Question 1

Which of the following is not a key control in the acquisition and payment cycle?
A)Authorization of purchases
B)Authorization of credit
C)Timely recording and independent review of transactions
D)Authorization of payments

Accepted Answer

Authorization of credit is not a key control in the acquisition and payment cycle. Rather, it is a key control in the sales and collection cycle. The other three options are all key controls in the acquisition and payment cycle.

Question 2

An auditor is gathering evidence on the completeness assertion.To do so she performs a test to verify that all goods received by the company have been recorded properly.The document population for this test would consist of all:
A)vendor invoices.
B)purchase orders.
C)receiving reports.
D)cash disbursements for accounts payables.

Accepted Answer

Receiving reports would be the best population to test for completeness of goods received, as they document the physical receipt of the goods by the company. Vendor invoices and purchase orders do not necessarily provide evidence of the actual receipt of goods, and cash disbursements for accounts payable would not be relevant to this test.

Question 3

A substantive tests of transactions for acquisitions that would be used to provide evidence regarding the occurrence assertion would be to:
A)compare the classification with the chart of accounts by referring to vendors' invoices.
B)recompute the clerical accuracy on the vendors' invoice.
C)review the acquisitions journal for large or unusual amounts.
D)trace from a file of receiving reports to the acquisition journal.

Accepted Answer

The answer of A substantive tests of transactions for acquisitions...

Question 4

The accounts payable department usually has responsibility for approving acquisitions for payment by comparing the details on the:
A)vendor's invoice and the receiving report.
B)vendor's invoice and the purchase requisition.
C)purchase order, receiving report, and vendor's invoice.
D)purchase requisition, purchase order, and receiving report.

Accepted Answer

The accounts payable department should compare the details on the purchase order, receiving report, and vendor's invoice to ensure that the correct goods or services were received, and the invoice amount matches the purchase order amount. The purchase requisition is not relevant for invoice approval as it is just a request for goods or services, and the vendor's invoice and purchase requisition do not provide information on goods received. Thus, comparing the vendor's invoice and the receiving report, or purchase requisition and the vendor's invoice is not enough to approve acquisitions for payment. Therefore, the best choice is C, which includes all the relevant documents for approval of acquisitions for payment.

Question 5

The auditor's internal control objective to determine that "recorded acquisitions are for goods and services received" satisfies the audit objective of:
A)accuracy.
B)occurrence.
C)authorization.
D)completeness.

Accepted Answer

The internal control objective to determine that "recorded acquisitions are for goods and services received" aligns with the audit objective of occurrence, which seeks to ensure that recorded transactions actually occurred and pertain to the entity being audited. By verifying that recorded acquisitions are for goods and services actually received by the entity, the auditor can confirm that the transactions actually occurred, thereby satisfying the occurrence objective.

Question 6

Which of the following is not an accurate statement regarding the acquisition and payment cycle?
A)The personnel in the receiving department should be independent of the storeroom personnel.
B)Goods received should be physically controlled from the time of their receipt until their use or disposal.
C)Accounting records should transfer responsibility for the goods each time they are moved.
D)The accounting department should be responsible for receiving goods and preparing the receiving report.

Accepted Answer

The accounting department should not be responsible for receiving goods as this creates a lack of segregation of duties. The receiving department should be responsible for physically receiving the goods and preparing the receiving report, while the accounting department should be responsible for recording the transaction in the accounting records.

Question 7

When reviewing the controls and procedures in the acquisition and payment cycle:
A)companies cannot record the liability for the acquisition until the invoice is received from the vendor.
B)the purchasing department has the responsibility for verifying for appropriateness of the acquisition.
C)personnel who record the acquisitions should not have access to cash or other assets.
D)the accounts payable department should account for all receiving reports to assure that the occurrence objective is satisfied.

Accepted Answer

The answer of When reviewing the controls and procedures in...

Question 8

You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities.You have decided to vouch a sample of entries in the accounts payable master file to supporting documents.Which assertion is this test of controls most likely to support?
A)Accuracy
B)Classification
C)Completeness
D)Occurrence

Accepted Answer

Vouching entries in the accounts payable master file to supporting documents would most likely support the occurrence assertion, which ensures that recorded transactions actually took place and pertain to the entity. By verifying that the recorded accounts payable are supported by valid invoices or other relevant documents, the auditor can gain assurance that the payables represent genuine obligations of the entity. Accuracy, completeness, and classification are other assertions that relate to different aspects of the transaction cycle, such as the accuracy of amounts, the completeness of the population, or the proper classification of the transactions, respectively.

Question 9

A key internal control over the acquisition cycle is to ensure that the company requires recording transactions as soon as possible after the goods and services have been received.This satisfies the transaction-related audit objective of:
A)accuracy.
B)completeness.
C)timing.
D)occurrence.

Accepted Answer

The timing of recording transactions is an important internal control in the acquisition cycle to ensure that all transactions are recorded in a timely manner. This satisfies the transaction-related audit objective of timing. Accuracy refers to the correct recording of transaction details, completeness ensures that all transactions are recorded and occurrence ensures that all recorded transactions actually occurred. While these are also important audit objectives, they are not directly related to the internal control of recording transactions in a timely manner.

Question 10

Failure to record the acquisition of goods is a violation of which audit objective?
A)Accuracy
B)Occurrence
C)Authorization
D)Completeness

Accepted Answer

The completeness objective states that all transactions should be recorded in the accounting system. Failure to record the acquisition of goods violates this objective because it results in an incomplete record of transactions.

Question 11

When a client uses perpetual inventory records, the tests of details of balances for inventory can be significantly reduced if the auditor believes the records are accurate.The controls over the acquisitions included in the records are normally tested as a part of the:
A)tests of controls for acquisitions.
B)tests of controls and substantive tests of transactions for acquisitions.
C)tests of details of balances for acquisitions.
D)analytical procedures and tests of controls for acquisitions.

Accepted Answer

Since perpetual inventory records are used, the tests of details of balances for inventory can be significantly reduced if the auditor believes the records are accurate. Therefore, the controls over the acquisitions included in the records are normally tested as a part of the tests of controls and substantive tests of transactions for acquisitions.

Question 12

The acquisition and payment cycle typically begins with the initiation of purchase requisition for goods and services from an authorized individual.

Accepted Answer

The acquisition and payment cycle does begin with the initiation of purchase requisition for goods and services from an authorized individual.

Question 13

Which one of the following duties should not be assigned the purchases department?
A)Finding the lowest cost vendor
B)Reviewing vendors' catalog descriptions and prices for standardized items
C)Designing the purchase order form
D)Authorizing the acquisition of goods

Accepted Answer

The authorization of the acquisition of goods is typically a responsibility of management or a separate authorization department to ensure proper checks and balances, not the purchasing department.

Question 14

A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms, and date of billing is called the voucher.

Accepted Answer

The document described is known as an invoice, not a voucher. A voucher is a document used by a company’s accounts payable department to gather and file all of the supporting documents needed to approve the payment of a liability.

Question 15

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods, the quantity received, the date received, and other relevant data.

Accepted Answer

The answer of A vendor invoice is normally prepared at...

Question 16

When testing the controls for the completeness transaction-related audit objectives:
A)failure to record the acquisition of goods or services will generally understate net income.
B)failure to record the acquisition of goods or services has no impact on the balance sheet.
C)it is generally easy for the auditor to determine whether unrecorded transactions exist.
D)the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls.

Accepted Answer

The answer of When testing the controls for the completeness...

Question 17

A written purchase order is a contractual document that is:
A)an offer to buy goods or services.
B)not enforceable if it is not in writing.
C)a binding agreement between purchaser and vendor.
D)an acceptance of a vendor's catalog offer to sell.

Accepted Answer

A written purchase order is an offer to buy goods or services, which becomes a binding contract once accepted by the vendor.

Question 18

An acquisitions transaction file is a computer generated file that includes all information entered into the system regarding acquisition transactions.

Accepted Answer

An acquisitions transaction file is indeed a computer generated file that includes all information entered into the system regarding acquisition transactions.

Question 19

The internal control that requires that "checks are prenumbered and accounted for" satisfies the objective of:
A)accuracy.
B)existence.
C)completeness.
D)posting and summarization.

Accepted Answer

The internal control of prenumbering checks and accounting for them ensures that all transactions are recorded and none are missing, which satisfies the objective of completeness. This helps in ensuring that all checks issued are accounted for, preventing any from being overlooked or omitted from the records.

Question 20

Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received?
A)Count goods upon receipt in storeroom.
B)Match purchase order, receiving report, and vendor's invoice for each voucher in accounts payable department.
C)Compare goods received with goods requisitioned in receiving department.
D)Verify vouchers for accuracy and approval in internal audit department.

Accepted Answer

The answer of Which of the following is the most...

Quiz 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Which of the following is not a key control in the acquisition and payment cycle?

An auditor is gathering evidence on the completeness assertion.To do so she performs a test to verify that all goods received by the company have been recorded properly.The document population for this test would consist of all:

A substantive tests of transactions for acquisitions that would be used to provide evidence regarding the occurrence assertion would be to:

The accounts payable department usually has responsibility for approving acquisitions for payment by comparing the details on the:

The auditor's internal control objective to determine that "recorded acquisitions are for goods and services received" satisfies the audit objective of:

Which of the following is not an accurate statement regarding the acquisition and payment cycle?

When reviewing the controls and procedures in the acquisition and payment cycle:

You have been assigned to the accounts payable transaction cycle as part of your auditing responsibilities.You have decided to vouch a sample of entries in the accounts payable master file to supporting documents.Which assertion is this test of controls most likely to support?

A key internal control over the acquisition cycle is to ensure that the company requires recording transactions as soon as possible after the goods and services have been received.This satisfies the transaction-related audit objective of:

Failure to record the acquisition of goods is a violation of which audit objective?

When a client uses perpetual inventory records, the tests of details of balances for inventory can be significantly reduced if the auditor believes the records are accurate.The controls over the acquisitions included in the records are normally tested as a part of the:

The acquisition and payment cycle typically begins with the initiation of purchase requisition for goods and services from an authorized individual.

Which one of the following duties should not be assigned the purchases department?

A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms, and date of billing is called the voucher.

A vendor invoice is normally prepared at the time tangible goods are received and indicates the description of goods, the quantity received, the date received, and other relevant data.

When testing the controls for the completeness transaction-related audit objectives:

A written purchase order is a contractual document that is:

An acquisitions transaction file is a computer generated file that includes all information entered into the system regarding acquisition transactions.

The internal control that requires that "checks are prenumbered and accounted for" satisfies the objective of:

Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received?