SOLVED

10) Cutoff information for inventory acquisitions should be obtained during: A) the interim period prior to year-end. B) the interim period immediately following year-end. C) the physical observation of inventory. D) either the interim period prior to or immediately following year-end. 11) The auditor has decided to use accounts payables confirmations when testing substantive testing for balances. Which two management assertions is she testing? A) Existence and Completeness B) Existence and Occurrence C) Existence Only D) Completeness Only 12) In searching for unrecorded liabilities the purpose of the audit procedure to “examine underlying documentation for subsequent cash disbursements” is to: A) uncover liabilities on the balance sheet which should not have been recorded until a subsequent period. B) find the documentation relating to a cash disbursement. C) uncover payments made in a subsequent accounting period for liabilities that existed at the balance sheet date. D) uncover cash disbursements recorded in a subsequent accounting period which should be recorded in this period. 13) To test for cutoff errors which overstate liabilities, the auditor should trace, to vendors’ invoices, the receiving reports issued: A) after year-end. B) before year-end. C) the last day of the fiscal year. D) both before and after year-end. 14) In determining that the accounts payable cutoff is correct, it is essential that the cutoff tests be coordinated with the: A) confirmation of payables. B) tests on long-term liabilities. C) observation of inventory. D) cash count. 15) An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result: A) is an understatement of net earnings. B) is an overstatement of net earnings. C) is an overstatement of working capital. D) is an overstatement of owner’s equity. 16) When an acquisition is on an FOB origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were: A) received prior to the balance sheet date. B) shipped prior to the balance sheet date. C) both shipped and received prior to the balance sheet date. D) paid for in advance. 17) 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? A) Auditors’ legal liability B) GAAP C) GAAS requirements D) All of the above 18) Auditors examine supporting documentation for cash disbursements subsequent to the balance sheet date in order to determine whether the cash disbursement was for a current period liability. Describe at least two audit procedures the auditor would perform to provide evidence that the cash disbursement was made for a current period liability.