Questions 1 through 9 are typically found in questionnaires used by auditors to obtain an understanding of internal control in the acquisition and payment cycle. In using the questionnaire for a client, a "yes" response to a question indicates a possible internal control, whereas a "no" indicates a potential deficiency.

Read the requirements.

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Part 1

Requirement a. For each of the questions, state the transaction-related audit objective(s) being fulfilled if the control is in effect.

Question

Transaction Related Audit Objectives

1.

Is the purchasing function performed by personnel who are independent of the receiving and shipping functions and the payables and disbursing functions?

Occurance

2.

Are all receiving reports prenumbered and the numerical sequence checked by a person independent of check preparation?

Completeness

3.

Are all vendors' invoices routed directly to accounting from the mailroom?

Completeness and Timing

4.

Does the accounts payable clerk match the description and quantities of goods on the purchase order, receiving report, and vendor's invoice?

Completeness

5.

Does a responsible employee review and approve the invoice account distribution before the transaction is entered in the computer?

Classification

6.

Are all extensions, footings, discounts, and freight terms on vendors' invoices checked for accuracy?

Accuracy

7.

Are checks automatically posted in the cash disbursements journal as they are prepared?

Completeness and Timing

8.

Are all supporting documents properly cancelled at the time the checks are signed?

Occurance

9.

Is the custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, and general ledger functions?

Occurance

Part 2

Requirement b. For each internal control, list a test of control to test its effectiveness.

Match each question with the corresponding letter (from the list below) that correlates to its test of control. Use each letter only once.

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(Click the icon to view the list of choices.)

Question		Test of Control
1.	Is the purchasing function performed by personnel who are independent of the receiving and shipping functions and the payables and disbursing functions?
2.	Are all receiving reports prenumbered and the numerical sequence checked by a person independent of check preparation?
3.	Are all vendors' invoices routed directly to accounting from the mailroom?
4.	Does the accounts payable clerk match the description and quantities of goods on the purchase order, receiving report, and vendor's invoice?
5.	Does a responsible employee review and approve the invoice account distribution before the transaction is entered in the computer?
6.	Are all extensions, footings, discounts, and freight terms on vendors' invoices checked for accuracy?
7.	Are checks automatically posted in the cash disbursements journal as they are prepared?
8.	Are all supporting documents properly cancelled at the time the checks are signed?
9.	Is the custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, and general ledger functions?

Part 3

Requirement c. For each of the questions, identify the nature of the potential financial misstatement(s) if the control is not in effect.

Match each question with the corresponding roman numeral or numerals (from the list below) that correlates to the appropriate potential misstatement(s).

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(Click the icon to view the potential misstatements.)

Question		Potential Misstatement(s)
1.	Is the purchasing function performed by personnel who are independent of the receiving and shipping functions and the payables and disbursing functions?
2.	Are all receiving reports prenumbered and the numerical sequence checked by a person independent of check preparation?
3.	Are all vendors' invoices routed directly to accounting from the mailroom?
4.	Does the accounts payable clerk match the description and quantities of goods on the purchase order, receiving report, and vendor's invoice?
5.	Does a responsible employee review and approve the invoice account distribution before the transaction is entered in the computer?
6.	Are all extensions, footings, discounts, and freight terms on vendors' invoices checked for accuracy?
7.	Are checks automatically posted in the cash disbursements journal as they are prepared?
8.	Are all supporting documents properly cancelled at the time the checks are signed?
9.	Is the custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, and general ledger functions?

Part 4

Requirement d. For each of the potential misstatements in part c., list a substantive audit procedure that can be used to determine whether a material misstatement exists.

Match each question with the corresponding number or numbers (from the list below) that correlates to the appropriate substantive audit procedure.

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(Click the icon to view the substantive audit procedures.)Review your answer from Requirement c

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Question		Substantive Procedure(s)
1.	Is the purchasing function performed by personnel who are independent of the receiving and shipping functions and the payables and disbursing functions?
2.	Are all receiving reports prenumbered and the numerical sequence checked by a person independent of check preparation?
3.	Are all vendors' invoices routed directly to accounting from the mailroom?
4.	Does the accounts payable clerk match the description and quantities of goods on the purchase order, receiving report, and vendor's invoice?
5.	Does a responsible employee review and approve the invoice account distribution before the transaction is entered in the computer?
6.	Are all extensions, footings, discounts, and freight terms on vendors' invoices checked for accuracy?
7.	Are checks automatically posted in the cash disbursements journal as they are prepared?
8.	Are all supporting documents properly cancelled at the time the checks are signed?
9.	Is the custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, and general ledger functions?