Question 1

The overall objective in the audit of the acquisition and payment cycle is:
A) to ensure the reliability of the affected accounts.
B) to ensure the accuracy of the affected accounts.
C) to evaluate whether the affected accounts are fairly presented in accordance with accounting standards.
D) to evaluate whether fraudulent payments were made.

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, including completeness, accuracy, and validity. The objective is not only to ensure the reliability or accuracy of the accounts, as these are part of the objectives, but not the only ones. Detecting fraudulent payments is also part of the audit, but it is not the overall objective.

Question 2

Absent disputed amounts and minor timing differences,the vendor's statements should reconcile to the:
A) acquisition journal.
B) accounts payable master file.
C) cash disbursements amount for purchases.
D) vouchers payable amount for vendors.

Accepted Answer

Accounts payable master file is the ledger where all vendor balances are recorded and updated with every transaction. Therefore, the vendor's statements should reconcile to the accounts payable master file. Choice A is incorrect as the acquisition journal only records the purchase transactions and not the payment transactions. Choice C is incorrect as it only represents the amount of cash disbursed and does not provide details of individual transactions. Choice D is incorrect as it only represents the total amount owed to vendors and not the details of individual transactions.

Question 3

Which of the following accounts is not part of the acquisition and payment cycle?
A) Prepaid expenses
B) Accounts payable
C) Sales returns and allowances
D) Property, plant, and equipment

Accepted Answer

C

Question 4

After a purchase requisition is approved,a ________ must be initiated to purchase the goods or services.
A) purchase order
B) vendor order
C) call order
D) vendor invoice

Accepted Answer

A purchase order is a document that a buyer sends to a supplier to request goods or services. It contains information such as the type and quantity of goods or services required, the agreed-upon price, and the delivery date. Once a purchase requisition has been approved, a purchase order must be initiated to actually purchase the goods or services. Therefore, choice A is the correct answer. Choices B, C, and D are not applicable in this scenario.

Question 5

Which of the following accounts is not included in the acquisitions class of transactions?
A) Inventory
B) Prepaid expenses
C) Purchase discounts
D) Accounts payable

Accepted Answer

The answer of Which of the following accounts is not...

Question 6

What typically ends the acquisitions and payment cycle?
A) Issuance of a purchase requisition or request for purchase of goods/services
B) Issuance of a payment on accounts payable
C) Approval of a new vendor
D) Purchase requisition

Accepted Answer

The issuance of a payment on accounts payable typically marks the end of the acquisitions and payment cycle. This means that the organization has received the goods or services that were requested, and payment has been made in full to the vendor or supplier. The other options listed are all steps within the cycle, but they do not necessarily signal the end of the process.

Question 7

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 8

Smaller privately held companies may not maintain an accounts payable master file by vendor.These companies pay on the basis of:
A) vendors' monthly statements.
B) individual vendors' invoices.
C) the accounts payable account in the general ledger.
D) dunning letters.

Accepted Answer

Smaller privately held companies may not maintain an accounts payable master file by vendor. Hence, they may pay on the basis of individual vendors' invoices. Monthly statements may not always be available or may not be used as the sole basis for payment. The accounts payable account in the general ledger may only provide a summary of total amounts owed and dunning letters are typically used for collections from customers, not for payment to vendors.

Question 9

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 10

A document generally received from the vendor which indicates a reduction in the amount owed due to the company granting an allowance is a:
A) vendor invoice.
B) debit memo.
C) credit adjustment form.
D) credit memo.

Accepted Answer

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

Question 11

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 is...

Question 12

A document indicating a reduction in the amount owed to a vendor because of returned goods is:
A) a debit memo.
B) a credit memo.
C) a receiving report.
D) a contractual adjustment form.

Accepted Answer

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

Question 13

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):
a.Purchase requisition
b.Purchase order
c.Receiving report
d.Acquisitions journal
e.Summary acquisitions report
f.Vendor's invoice
g.Debit memo
h.Voucher
i.Accounts payable master file
j.Accounts payable trial balance
k.Vendor's statement
l.Check
m.Cash disbursements journal
________ 1.A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted.
________ 2.A document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition.
________ 3.A document prepared by the purchasing department indicating the description,quantity,and related information for goods and services that the company intends to purchase.
________ 4.A listing of the amount owed to each vendor at a point in time.
________ 5.A document used to establish a formal means of recording and controlling acquisitions; it includes a cover sheet and a package of relevant documents.
________ 6.A document used to request goods and services by an authorized employee.
________ 7.The listing or report that includes all cash payments for a given period.

Accepted Answer

The answer of Match seven of the terms for documents...

Question 14

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:
A) voucher.
B) purchase order.
C) receiving report.
D) purchase requisition.

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 15

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

Accepted Answer

The acquisition and payment cycle involves numerous transactions, such as purchase orders, receiving reports, vendor invoices, and payment processing. Auditors must verify the accuracy and completeness of each transaction, as well as ensure compliance with relevant laws and regulations. This can be a time-consuming process compared to other cycles, such as the revenue cycle or production cycle.

Question 16

What typically initiates the acquisitions and payment cycle?
A) Issuance of a purchase requisition or request for purchase of goods/services
B) Issuance of payment to vendor
C) Approval of a new vendor
D) Purchase requisition

Accepted Answer

The acquisitions and payment cycle typically initiates with the issuance of a purchase requisition or request for purchase of goods/services. This triggers the process of selecting a vendor, negotiating terms, and ultimately making a payment for the goods/services received. Options B and C are not correct as they occur later in the cycle after the initial purchase requisition has been issued. Option D is redundant as it is already listed as the correct answer under option A.

Question 17

The computer-generated file which records acquisitions,disbursements and allowances for each vendor is the:
A) Accounts payable master file.
B) Cash disbursements file.
C) Acquisitions transaction file.
D) Purchase approval file.

Accepted Answer

The accounts payable master file is a computer-generated file that records acquisitions, disbursements, and allowances for each vendor. It serves as the main database for tracking and managing payment obligations to vendors. The other options listed are not as inclusive as the accounts payable master file. The cash disbursements file records only the payments made, the acquisitions transaction file records only the purchases made, and the purchase approval file records only the approvals for purchases.

Question 18

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

Accepted Answer

The cash account is an essential part of the acquisitions and payment cycle as it records all cash inflows and outflows related to purchases and payments.

Question 19

Which of the following business functions is not considered to be part of the acquisitions class of transactions?
A) Processing purchase orders
B) Recognizing liabilities
C) Receiving goods and services
D) Processing cash disbursements

Accepted Answer

Processing cash disbursements is considered a part of the disbursements class of transactions, not the acquisitions class. The acquisitions class of transactions includes activities related to purchasing goods and services, such as processing purchase orders, recognizing liabilities, and receiving goods and services.

Question 20

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

Accepted Answer

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

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

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

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

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

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

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

What typically ends the acquisitions and payment cycle?

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

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

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

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

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

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

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:

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

What typically initiates the acquisitions and payment cycle?

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

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

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

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