Question 1

You are performing an audit of Hawk Company.In evaluating the accounts payable balance you are concerned with the completeness assertion.Which of the following audit procedures best satisfy your concern?
A)Send confirmations to only vendors with large balances.
B)Send confirmations to vendors with large, active, zero balance accounts and a representative sample of all others.
C)Send confirmations to vendors chosen from sample stratified by the dollar balance.
D)Send confirmations to all vendors.

Accepted Answer

Sending confirmations to vendors with large, active, zero balance accounts and a representative sample of all others would best satisfy the completeness assertion. This ensures that the auditor is confirming balances with vendors who are more likely to have significant transactions with the company while also including a representative sample of all vendors to mitigate the risk of material misstatements in the accounts payable balance.

Question 2

The auditor is performing substantive tests of balances for accounts payable.What documentation would provide the best evidence for the ending balance?
A)Vendors' invoices
B)Vendors' statements
C)Receiving reports
D)Purchase orders

Accepted Answer

Vendors' statements provide the best evidence for the ending balance of accounts payable as they reflect the vendor's record of what is owed by the company, including any outstanding invoices and adjustments.

Question 3

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?
A)Internal accounting control over accounts payable is adequate, and there is sufficient evidence on hand to minimize the risk of a material misstatement.
B)Confirmation response is expected to be favorable, and accounts payable balances are of immaterial amounts.
C)Creditor statements are not available and internal control over payables is unsatisfactory.
D)The majority of accounts payable balances are with associated companies.

Accepted Answer

The auditor should confirm accounts payable with creditors if creditor statements are not available and if internal control over payables is unsatisfactory. This is because the risk of material misstatement is higher in such circumstances, and confirmation with creditors can provide reliable and independent evidence of the existence, ownership, and valuation of accounts payable balances. Confirmation is therefore a useful procedure for mitigating this risk and obtaining sufficient audit evidence. The other options do not typically warrant confirmation of accounts payable, as internal control, materiality, and related party transactions may mitigate the risk of material misstatement or reduce the need for confirmation.

Question 4

When verifying the correct balance in accounts payable, vendors' invoices are more useful than vendors' statements.

Accepted Answer

The answer of When verifying the correct balance in accounts...

Question 5

The documents typically used to reconcile the balance on the accounts payable list with the confirmation or vendor's statements include all of the following except for:
A)receiving reports.
B)vendor's invoices.
C)sales invoices.
D)cancelled checks.

Accepted Answer

Receiving reports, vendor's invoices, and cancelled checks are commonly used documents to reconcile the balance on the accounts payable list. However, sales invoices are typically not used for this purpose as they relate to revenue and not payables.

Question 6

The "rights "aspect of the "rights and obligations" objective is not applicable to liabilities.

Accepted Answer

The concept of "rights" applies to the things that a person or entity is entitled to do or have, while "obligations" refer to the responsibilities or duties that a person or entity has towards others. Liabilities, on the other hand, represent an entity's financial obligations or debts that must be paid. Therefore, the "rights" aspect is not applicable to liabilities.

Question 7

Auditor confirmation of accounts payable balances at the balance sheet date may not need to be performed by the auditor because:
A)this is a duplication of cutoff tests.
B)there is likely to be other reliable external evidence available to support the balances.
C)accounts payable balances at the balance sheet date may not be paid before the audit is completed.
D)correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment.

Accepted Answer

There is likely to be other reliable external evidence available to support the balances, such as vendor invoices, purchase orders, receiving reports, and other documentation. Therefore, auditor confirmation may not be necessary.

Question 8

Which of the following documents is best for verifying the correct balance in accounts payable?
A)Bills of lading
B)Confirmations
C)Vendors' invoices
D)Vendors' statements

Accepted Answer

Vendors' statements are issued by suppliers and show the total amount owed by the company, making them ideal for verifying the correct balance in accounts payable.

Question 9

The auditor gets highly reliable evidence about individual transactions by examining:
A)vendors' invoices.
B)vendors' statements.
C)confirmations of accounts payable balances.
D)detailed inventory counting instructions.

Accepted Answer

The answer of The auditor gets highly reliable evidence about...

Question 10

When auditors examine vendors' statements or receive confirmations, there must be a reconciliation of the statement or confirmation with the:
A)accounts payable list.
B)vendors' invoices.
C)purchase orders.
D)receiving reports.

Accepted Answer

Auditors would reconcile the statement or confirmation with the accounts payable list to ensure that all vendor invoices have been recorded and accounted for accurately. While the purchase orders and receiving reports may provide additional information to support the accounts payable balance, they would not be the primary source for reconciling the vendor statements or confirmations.

Question 11

Auditors primarily emphasize the understatement of liabilities in the audit of accounts payable because they are concerned about potential legal liability.

Accepted Answer

Auditors are concerned with potential legal liability if they fail to identify and disclose material understatement of liabilities, particularly in the case of accounts payable as it can have a significant impact on financial statements. Therefore, auditors prioritize the detection of any potential understatement of liabilities in their audit of accounts payable.

Question 12

A vendor's statement is unreliable and auditors rarely use it.

Accepted Answer

A vendor's statement is considered reliable and auditors often use it as a source of information for their audit procedures.

Question 13

Discuss the circumstances in which it is desirable to send confirmation requests to the client's vendors.

Accepted Answer

The answer of Discuss the circumstances in which it is...

Question 14

The auditor is performing tests of transactions for individual accounts payable transactions with vendors.Which document provides more reliable information about individual transactions with vendors?
A)Receiving report
B)Vendors' invoices
C)Vendors' statements
D)Purchase orders

Accepted Answer

Vendors' invoices provide the most reliable information about individual transactions with vendors as they contain details of the goods or services received, the amount owed, and the terms of sale. Receiving reports support the information on the invoice by indicating that goods were received and accepted, while vendors' statements summarize all transactions with the vendor over a period, and purchase orders only represent the expectation of a transaction.

Question 15

Which of the following is most reliable for verifying the correct balance of accounts payable?
A)Vendors' invoices
B)Vendors' statements
C)Confirmations
D)Bills of lading

Accepted Answer

Confirmations are the most reliable method for verifying the correct balance of accounts payable as they directly confirm the balances with the vendors. Vendors' invoices and bills of lading may not necessarily reflect the actual balance owed, and vendors' statements may not always be accurate.

Question 16

Match between columns
                        Premises: A document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition.
A document prepared by the purchasing department indicating the description quantity and related information for goods and services that the company intends to purchase.
A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted.
A document used to establish a formal means of recording and controlling acquisitions; it includes a cover sheet and a package of relevant documents.
A listing of the amount owed to each vendor at a point in time.
A document used to request goods and services by an authorized employee.
The listing or report that includes all cash payments for a given period.

Accepted Answer

The Answer of Check and Accounts payable trial balance and is...

Quiz 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

You are performing an audit of Hawk Company.In evaluating the accounts payable balance you are concerned with the completeness assertion.Which of the following audit procedures best satisfy your concern?

The auditor is performing substantive tests of balances for accounts payable.What documentation would provide the best evidence for the ending balance?

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

When verifying the correct balance in accounts payable, vendors' invoices are more useful than vendors' statements.

The documents typically used to reconcile the balance on the accounts payable list with the confirmation or vendor's statements include all of the following except for:

The "rights "aspect of the "rights and obligations" objective is not applicable to liabilities.

Auditor confirmation of accounts payable balances at the balance sheet date may not need to be performed by the auditor because:

Which of the following documents is best for verifying the correct balance in accounts payable?

The auditor gets highly reliable evidence about individual transactions by examining:

When auditors examine vendors' statements or receive confirmations, there must be a reconciliation of the statement or confirmation with the:

Auditors primarily emphasize the understatement of liabilities in the audit of accounts payable because they are concerned about potential legal liability.

A vendor's statement is unreliable and auditors rarely use it.

Discuss the circumstances in which it is desirable to send confirmation requests to the client's vendors.

The auditor is performing tests of transactions for individual accounts payable transactions with vendors.Which document provides more reliable information about individual transactions with vendors?

Which of the following is most reliable for verifying the correct balance of accounts payable?

Match seven of the terms for documents and records (a-m)used in the acquisitions and cash disbursement cycle with the descriptions provided below (1-7):