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Multiple Choice
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1

Which of the following controls would most effectively ensure that recorded purchases are free of material misstatements?
A)The receiving department compares the quantity ordered on purchase orders with the quantity received on receiving reports.
B)Vendor invoices are compared with purchase orders by an employee who is independent of the receiving department.
C)Receiving reports require the signature of the individual who authorized the purchase.
D)Purchase orders, receiving reports, and vendor invoices are independently matched when preparing vouchers.
2

An auditor designs cutoff tests to determine that purchases made after the end of the current year have not been recorded in the current year to provide assurance about management's assertion of
A)Valuation or allocation.
B)Existence or occurrence.
C)Completeness.
D)Presentation & disclosure.
3

Transactions processed through the purchasing process include all of the following except:
A)Purchase of services for cash.
B)Depreciation of fixed assets.
C)Payment of liabilities for inventory purchases.
D)Returns of goods to suppliers for credit.
4

Which of the following is not considered an important element of segregation of duties in the purchasing process?
A)Separating the check signing and check mailing functions.
B)Separating invoice-processing and the accounts payable functions.
C)Separating the accounts payable and general ledger functions.
D)Separating the purchasing function from the requisition function.
5

Accounts payable confirmations are generally used less frequently than accounts receivable confirmations since:
A)Auditors can normally test accounts payable by examining vendor invoices and monthly statements.
B)They generally have lower response rates than A/R confirmations.
C)They do not address the existence assertion.
D)They do not address specific audit objectives.
6

Tests of controls for the completeness internal control objective related to purchases include all of the following except:
A)Trace a sample of receiving reports to vendor invoices.
B)Trace a sample of receiving reports to vouchers.
C)Examine paid vouchers and supporting documents for indication of cancellation.
D)Trace a sample of vouchers to the purchases journal.
7

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population would most likely be:
A)Payees of checks written in the month after year-end.
B)Those vendors with balances in the year-end accounts payable subsidiary ledger.
C)Vendors with whom the client has done business with during the year.
D)Invoices filed in the client's open (unpaid) invoice file at year-end.
8

Which of the following is an internal control activity that most likely would prevent a paid disbursement voucher from being paid a second time?
A)Disbursement vouchers should be approved by at least two members of management.
B)Vouchers should be prepared by individuals who are responsible for signing checks.
C)The individual signing the check should compare the check with the voucher and stamp "paid" on the voucher.
D)The date on the voucher should be within a few days of the date the voucher is processed for payment.
9

If a client's accounts payable turnover has increased significantly since the prior year, this is an indication that which of the following assertions for accounts payable may be violated?
A)Completeness.
B)Existence or occurrence.
C)Rights and obligations.
D)Valuation
10

Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?
A)Scan the cash disbursements journal just before year-end for indications of unusual transactions
B)Vouch a sample of cash disbursements recorded just after year-end to related receiving reports and vendor invoices
C)Compare a sample of purchase orders issued just after year-end with the A/P subsidiary ledger.
D)Trace a sample of accounts payable entries recorded just before year- end to the "open" receiving report file [not yet received items]





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