Sale Product For Business Ch12+14 Flashcards

An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors' invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all: A) Cash disbursements. B) Approved vouchers. C) Receiving reports. D) Vendors' invoices.

Which of the following manipulations would understate accounts payable on the financial statements? A) Overstatement of purchases. B) Closing the cash disbursements journal prior to year-end. C) Leaving the cash receipts journal open after year-end. D) Overstating purchase returns.

Which statement is correct with respect to accounts payable confirmations?
A) The negative form is used in most circumstances.
B) Accounts with new suppliers are always confirmed.
C) They are a required auditing procedure.
D) They are more frequently used in situations in which some vendors don't send monthly statements.

The assertion most directly addressed when performing the search for unrecorded liabilities is: A) Completeness. B) Existence. C) Presentation. D) Rights.

Which of the following is true about the auditors' observation of the client's physical inventory?
A) The auditors should plan the physical inventory.
B) The auditors should segregate damaged and obsolete goods.
C) The auditors should evaluate the adequacy of the client's counting procedures.
D) The auditors should supervise the client's personnel.

The auditors will usually trace the details of the test counts made during the observation of the physical inventory taking to a final inventory schedule. This audit procedure is undertaken to provide evidence that items physically present and observed by the auditors at the time of the physical inventory count are:
A) Owned by the client.
B) Not obsolete.
C) Physically present at the time of the preparation of the final inventory schedule.
D) Included in the final inventory schedule.

In auditing a manufacturing entity, which of the following procedures would an auditor least likely perform to determine whether slow-moving, defective, and obsolete items included in inventory are properly identified?
A) Test the computation of standard overhead rates.
B) Tour the manufacturing plant or production facility.
C) Compare inventory balances to anticipated sales volume.
D) Review inventory experience and trends.

Which of the following best describes the auditors' approach to the audit of accrued liabilities?
A) Test computations.
B) Confirmation.
C) Observation.
D) A low planned assessed level of control risk.

The form typically used to confirm accounts payable:
A) Does not require a response from the vendor.
B) Confirms the balance recorded by the client at year-end.
C) Requires the vendor to indicate the amount of the payable.
D) Is the same as the form used to confirm accounts receivable.

Internal control over accounts payable is improved when:
A) Purchase orders show approved prices.
B) Informal bids are obtained.
C) Annual trial balance of accounts payable subsidiary ledgers is required.
D) Payment is made upon approval of the purchasing agent.

Which of the following audit procedures most likely would provide assurance that a manufacturing entity's inventory valuation is proper?
A) Testing the entity's computation of standard overhead rates.
B) Obtaining confirmation of inventories pledged under loan agreements.
C) Reviewing a cutoff procedure for inventories.
D) Tracing test counts to the entity's inventory listing.

Which of the following is a control procedure that is usually applied to accounts payable?
A) Periodic confirmation of accounts payable.
B) Mailing statements to vendors detailing their account.
C) Periodic aging of accounts payable.
D) Reconciliation of vendor statements with accounts payable.

Which of the following is the best control procedure to prevent the payment of an invoice twice?
A) Review of supporting documentation by the person signing the check.
B) Requiring dual signatures on checks.
C) Use of a check protector.
D) Reconciliation of vendor statements to accounts payable.

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable?
A) Existence.
B) Completeness.
C) Valuation.
D) Authorization.

Which of the following best describes the specific accounts payable that are selected for confirmation?
A) Accounts with large balances.
B) Accounts with zero balances.
C) Accounts with a large amount of activity regardless of their balance.
D) Accounts for which vendor statements are available.