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Auditing & Assurance 101 Practice Test: Audit of the Acquisition and Payment Cycle - Tests of Controls and Substantive Tests of Transactions, and Accounts Payable
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The audit of the acquisition and payment cycle (APC) evaluates whether the accounts affected by acquisitions and cash disbursements are fairly presented according to accounting standards.  The audit involves: Identifying business functions, transactions, accounts, and documents Identifying potential misstatements Assessing control risk Designing tests of controls and substantive tests of transactions  The five phases of the acquisition and payment process are: Requisition for goods or services, Purchase of goods or services, Receipt of goods or services, Approval of items for payment,... Show more
Auditing & Assurance 101 Practice Test: Audit of the Acquisition and Payment Cycle - Tests of Controls and Substantive Tests of Transactions, and Accounts Payable
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25 Questions

1. You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities. You have decided to vouch a sample of entries in the accounts payable master file to supporting documents. Which assertion is this test of controls most likely to support?
2. The balance-related audit objective realizable value is not applicable when auditing Accounts payable.
3. The cash account is not part of the acquisitions and payment cycle.
4. A written purchase order is a contractual document that is:
5. Cutoff information for inventory acquisitions should be obtained during:
6. A substantive test for accounts payable that would be used to provide evidence regarding the occurrence assertion would be to:
7. Which of the following accounts is not included in the acquisitions class of transactions?
8. The main focus taken by the auditor in verifying liability balances is on the discovery of:
9. An acquisitions transaction file is a computer generated file that includes all information entered into the system regarding acquisition transactions.
10. The accounts payable department usually has responsibility for approving acquisitions for payment by comparing the details on the:
11. The acquisition and payment cycle typically begins with the initiation of purchase requisition for goods and services from an authorized individual.
12. A substantive test of transactions commonly used to test the completeness objective for acquisitions is 'Trace from a file of receiving reports to the acquisitions journal.'
13. When assets are being verified, auditors focus much of their attention on making sure that the accounts are not overstated. Alternatively, auditors focus their efforts on understatement when auditing liabilities. What is the primary reason for this difference in focus?
14. When verifying the correct balance in Accounts payable, vendors' invoices are more useful than vendors' statements.
15. Absent disputed amounts and minor timing differences, the vendor's statements should reconcile to the:
16. To test for cutoff errors which overstate liabilities, the auditor should trace, to vendors' invoices, the receiving reports issued:
17. Which of the following tests of controls is least useful in assessing the transaction-related audit objective related to occurrence?
18. Auditors primarily emphasize the understatement of liabilities in the audit of Accounts payable because they are concerned about potential legal liability.
19. With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been:
20. Proper authorization for acquisition is useful for management as an internal control procedure, because it:
21. To test for overstatement cutoff amounts when auditing Accounts payable, the auditor should trace receiving reports issued before year-end to related vendors' invoices to make sure they are not recorded as Accounts payable.
22. After a purchase requisition is approved, a ________ must be initiated to purchase the goods or services.
23. A company failed to record an acquisition of merchandise and its related liability, but the merchandise was included in ending inventory. The effect on the financial statements was to:
24. By tracing receiving reports issued at and before year-end to vendors' invoices and making sure they are included in accounts payable, the auditor is testing for:
25. The internal control that requires that 'checks are prenumbered and accounted for' satisfies the objective of:

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