By tracing receiving reports issued at and before year-end to vendors' invoices and making sure they are included in accounts payable, the auditor is testing for
A) theft of merchandise by employees.
B) unrecorded obligations.
C) lapping.
D) kiting.

Question

Quizplus · Accepted Answer

By tracing receiving reports to vendors' invoices and making sure they are included in accounts payable, the auditor is testing for unrecorded obligations. This ensures that all the goods received have been correctly recorded in the accounts payable, and no unrecorded liabilities exist at the year-end. Theft of merchandise by employees, lapping, and kiting are other fraudulent activities that require different audit procedures.

By Tracing Receiving Reports Issued at and Before Year-End to Vendors