:
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Study Notes
Cutoff and Assertions
- Tests identify purchases made before year-end recorded after to assure management's cutoff assertion.
- Cutoff assertion ensures transactions are recorded in the correct accounting period.
Accounts Payable Assertion Focus
- In auditing accounts payable, emphasis is on management's assertion of completeness.
- Completeness ensures all liabilities and expenses are recorded.
Receiving Authority
- Authority for accepting incoming goods is based on an approved purchase order.
- A purchase order confirms vendor intent and terms of sale.
Auditor Confirmation Procedures
- Auditor confirmation of accounts payable balances may be unnecessary when reliable external evidence exists.
- Other evidence may include vendor statements and contracts to support account balances.
Purchase Order Responsibilities
- Responsibilities for the purchasing process include:
- Purchasing department prepares the purchase order.
- Accounts payable matches documents.
- Treasurer handles payment.
Vouchers Payable Department Controls
- Not typically performed in the vouchers payable department:
- Control over mailing checks and remittance advice.
- This activity is often managed in a different department to maintain segregation of duties.
Unrecorded Liabilities Examination
- In searching for unrecorded liabilities, auditors examine receiving reports for items received before year-end but not recorded.
- This helps identify expenses or liabilities that have not yet been recognized in financial statements.
Mailing of Disbursement Checks
- Mailing disbursement checks and remittance advices should be managed by the employee who signs the checks last.
- This helps ensure that the individual finalizing disbursements does not have prior access to supporting documentation.
Internal Control Activities in Vouchers Payable
- Common internal control activities in the vouchers payable department include:
- Approving vouchers with authorized signatures.
- Matching invoices with receiving reports.
- Accounting for unused prenumbered purchase orders is not standard in this department.
Cash Disbursement Controls
- In testing cash disbursement controls, auditors find that check signers are also responsible for mailing checks.
- This dual responsibility highlights the need for careful oversight to prevent fraud.
Employee Misconduct Suspicion
- Concerns arise when auditors suspect client employees may be ordering goods for personal use without documentation.
- Such actions can indicate a breakdown in internal controls and potential for unethical behavior.
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Description
Test your knowledge on key concepts from Chapter 11 of Auditing II. This quiz includes important definitions and assertions related to auditing practices. Perfect for students reviewing their understanding of cutoff and accounts payable assertions.
