SOLVED

Learning Objective 18-7 1) In the course of your audit over the acquisitions cycle you need to determine whether the client billings from vendors were received by the client. You have decided to perform a sample test. The population for the sample would be comprised of: A) Vendor Invoices. B) Receiving reports. C) Cash Disbursements. D) Accounts Payable Subsidiary Ledger for Vendors. 2) Which of the following is most reliable for verifying the correct balance of accounts payable? A) Vendors’ invoices B) Vendors’ statements C) Confirmations D) Bills of lading 3) Vendors’ statements and vendors’ invoices are both relatively reliable evidence because they: A) come directly to the auditor without being in client’s possession. B) originate from a third party. C) validate the effectiveness of the control system. D) are compared to and reconciled with sales invoices. 4) The auditor is performing tests of transactions for individual accounts payable transactions with vendors. Which document provides more reliable information about individual transactions with vendors? A) Receiving report B) Vendors Invoices C) Vendor Statements D) Purchase Orders 5) Auditor confirmation of accounts payable balances at the balance sheet date may not need to be performed by the auditor because: A) this is a duplication of cutoff tests. B) there is likely to be other reliable external evidence available to support the balances. C) accounts payable balances at the balance sheet date may not be paid before the audit is completed. D) correspondence with the audit client’s attorney will reveal all legal action by vendors for nonpayment. 6) Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors? A) Internal accounting control over accounts payable is adequate, and there is sufficient evidence on hand to minimize the risk of a material misstatement. B) Confirmation response is expected to be favorable, and accounts payable balances are of immaterial amounts. C) Creditor statements are not available and internal control over payables is unsatisfactory. D) The majority of accounts payable balances are with associated companies. 7) The auditor is performing substantive tests of balances for accounts payable. What documentation would provide the best evidence for the ending balance? A) Vendor Invoices B) Vendor Statements C) Receiving reports D) Purchase orders 8) The auditor gets highly reliable evidence about individual transactions by examining: A) vendors’ invoices. B) vendors’ statements. C) confirmations of accounts payable balances. D) detailed inventory counting instructions. 9) Which of the following documents is best for verifying the correct balance in accounts payable? A) Bills of lading B) Confirmations C) Vendors’ invoices D) Vendors’ statements 10) You are performing an audit of Hawk Company. In evaluating the accounts payable balance you are concerned with the completeness assertion. Which of the following audit procedures best satisfy your concern? A) send confirmations to only vendors with large balances B) send confirmations to vendors with large, active, zero balance accounts and a representative sample of all others C) send confirmations to vendors chosen from sample stratified by the dollar balance D) send confirmations to all vendors 11) Discuss the circumstances in which it is desirable to send confirmation requests to the client’s vendors. 12) A vendor’s statement is unreliable and auditors rarely use it. A) True B) False