Auditing Ch 8 MCs

Which of the following accounts does not appear in the acquisition and expendire cycle?

A. Cash
B. Sales returns
C. Purchase returns
D. Prepaid insurance

For which of the following accounts would the matching concept be the most appropriate?

A. Sales
B. Research and Development
C. Depreciation expense
D. Cost of goods sold

Which of the following would not overstate current period net income?

A. Capitalizing an expenditure that should be expensed
B. Failing to record a liability for an expenditure
C. Failing to record a check pyaing an item in Vouchers Payable
D. All of the above would overstate net income

A client's purchasing system ends with the recording of a liability and its eventual payment. Which of the following best describes auditor's primary concern with respect to liabilities resulting from the purchasing system?

A. Authority to incur liabilities is restricted to noe designated person
B. Committments for all purchases are made only after established competitive bidding procedures are followed
C. Acquisition of materials is not made from one vendor or one group of vendors
D. Accounts payable are not material understated

Which of the following is an internal control activity that could prevent a paid disbursement voucher from being presented for payment a second time?

a. Vouchers should be prepared by individuals who are responsible for signing disbursement checks

b. Disbursement vouchers should be approved by at least two responsible management officials

c. The date on a disbursement voucher should be within a few days of the date the voucher is being presented for payment

d. The official who signs the check should compare the check with the voucher and should stamp "paid" on teh voucher documents

Budd, the purchasing agent of Lake Hardware Wholesalers, has a relative who owns a retail hardware store. Budd arranged for hardware to be delivered by manufacturers to the retail store on a cash-on-delivery (COD) basis, thereby enabling his relative to buy at Lake's wholesale prices. Budd was probably able to accomplish this because of Lake's poor internal control over

A. Purchase requisitions
B. Perpetual inventory records
C. Purchase orders
D. Cash receipts

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

a. Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable

b. Examine a sample of cash disbursements in the period subsequent to year-end

c. Examine a sample of invoices a few days prior to and subsequent to the year-end to ascertain whether they have been property recorded

d. Examine unusual relationships between monthly accounts payable and recorded transactions

Which of the following procedures is least likely to be performed before the balance-sheet date?

A. Review of internal control over cash disbursements
B. Search for unrecorded liabilities
C. Observation of inventory
D. Confirmation of receivables

To determine whether accounts payable are complete, auditors perform a test to verify that all merchandise received has been recorded. The population for this test consists of all

A. Vendor's invoices
B. Receiving reports
C. Canceled checks
D. Purchase orders

When verifying debits to the perpetual inventory records of a nonmanufacturing company, auditors would be most interested in examining a sample of purchase

A. Orders
B. Invoices
C. Approvals
D. Requisitions

A furniture company ordered 84 tables from a supplier. The supplier accidentally sent only 48 tables. The tables were accepted by the receiving department at the furniture company. The invoice was eventually received but was for the original 84 tables. The furniture company paid the entire amount. Which of the following controls would have been least likely to have prevented the erroneous payment?

a. the copy of the purchase order sent to the furniture company's receiving department should not have shown an expected quantity

b. Personnel in the furniture company's accounts payable department should compare the receiving report to the purchase invoice before creation of the voucher

c. Personnel in the furniture company's cash disbursements department should compare the check that is preapred to all of the backup documentation

d. Personnel in teh furniture company's purchasing department should compare the purchase requistion to the purchase order

Curtis, a maintenance supervisor, submitted maintenance invoices from a phone repair company and received the checks at a post office box. This should have been prevented by

a. Comparison of the company name to the approved vendor list by the check signor

b. Recognition of the excess maintenance costs by Curtis's supervisor

c. Refusal by the purchasing department to approve the vendor

d. All of the above

An audit team would most likely examine the detail support for which of the following charges?

A. Supplies expense
B. Payroll expense
C. Cost of goods sold
D. Legal expense

Which of the following accounts would most likely be audited in connection with a related balance sheet account?

A. Legal expense
B. Research and Development
C. Property Tax expense
D. Payroll Expense

When auditing liabilities account balances, auditors are most concerned with management's assertion about

A. Valuation and allocation
B. Existence
C. Completeness
D. Rights and Obligations

In a test of controls, auditors may trace receiving reports to vouchers recorded in the voucher register. This is a test for

A. Occurence
B. Completeness
C. Cutoff
D. Classification