Question 1

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

Accepted Answer

False

Question 2

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 can help ensure that payments were made for the correct amounts and to the correct vendors, providing evidence for the valuation of accounts payable.

Question 3

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 particularly focus on payments made shortly after the end of the year because these could relate to expenses incurred during the current year that have not been recorded as liabilities or expenses. This search enables the auditors to ensure that all liabilities have been correctly recorded in the financial statements, and that there are no undisclosed obligations that could affect the financial position of the company.

Question 4

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

Accepted Answer

Inspecting the unmatched receiving report file can help auditors determine whether the company has recorded a liability for received goods that have not yet been invoiced or paid for. This is an important step in confirming the accuracy and completeness of a company's financial records.

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

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 helps to track and match the goods received with the purchase order, ensuring accuracy in the inventory and payment process.

Question 7

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

Accepted Answer

A "blind" copy of the purchase order typically omits the quantities and prices, not the vendor's name and address, to ensure an unbiased inspection of the goods received.

Question 8

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. If a person is absent from the company due to illness or vacation, they are still entitled to their regular pay for that period and their paycheck is not returned to the payroll department.

Question 9

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 10

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 more concerned about the completeness assertion because if expenses or liabilities are understated, it could lead to a misrepresentation of the company's financial position and performance. It is essential to ensure that all transactions and events are recorded and presented in a comprehensive and accurate manner. Overstated expenses or liabilities may impact the company's profitability, but it is not as critical as understating them.

Question 11

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

Accepted Answer

The accounts payable department is responsible for ensuring that the vendor invoice matches the purchase order and receiving report before authorizing payment to the vendor. This process is known as three-way matching and helps to prevent errors and fraud.

Question 12

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

Accepted Answer

This helps to separate payroll funds from other company funds and ensures that there is a clear audit trail for payroll transactions. It also helps to minimize the risk of fraud and errors in payroll processing.

Question 13

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Accepted Answer

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Question 14

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

This statement is true. If there are weak internal controls over the expenditure cycle, auditors cannot rely on those controls to ensure the accuracy of financial statement account balances. Instead, they will need to perform substantive procedures to test those balances and identify any potential errors or misstatements that may have resulted from control failures.

Question 15

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

Accepted Answer

Proper separation of duties involves having different individuals or departments responsible for purchasing decisions and recordkeeping functions to ensure accountability and prevent fraud. It is not appropriate for the purchasing department to also handle recordkeeping.

Question 16

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

Accepted Answer

It is important for changes to the payroll master file to be approved by the human resources department to ensure accuracy and compliance with company policies and regulations.

Question 17

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

Accepted Answer

When the risk of material misstatement is assessed as high, it means that there is a greater likelihood that material misstatements exist in the financial statements. As a result, auditors typically increase the level of substantive procedures to reduce the risk of failing to detect material misstatements. Therefore, additional substantive procedures are likely to be required in such situations.

Question 18

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

Accepted Answer

Segregation of duties requires that no single individual has control over all aspects of a financial transaction. Allowing a supervisor to handle payroll checks could lead to conflicts of interest and potential fraud.

Question 19

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

Accepted Answer

The principal goal of the physical inspection of property, plant, and equipment is to verify the existence and condition of the assets, not to determine their valuation.

Question 20

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

The answer of Acquisition and expenditure activities include (1)purchasing goods...

Quiz 8: Acquisition and Expenditure Cycle