Question 1

A document used by organizations to establish a formal means of recording and controlling acquisitions which usually contains a package of documents about the acquisition is the

Accepted Answer

A voucher is a document used by organizations to record and control acquisitions, typically containing a package of documents about the acquisition.

Question 2

At what point in the acquisition and payment cycle do most companies first recognize the acquisition and related liability on their records?

Accepted Answer

The acquisition and related liability are typically recognized when the company receives the goods or services, as this is the point at which the economic benefits are received and a liability (or obligation to pay) arises.

Question 3

Auditing the acquisition and payment cycle often takes more time than any other cycle.

Accepted Answer

False

Question 4

The acquisition and payment cycle consists of one class of transactions.

Accepted Answer

The acquisition and payment cycle involves multiple classes of transactions, including purchases of goods and services, cash disbursements, and returns and allowances, among others.

Question 5

Which of the following is not one of the classes of transactions in the acquisition and payment cycle?

Accepted Answer

The acquisition of common stock is not considered a transaction in the acquisition and payment cycle, as it involves issuing equity securities and not the purchase of goods or services or the disbursement of cash. The other options - acquisition of goods and services, cash disbursements, and purchase returns and allowances and purchase discounts - are all classes of transactions within the acquisition and payment cycle.

Question 6

Which of the following accounts is not included in the acquisitions class of transactions?

Accepted Answer

Sales discounts are related to sales transactions, not acquisitions. Acquisitions typically involve the purchase of goods and services, affecting accounts like inventory, prepaid expenses, and accounts payable.

Question 7

Companies may deliberately understate accounts payable to overstate financial performance.

Accepted Answer

Companies may intentionally understate their accounts payable balance to make their financial performance appear better than it actually is. This practice can make the company look more financially stable than it actually is, as it makes it appear that the company has more cash on hand. However, in reality, the company may have significant outstanding debts that it is not accounting for properly.

Question 8

Inadequate controls over purchases and accounts payable can result in opportunities to embezzle from the organization.

Accepted Answer

This statement is true. If an organization does not have adequate controls over purchases and accounts payable, it could allow for opportunities for individuals to embezzle funds from the organization. Adequate controls should include policies and procedures, segregation of duties, and proper authorization and approval processes to prevent fraudulent activities.

Question 9

Absent disputed amounts and minor timing differences, the vendor's statements should reconcile to the

Accepted Answer

The accounts payable master file is the ledger that records all outstanding amounts owed to vendors. Therefore, the vendor's statements should reconcile to this master file. The acquisition journal records the purchase of assets or goods, but does not necessarily represent the final amounts owed to vendors. The cash disbursements and vouchers payable amounts may have minor timing differences or disputed amounts which can lead to discrepancies.

Question 10

The cash account is not part of the acquisitions and payment cycle.

Accepted Answer

The cash account is part of the acquisitions and payment cycle as it is used to pay for acquisitions and record payments.

Question 11

Smaller privately held companies may not maintain an accounts payable master file by vendor. These companies pay on the basis of

Accepted Answer

Smaller privately held companies may not have the resources or need to maintain an accounts payable master file by vendor. As a result, they may pay their bills on the basis of individual vendor invoices, rather than maintaining a central vendor database or relying on monthly statements or dunning letters.

Question 12

Which of the following accounts is not part of the acquisition and payment cycle?

Accepted Answer

Sales returns and allowances are not part of the acquisition and payment cycle; they are part of the revenue cycle.

Question 13

What typically initiates the acquisitions and payment cycle?

Accepted Answer

The acquisitions and payment cycle typically begins with the issuance of a purchase requisition or request for purchase of goods or services. This request initiates the process of ordering and paying for goods or services from a vendor.

Question 14

Which of the following business functions is not considered to be part of the acquisitions class of transactions?

Accepted Answer

Processing cash disbursements is a part of the cash disbursements or payment class of transactions, not acquisitions. The other options, processing purchase orders, recognizing liabilities, and receiving goods and services, are all part of the acquisitions class of transactions.

Question 15

The computer-generated file which records acquisitions, disbursements and allowances for each vendor is the

Accepted Answer

The accounts payable master file contains information on all vendors that a company owes money to, including the amounts owed, payment terms, and other relevant data. This file is generated by the company's accounting system and is typically updated in real-time as new transactions occur. The other options are not as appropriate as they are either too specific (B and D) or too general (C) to describe this particular file.

Question 16

After a purchase requisition is approved, a ________ must be initiated to purchase the goods or services.

Accepted Answer

A purchase order is a legally binding document that specifies the details of the goods or services being purchased, including the quantity, price, and delivery date. It is generated after a purchase requisition has been approved and serves as authorization for the vendor to supply the goods or services. Option B, vendor order, is not a commonly used term in procurement and is not a standard part of the purchasing process. Option C, call order, is also not a commonly used term in procurement and may refer to a specific type of order in a particular industry or business. Option D, vendor invoice, comes after the purchase order has been fulfilled and is a bill or request for payment from the vendor.

Question 17

A document indicating a reduction in the amount owed to a vendor because of returned goods is

Accepted Answer

The answer of A document indicating a reduction in the...

Question 18

What typically ends the acquisitions and payment cycle?

Accepted Answer

The payment on accounts payable marks the end of the acquisitions and payment cycle as it signifies the completion of a transaction and settlement of the vendor's invoice. The other options listed are part of the beginning stages of the cycle, such as initiating a purchase request or requisition, approving a new vendor, or generating a purchase order.

Question 19

A document generally received from the vendor which indicates a reduction in the amount owed due to the company granting an allowance is a

Accepted Answer

The answer of A document generally received from the vendor...

Question 20

The overall objective in the audit of the acquisition and payment cycle is

Accepted Answer

The overall objective of the audit of the acquisition and payment cycle is to evaluate whether the affected accounts are fairly presented in accordance with accounting standards. While ensuring reliability and accuracy of the accounts is important, the ultimate goal is to determine if the financial statements are fairly presented. Detecting fraudulent payments is also important, but it is not the overall objective of the audit of this cycle.

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