Question

In: Accounting

QUESTION 32 An audit objective that is normally not part of a financial audit of accounts...

QUESTION 32

  1. An audit objective that is normally not part of a financial audit of accounts payable account is:  

    a.

    Detection of accounts that are past due.

    b.

    Verification that payables were authorized.

    c.

    Determine the reasonableness of recorded liabilities.

    d.

    Determine that all existing liabilities at the balance sheet date have been recorded.

2 points   

QUESTION 33

  1. An auditor was assigned to determine completeness of a company's outstanding liabilities as part of accounts payable. All of the following audit procedures are relevant except for:  

    a.

    Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.

    b.

    Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.

    c.

    Select a sample of accounts payable from the accounts payable listing and verify the supporting receiving reports, purchase orders, and invoices.

    d.

    Trace receiving reports issued before the period end to the related vendor invoices and accounts payable listing.

2 points   

QUESTION 34

  1. In order to identify existence of unrecorded liabilities, the most appropriate audit procedure is?

    a.

    Examine confirmation requests returned by creditors whose accounts appear on a subsidiary trial balance of accounts payable.

    b.

    Examine unusual relationships between recorded purchases and monthly Accounts payable balances.

    c.

    Examine a sample of invoices a few days prior to and subsequent to year-end to ascertainwhether they have been properly recorded.

    d.

    In the period subsequent to year-end, examine a selection of cash disbursements.

2 points   

QUESTION 35

  1. As part of testing accounts payable controls, the auditors vouch entries in the purchases journal to supporting documents. Which assertion would this most likely test?

    a.

    Completeness.

    b.

    Existence.

    c.

    Valuation.

    d.

    Rights.

2 points   

QUESTION 36

  1. An auditor is assessing the effectiveness of internal controls within the accounts payable department. In order to help ensure accurate and complete payments to vendors, a key control within the accounts payable process would be?

    a.

    all purchase orders should be approved.

    b.

    personnel within accounts payable should have authority to sign for payments.

    c.

    review and agree the vendor's invoice with the receiving report and purchase order.

    d.

    supervise the preparation of the receiving report.

2 points   

QUESTION 37

  1. True or False - Failure to record the acquisition of goods and services received overstates both accounts payable and net income.

    a.

    True

    b.

    False

Solutions

Expert Solution

Question 1:- ( 32 per screen above)

Based on the options available, the correct answer is Option A - Detection of accounts that are past due. Generally, accounts payable procedures are not designed or emphasized on the detection of account balances that are past due.

Option B is incorrect. Verifying that the payables are properly authorized is one of the most important audit tests of the acounts payable audit process. Hence, this option is incorrect.

Option C is incorrect. The audit team should ascertain the reasonableness of the account payables balances recorded by the business to ensure they are in line with the business activities and functions. Hence , this procedure is part of the of the accounts payable balance.

Option D is incorrect. This procedure is part of the cut off assertion of the accounts payable balance. It is important for the auditors to ensure that the existing liabilities as of the balance sheet are properly recorded and hence this is a required procedure that needs to be completed as part of the audit of the accounts payable balance.

Kindly requesting you to raise the other questions separately so that we can answer them as well. All the best and please do let me know if you have any questions.


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