A client'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 whether accounts payable are materially understated. This is because understating accounts payable can overstate the financial position of the company, which can mislead investors and creditors. The other choices are important controls to ensure proper procurement, but they do not directly address the concern of understated liabilities.

A Client's Procurement System Ends with the Assumption of a Liability