An entity's procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?
A)Accounts payable are not materially understated.
B)Authority to incur liabilities is restricted to one designated person.
C)Acquisition of materials is not made from one vendor or one group of vendors.
D)Commitments for all purchases are made only after established competitive bidding procedures are followed.

Question

Quizplus · Accepted Answer

The auditor's primary concern with respect to liabilities resulting from the procurement system is to ensure that accounts payable are not materially understated. This means that the entity has properly recorded all of its liabilities and that there are no unrecorded liabilities that could materially affect the financial statements. B, C, and D may also be important considerations, but they are not the primary concern for the auditor.

An Entity's Procurement System Ends with the Assumption of a Liability