AUDIT OF LIABILITIES Flashcards
(15 cards)
In auditing accounts payable, an auditor’s procedures most likely will focus primarily on
management’s assertion of
A. Existence
B. Presentation and disclosure
C. Completeness
D. Valuation and allocation
C
An auditor performs a test to determine whether all merchandise for which the client was
billed was received. The population for this test consists of all
A. Merchandise received
B. Vendors’ invoices
C. Canceled checks
D. Receiving reports
B
The primary audit test to determine if accounts payable are valued properly is
A. Confirmation of accounts payable.
B. Vouching accounts payable to supporting documentation.
C. An analytical procedure.
D. Verification that accounts payable was reported as a current liability in the balance sheet.
B VOUCHING -EXISTENCE
Which of the following procedures is least likely to be performed before the balance sheet
date?
A. Observation of inventory count.
B. Testing of internal control over cash.
C. Search for unrecorded liabilities.
D. Confirmation of receivables.
C SEARCH – AFTER ,,,, vouching , hiramin disbursement book of January kung ang balance sheet date dec 31.. hanapin kung mayron hindi narecord
An audit assistant found a purchase order for a regular supplier in the amount of P5,500.
The purchase order was dated after receipt of goods. The purchasing agent had forgotten
to issue the purchase order. Also, a disbursement of P450 for materials did not have a
receiving report. The assistant wanted to select additional purchase orders for investigation
but was unconcerned about lack of receiving report. The audit director should
A. Agree with the assistant because the amount of the purchase order exception was
considerably larger than the receiving report exception.
B. Agree with the assistant because the cash disbursement clerk had been assured by the
receiving clerk that the failure to fill out a report didn’t happen very often.
C. Disagree with the assistant because two problems have an equal risk of loss associated
with them.
D. Disagree with the assistant because the lack of a receiving report has a greater risk of
loss associated with it.
D
When using confirmation to provide evidence about completeness assertion for accounts
payable, the appropriate population most likely is
A. Vendors with whom the entity has previously done business.
B. Amounts recorded in the accounts payable subsidiary ledger.
C. Payees of checks drawn in the month after the year end.
D. Invoices filed in the entity’s open invoice file.
A
Which of the following is a substantive test that an auditor is most likely to perform to verify
the existence and valuation of recorded accounts payable?
A. Investigating the open purchase order file to ascertain that pre-numbered purchase
orders are used and accounted for.
B. Receiving the client’s mail, unopened, for a reasonable period of time after year end to
search for unrecorded vendor’s invoices.
C. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders
and receiving reports.
D. Confirming accounts payable balances with known suppliers who have zero balances.
C
Unrecorded liabilities are most likely to be found during the review of which of the following
documents?
A. Unpaid bills
B. Shipping records
C. Bills of lading
D. Unmatched sales invoices
A
See the unpaid bill like Meralco, walter bill
Which of the following audit procedures is best for identifying unrecorded trade accounts
payable?
A. Reviewing cash disbursements recorded subsequent to the balance sheet date to
determine whether the related payables apply to the prior period.
B. Investigating payables recorded just prior to and just subsequent to the balance sheet
date to determine whether they are supported by receiving reports.
C. Examining unusual relationships between monthly accounts payable balances and
recorded cash payments.
D. Reconciling vendors’ statement to the file of receiving reports to identify items received
just prior to the balance sheet date.
A
Which of the following procedures relating to the examination of accounts payable could
the auditor delegate entirely to the client’s employees?
A. Test footings in the accounts payable ledger.
B. Reconcile unpaid invoices to vendors’ statements.
C. Prepare a schedule of accounts payable.
D. Mail confirmations for selected account balances.
C
An audit plan for noncurrent liabilities should include steps that require
A. Examining bond trust indentures.
B. Inspecting the accounts payable subsidiary ledger.
C. Investigating credits to the bond interest income account.
D. Verifying the existence of bondholders.
A
In connection with an audit of bonds payable, an auditor expects to find in the trust
indenture the
A. Description of the collateral.
B. The issuer’s debt-to-equity ratio at the time of issuance.
C. Effective yield of the bonds issued.
D. Subscription list.
A
During an audit of an issuer of bonds, the auditor should obtain written confirmation
regarding debenture transactions from the
A. Internal auditors.
B. Trustee.
C. Client’s attorney.
D. Debenture holders.
B
During its fiscal year, a company issued, at a discount, a substantial amount of first-
mortgage bonds. When performing audit work concerning this bond issue, the independent
auditor should
A. Inspect the records maintained by the bond trustee.
B. Trace the net cash received from the issuance to the bonds payable account.
C. Review the minutes for authorization.
D. Confirm the existence of the bondholders.
C
Kasi malaking amount ang involve
The auditor is most likely to verify accrued commissions payable in conjunction with the
A. Sales cutoff test.
B. Examination of trade accounts payable.
C. Verification of contingent liabilities.
D. Review of disbursements subsequent to the balance sheet date.
A
