SOLVED

Learning Objective 18-5 1) The overall objective in the audit of accounts payable is to determine whether accounts payable: A) is fairly stated and properly disclosed. B) is overstated. C) is understated. D) is accurately stated. Learning Objective 18-6 1) At what point do most companies recognize liabilities in the acquisition and payment cycle when the goods are shipped FOB Destination? A) the issuance of a purchase order B) receipt of acknowledgement of order by vendor C) receipt of goods or services D) the receipt of a vendor invoice 2) Cutoff procedures for inventory purchased should be designed by companies to assure the company that: A) inventory owned by the company has been received. B) inventory included in the year end inventory count has been paid. C) inventory received before year end was recorded before year end. D) inventory was correctly valued at year end. 3) You are the in-charge auditor and are designing audit procedures for accounts payable. Which of the following management assertions would you normally be most concerned about? A) Occurrence B) Accurancy C) Completeness D) Existence 4) The main focus taken by the auditor in verifying liability balances is on the discovery of: A) understated liabilities. B) overstated liabilities. C) unrecorded liabilities. D) overstated or extraneous liabilities. 5) 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: A) theft of merchandise by employees. B) unrecorded obligations. C) lapping. D) kiting. 6) The extent of a search for unrecorded liabilities largely depends on: A) materiality and inherent risk. B) materiality and control risk. C) materiality only. D) inherent risk only. 7) A document review of which of the following is most likely to yield evidence of any unrecorded liabilities? A) Receiving reports B) Vendor Memorandums C) Unpaid accounts payable D) Sales invoices out of sequence 8) When the client’s physical inventory occurs before the last day of the year, it is still necessary to perform an accounts payable cutoff at the time of the count. In addition, the auditor must verify whether all acquisitions taking place between the count and the end of the year were added to: A) the physical inventory. B) Accounts Payable. C) Accounts Payable and Cost of Goods Sold. D) the physical inventory and Accounts Payable. 9) Peprah Company pays its accounts payable 45 days after receipt of the goods or services. In this case which audit procedure should be used to detect any unrecorded liabilities? A) examine cash disbursements for several weeks after the balance sheet date B) reconcile purchase orders to requisition orders C) reconcile purchase orders to receiving reports D) reconcile purchase orders to vendor invoices