Question 1

Consider the following procedures for the verification of accounts payable:
-A number of open vouchers were accidentally omitted from the list given to the auditor.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 2

Consider the following procedures for the verification of accounts payable:
-Utility bills are never accrued. Instead, they are simply recorded and paid
immediately upon receipt the first week of the next period.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 3

In the confirmation of accounts payable, which of the following accounts would be least likely to be selected by the auditor for confirmation?
A) an account with high activity during the year, but a low balance at year end.
B) an account with a vendor who sends a monthly statement.
C) an account with a zero balance.
D) a major vendor used in the prior year, but not in the current year.
E) an account with a debit balance.

Accepted Answer

The answer of In the confirmation of accounts payable, which...

Question 4

Consider the following procedures for the verification of accounts payable:
-Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The procedure to search for unrecorded accounts payable is relevant here because the work is only 10% complete, and there may be liabilities that have not yet been recorded.

Question 5

For each of the following potential expenditure cycle misstatements below, indicate the necessary control, which would most likely prevent or detect the misstatement.

Accepted Answer

The answer of For each of the following potential expenditure...

Question 6

Consider the following procedures for the verification of accounts payable:
-Invoices on disputed orders are routinely held in a "pending" file in vouchers payable until the dispute is resolved.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

Invoices on disputed orders held in a "pending" file may not be recorded in accounts payable. Searching for unrecorded accounts payable helps identify such liabilities that should be recognized.

Question 7

Discuss the confirmation of accounts payable in terms of:
1.requirements under GAAS;
2.accounts selected for confirmation; and
3.the difference in the form for accounts payable versus accounts receivable confirmations.

Accepted Answer

The answer of Discuss the confirmation of accounts payable in...

Question 8

Consider the following procedures for the verification of accounts payable:
-The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 9

Consider the following procedures for the verification of accounts payable:
-Purchases are often recorded for goods that are never received.
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 10

Consider the following procedures for the verification of accounts payable:
-Numerous debit balances exist in vendor accounts from multiple payments on
invoices.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 11

For each one of the following financial ratios, indicate the formula and identify the audit significance.

Accepted Answer

The answer of For each one of the following financial...

Question 12

Consider the following procedures for the verification of accounts payable:
-A number of checks were written and recorded on the last day of the year, but were not mailed until several days later.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

Performing a cash disbursements cutoff test helps ensure that transactions are recorded in the correct accounting period, which is crucial when checks are written but not mailed until after year-end.

Question 13

Central Meat Inc. buys and processes livestock for sales to supermarkets. In connection with your examination of the company's financial statements, you accumulate the following information about purchases and cash disbursements transactions in the expenditure cycle.
1.Each livestock buyer submits a daily report of purchases to the plant superintendent. This report shows the dates of purchase and expected delivery, the vendor and the number, weights, and type of livestock purchased. As shipments are received, any available plant employee counts the number of each type received and places a check mark beside this quantity on the buyer's report. When all shipments listed on the report have been received, the report is returned to the buyer.
2.Vendor's invoices, after a clerical check, are sent to the buyer for approval and returned to the accounting department. A disbursement voucher and a check for the approved amount are prepared in the accounting department. Checks are forwarded to the treasurer for signing. The treasurer's office sends signed checks directly to the buyer for delivery to the vendor.
REQUIRED: For each of the numbered notes identify three specific weaknesses. Give your recommended improvement for each weakness. Use a tabular format for your answer with columns for weaknesses and recommended improvements.

Accepted Answer

The answer of Central Meat Inc. buys and processes livestock...

Question 14

Consider the following procedures for the verification of accounts payable:
-Goods in transit shipped FOB-shipping point were not recorded as purchases in the current period.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

Performing a purchases cutoff test helps ensure that transactions are recorded in the correct accounting period, which is crucial for identifying goods in transit that should be recorded as purchases.

Question 15

In understanding the client's business and industry, briefly describe the expenditure cycle characteristics of a (1) large retail grocer and (2) public school district.

Accepted Answer

The answer of In understanding the client's business and industry,...

Question 16

Shown below is a partial flowchart of the overview of a computerized system for purchases transactions and cash disbursements in the expenditure cycle.
  REQUIRED: Label the symbols in the partial flowchart.

Accepted Answer

The answer of Shown below is a partial flowchart of...

Question 17

Consider the following procedures for the verification of accounts payable:
-Goods are sometimes ordered by purchasing agents on their own initiative to fill secret agreements with certain vendors.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 18

Consider the following procedures for the verification of accounts payable:
-Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became "past due."
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 19

Consider the following procedures for the verification of accounts payable:
-A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated.
_____
A)Verify the accuracy of schedules and agreement with accounts payable balances.
B)Apply analytical procedures.
C)Vouch recorded payables.
D)Confirm accounts payablE.
E)Perform purchases cutoff test.
F)Perform cash disbursements cutoff test.
G)Examine subsequent payments.
H)Search for unrecorded accounts payablE.
I)Compare statement presentation with GAAP.

Accepted Answer

The answer of Consider the following procedures for the verification...

Question 20

Match between columns
                        Premises: Utility bills are never accrued.Instead, they are simply recorded and paid immediately upon receipt the first week of the next period.
A number of open vouchers were accidentally omitted from the list given to the auditor.
Goods are sometimes ordered by purchasing agents on their own initiative to fill secret agreements with certain vendors.
A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated.
Construction work is underway on a new wing of the warehouse.  The work is about 10% complete.  The contract calls for the first progress billing at 25% completion.
The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year.
A number of checks were written and recorded on the last day of the year, but were not mailed until several days later.
Invoices on disputed orders are routinely held in a “pending” file in vouchers payable until the dispute is resolved.
Liquidity problems in the current year have caused the client to miss a large number of cash discounts.  Further, many invoices were not paid until they became “past due.”
Goods in transit shipped FOB-shipping point were not recorded as purchases in the current period.
Numerous debit balances exist in vendor accounts from multiple payments on invoices.
Purchases are often recorded for goods that are never received.

Accepted Answer

The Answer of Verify the accuracy of schedules and agreement is...

Quiz 15: Auditing the Expenditure Cycle

Consider the following procedures for the verification of accounts payable: -A number of open vouchers were accidentally omitted from the list given to the auditor. _____

Consider the following procedures for the verification of accounts payable: -Utility bills are never accrued. Instead, they are simply recorded and paid immediately upon receipt the first week of the next period. _____

In the confirmation of accounts payable, which of the following accounts would be least likely to be selected by the auditor for confirmation?

Consider the following procedures for the verification of accounts payable: -Construction work is underway on a new wing of the warehouse. The work is about 10% complete. The contract calls for the first progress billing at 25% completion. _____

For each of the following potential expenditure cycle misstatements below, indicate the necessary control, which would most likely prevent or detect the misstatement.

Consider the following procedures for the verification of accounts payable: -Invoices on disputed orders are routinely held in a "pending" file in vouchers payable until the dispute is resolved. _____

Discuss the confirmation of accounts payable in terms of: 1.requirements under GAAS; 2.accounts selected for confirmation; and 3.the difference in the form for accounts payable versus accounts receivable confirmations.

Consider the following procedures for the verification of accounts payable: -The client has conspired to prevent the auditor from confirming or otherwise testing vendor accounts that are materially understated at year. _____

Consider the following procedures for the verification of accounts payable: -Purchases are often recorded for goods that are never received.

Consider the following procedures for the verification of accounts payable: -Numerous debit balances exist in vendor accounts from multiple payments on invoices. _____

For each one of the following financial ratios, indicate the formula and identify the audit significance.

Consider the following procedures for the verification of accounts payable: -A number of checks were written and recorded on the last day of the year, but were not mailed until several days later. _____

Consider the following procedures for the verification of accounts payable: -Goods in transit shipped FOB-shipping point were not recorded as purchases in the current period. _____

In understanding the client's business and industry, briefly describe the expenditure cycle characteristics of a (1) large retail grocer and (2) public school district.

Shown below is a partial flowchart of the overview of a computerized system for purchases transactions and cash disbursements in the expenditure cycle. REQUIRED: Label the symbols in the partial flowchart.

Consider the following procedures for the verification of accounts payable: -Goods are sometimes ordered by purchasing agents on their own initiative to fill secret agreements with certain vendors. _____

Consider the following procedures for the verification of accounts payable: -Liquidity problems in the current year have caused the client to miss a large number of cash discounts. Further, many invoices were not paid until they became "past due." _____

Consider the following procedures for the verification of accounts payable: -A vendor account, active in the prior year but showing a zero balance at the end of the current year, is materially misstated. _____

Consider the following procedures for the verification of accounts payable.For each of the following independent exceptions, indicate the most likely and efficient audit procedure that would have detected the error.