Question 1

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 2

Knowledge of the client's business is essential for tests related to reviewing the accounts payable listing and master file for related parties and debit balances.

Accepted Answer

Knowledge of the client's business is essential to understand the nature and scope of the accounts payable, related party transactions, and debit balances that need to be reviewed during testing. Without this understanding, the auditor may miss key information or fail to identify unusual transactions that require additional scrutiny. Thus, A is the correct answer.

Question 3

A company purchasing goods from a vendor on a FOB origin basis must record the liability when the goods are received at the company's receiving dock.

Accepted Answer

In FOB origin terms, the buyer assumes ownership and liability for the goods at the point of departure from the seller's location, not upon arrival at the buyer's dock.

Question 4

Typically, a company can determine whether inventory has been acquired FOB destination or origin by examining the vendor's invoice.

Accepted Answer

The vendor's invoice will indicate the shipping terms of FOB destination or origin, which will help the company determine how ownership and responsibility of the inventory is transferred during shipping.

Question 5

In an audit with a December 31 year-end, the audit needs to only examine supporting documentation for disbursements paid through January 31 of the following month.

Accepted Answer

In an audit with a December 31 year-end, the audit needs to examine supporting documentation for all disbursements made during the fiscal year, which includes the month of January. Therefore, the statement is false.

Question 6

Match between columns
                        Premises: a listing of the amount owed to each vendor at a point in time
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 document prepared by the purchasing department indicating the description quantity and related information for goods and services that the company intends to purchase
the listing or report that includes all cash payments for a given period
a document received from the vendor which shows the amount owed for an acquisition
a document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted
a document used to request goods and services by an authorized employee

Accepted Answer

The Answer of check and voucher and vendor's invoice and is...

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

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

Knowledge of the client's business is essential for tests related to reviewing the accounts payable listing and master file for related parties and debit balances.

A company purchasing goods from a vendor on a FOB origin basis must record the liability when the goods are received at the company's receiving dock.

Typically, a company can determine whether inventory has been acquired FOB destination or origin by examining the vendor's invoice.

In an audit with a December 31 year-end, the audit needs to only examine supporting documentation for disbursements paid through January 31 of the following month.

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).