Question 1

After a check prepared for payment to a vendor includes the signature of an authorized person, the check is now a liability.

Accepted Answer

A check becomes a liability when it is issued, not when it is signed. The liability is recognized when the obligation to pay is established, typically when the check is delivered to the vendor.

Question 2

A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms, and date of billing is called the voucher.

Accepted Answer

The document described is known as an invoice, not a voucher. A voucher is a document used by a company’s accounts payable department to gather and file all of the supporting documents needed to approve the payment of a liability.

Question 3

It is possible to use Electronic Data Interface (EDI) to process payments to vendors electronically using Electronic Funds Transfer (EFT) between the company's bank and the vendor's bank.

Accepted Answer

EDI can be used for various transactions between trading partners including payment processing and sending/receiving EFT payments.

Question 4

List the four business functions in the acquisition and payment cycle.

Accepted Answer

The answer of List the four business functions in the...

Question 5

The acquisition and payment cycle ends with the receiving of the goods or services.

Accepted Answer

The acquisition and payment cycle ends with the payment of cash to suppliers, not merely with the receiving of goods or services.

Question 6

Purchase returns and allowances and purchase discounts business functions are also part of the acquisition and payment cycle.

Accepted Answer

Purchase returns and allowances and purchase discounts are part of the acquisition and payment cycle as they affect the amount to be paid to the vendor or supplier for the purchased goods or services. Purchase returns and allowances are deductions from the amount owed to the vendor for returning the goods or accepting a reduction in the price due to damaged or defective goods. Purchase discounts are reductions in the price offered by the vendor for early payment of the invoice.

Question 7

Most companies maintain an accounts payable master file by vendor.

Accepted Answer

The answer of Most companies maintain an accounts payable master...

Question 8

List the following documents or records in the order they are typically processed with regards to purchase order processing: 
a. Purchase requisition
b. Purchase order
c. Receiving Report

Accepted Answer

The typical order of processing starts with a purchase requisition (a request to buy goods), followed by the issuance of a purchase order (the formal order to a supplier), and ends with the receiving report (documenting the receipt of the goods ordered).

Question 9

After a check is cashed by a vendor and clear's the vendors and the client's bank, the check is now a cancelled check and is no longer a liability, but now is a document.

Accepted Answer

The answer of After a check is cashed by a...

Question 10

You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities. You have decided to vouch a sample of entries in the accounts payable master file to supporting documents. Which assertion is this test of controls most likely to support?

Accepted Answer

Vouching transactions in the accounts payable master file to supporting documents would test the occurrence assertion, as it would ensure that the recorded transactions actually occurred and were properly authorized and supported by documentation. Accuracy would be tested by verifying the mathematical accuracy of the recorded transactions, classification would be tested by ensuring that transactions were recorded in the correct accounts, and completeness would be tested by verifying that all transactions were recorded.

Question 11

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods, the quantity received, the date received, and other relevant data.

Accepted Answer

The answer of A vendor invoice is normally prepared at...

Question 12

Discuss each of the four business functions that comprise the acquisition and payment cycle.

Accepted Answer

The answer of Discuss each of the four business functions...

Question 13

For companies using Electronic Data Interface (EDI), the invoice is transmitted from the supplier electronically. EDI affects how the auditor evaluates audit evidence in this transaction cycle.

Accepted Answer

With the use of EDI, the audit evidence is in electronic form, and the auditor needs to evaluate the controls in place to ensure the completeness, accuracy, and reliability of the data transmitted through EDI. The auditor also needs to ensure that the EDI system is secure and that there is adequate backup and recovery procedures in place. Additionally, the auditor needs to evaluate the segregation of duties and the access controls over the EDI system.

Question 14

Purchase returns and allowances and purchase discounts business functions are generally not significant in amount for most companies.

Accepted Answer

Purchase returns and allowances and purchase discounts are typically minor adjustments in the overall purchasing process and do not usually represent a significant portion of a company's financial transactions.

Question 15

Describe purchase requisitions and purchase orders. What is a key difference between the two documents?

Accepted Answer

The answer of Describe purchase requisitions and purchase orders. What...

Question 16

In the processing and recording of cash disbursements,

Accepted Answer

Electronic funds transfer (EFT) is a common method for companies to submit payment to vendors. It involves a secure transfer of funds between the company's bank and the vendor's bank, without the need for physical checks.

Answer: D
 The accounts payable master file is a computer-generated file that includes all cash disbursement transactions processed by the accounting system for a period. This file is used to keep track of outstanding payments, monitor vendor performance, and generate financial reports.

Question 17

The total of the unpaid individual account balances in the accounts payable master file should equal the total accounts payable balance in the general ledger.

Accepted Answer

The total of the unpaid individual account balances in the accounts payable master file should equal the total accounts payable balance in the general ledger. This is because the accounts payable master file contains the detailed information of each account, while the general ledger provides the overall balance of the accounts payable. Therefore, the information in both files should match for accurate financial reporting.

Question 18

An acquisitions transaction file is a computer-generated file that includes all information entered into the system regarding acquisition transactions.

Accepted Answer

An acquisitions transaction file is indeed a computer-generated file that includes all information entered into the system regarding acquisition transactions.

Question 19

The acquisition and payment cycle typically begins with the initiation of a purchase requisition for goods and services from an authorized individual.

Accepted Answer

The acquisition and payment cycle typically starts with a purchase requisition initiated by an authorized individual.

Question 20

When testing the controls for the completeness transaction-related audit objectives,

Accepted Answer

The answer of When testing the controls for the completeness...

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