Question 1

In order to ensure appropriate segregation of duties,the supervisor in each department handles the custody of the payroll checks.

Accepted Answer

To ensure appropriate segregation of duties, custody of payroll checks should be handled by an employee outside of the department responsible for payroll processing. This helps to prevent any one person or department from having too much control or access to sensitive financial information.

Question 2

Auditors should inspect the "unmatched receiving report" file to determine whether the liability for the receipt of goods has been recorded.

Accepted Answer

Auditors should inspect the "unmatched receiving report" file to determine whether the liability for the receipt of goods has been recorded. This is because the unmatched receiving report file contains information about goods received that have not yet been matched with a corresponding purchase order, invoice, or payment. Therefore, reviewing this file can help auditors identify any potential liabilities that may not have been properly recorded in the financial statements.

Question 3

Acquisition and expenditure activities include (1)purchasing goods and services,(2)receiving the goods or services,(3)recording the asset or expense and related liability,and (4)depreciating assets purchased.

Accepted Answer

False

Question 4

The emphasis is on the completeness assertion because financial statement users tend to be more concerned about understated expenses and liabilities than overstated.

Accepted Answer

Financial statement users are generally more concerned about understated expenses and liabilities because they can result in a company appearing more profitable or financially stable than it actually is. Overstated expenses and liabilities would have the opposite effect and would therefore be less of a concern to users. The completeness assertion is important because it ensures that all relevant expenses and liabilities are properly recorded, preventing any potential understatement.

Question 5

Unrecorded liabilities can be prevented if there is an appropriate segregation of duties in accounts payable.

Accepted Answer

The answer of Unrecorded liabilities can be prevented if there...

Question 6

If the risk of material misstatement is assessed as high,it is likely that additional substantive procedures will be required.

Accepted Answer

If the risk of material misstatement is assessed as high, it means that there is a greater likelihood of significant errors or fraud in the financial statements. Therefore, additional substantive procedures may be necessary to adequately address the heightened risk and ensure the accuracy of the financial statements.

Question 7

Tracing the payables to the cash disbursements journal can provide the evidence regarding the valuation of accounts payable.

Accepted Answer

Tracing the payables to the cash disbursements journal ensures that all payments made to suppliers have been properly recorded and accounted for, providing evidence for the valuation of accounts payable.

Question 8

When confirming accounts payable,emphasis should be put on what kind of accounts?

Accepted Answer

The answer of When confirming accounts payable,emphasis should be put...

Question 9

Changes to the payroll master file should be approved by human resources department.

Accepted Answer

Changes to employee information in the payroll master file can affect their salary, benefits, and taxes, which are all under the purview of the human resources department. Therefore, it is critical that any modifications to the master file are authorized by HR to ensure accuracy and compliance.

Question 10

Purchases are requisitioned by a purchasing department that seeks the best prices and quality.

Accepted Answer

The answer of Purchases are requisitioned by a purchasing department...

Question 11

Proper separation of duties involves the purchasing department as the recordkeeping function.

Accepted Answer

Proper separation of duties requires that the recordkeeping function be separate from the purchasing department to prevent potential fraud or errors.

Question 12

If a person is absent from the company due to illness or vacation,their paycheck should be returned to the payroll department.

Accepted Answer

The statement is false. The employee is entitled to receive their paycheck even if they are absent from the company due to illness or vacation. The payroll department typically handles the processing of payroll and distribution of paychecks, but they do not require the paycheck to be returned in these situations.

Question 13

The receiving department receives a "blind" copy of the purchase order which does not include the vendor's name and address.

Accepted Answer

The answer of The receiving department receives a "blind" copy...

Question 14

The principal goal of the physical inspection of property,plant,and equipment is to determine actual valuation of property.

Accepted Answer

The answer of The principal goal of the physical inspection...

Question 15

If internal controls over the expenditure cycle are weak,auditors will need to design substantive procedures to try to detect whether control failures have produced misleading financial statement account balances.

Accepted Answer

When there are weak internal controls over the expenditure cycle, auditors cannot rely on those controls to provide assurance that financial statement account balances are accurate. As a result, auditors will need to design substantive procedures to test the balances and determine if any errors or misstatements exist. This means that auditors will need to perform more extensive and detailed testing of transactions and account balances to obtain sufficient evidence to support their audit opinion.

Question 16

The auditors' "search for unrecorded liabilities" should emphasize payments made shortly after the end of the year.

Accepted Answer

The auditors' search for unrecorded liabilities should emphasize payments made shortly after the end of the year because they may relate to expenses incurred during the year but not recorded until after the year-end.

Question 17

The payroll department approves payroll hours prior to processing the payroll.

Accepted Answer

The answer of The payroll department approves payroll hours prior...

Question 18

Paychecks should be written to a payroll bank account that is used only for payroll.

Accepted Answer

Paychecks should be written to a dedicated payroll bank account to avoid confusion and ensure that payroll funds are not mixed with other business funds.

Question 19

Bill of ladings for goods shipped from a vendor to the purchasing company should always include the company's purchase order number.

Accepted Answer

Including the company's purchase order number on the bill of ladings is important for the tracking and processing of the shipment, as it helps match the products received with the original order placed by the company.

Question 20

The accounts payable department reconciles the vendor invoice,purchase order,and receiving report prior to approving the payment to the vendor.

Accepted Answer

The reconciliation of the vendor invoice, purchase order, and receiving report is a crucial step in the accounts payable process to ensure accuracy and avoid overpaying or paying for goods and services that were not received. Once these three documents are reconciled and match, the payment to the vendor can be approved.

Quiz 8: Acquisition and Expenditure Cycle