Multiple Choice Questions
The following questions concern accumulating evidence in the acquisition and payment cycle. Choose the best response.
a. In auditing accounts payable, an auditor’s procedures most likely will focus primarily on management’s assertion of
(1) Existence.
(2) Realizable value.
(3) Completeness.
(4) Valuation and allocation.
b. Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
(1) Examining unusual relationships between monthly accounts payable balances and recorded cash payments.
(2) Reconciling vendors’ statements to the file of receiving reports to identify items received just prior to the balance sheet date.
(3) Reviewing cash disbursements recorded subsequent to the balance sheet date to deter mine whether the related payables apply to the prior period.
(4) Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports.
c. An auditor traced a sample of purchase orders and the related receiving reports to the acquisitions journal and cash disbursements journal. The purpose of this substantive test of transactions most likely was to
(1) Identify unusually large purchases that should be investigated further.
(2) Verify that cash disbursements were for goods actually received.
(3) Determine that purchases were properly recorded.
(4) Test whether payments were for goods actually ordered.