~ The auditor will most likely perform extensive tests for possible understatement of a. Revenues c. Liabilities b. Assets d, Equity In auditing accounts payable, an auditor’s procedures most likely will focus primarily on management's assertion of a. Existence. b. Completeness c. Presentation and disclosure d. Valuation and allocation Which of the following audit procedures is not appropriate for addressing the assertion of valuation? a. Confirm with creditors. b. Test for unrecorded liabilities. c. Perform analytical procedures. d. Verify accounts payable trial balance. Which of the following is a substantive test that an auditor most likely would perform to verify the existence and valuation of recorded accounts payable? a. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders and receiving reports. b. Confirming accounts payable balances with known suppliers who have zero balances. c. Investigating the open purchase order file to ascertain that prenumbered purchase orders are used and accounted for. d. Receiving the client’s mail, unopened, for a reasonable period of time after the year-end to search for unrecorded vendor's invoices. Auditor confirmation of accounts payable balances at the end of the Teporting period may be unnecessary because a. There is likely to be other reliable external evidence to support the balances. b. This is a duplication of cutoff tests.Accounts. payable balances at the end may not be paid before the audit is com iF Correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment. 6. To determine whether accounts payable are complete, an auditor performs a test to verify that all merchandise received is recorded. The population of documents for this test consists of all a. Payment vouchers ¢. Purchase requisitions b. Receiving reports d. Vendors’ invoices of the reporting period jeted. 7. An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of the substantive audit procedure most likely was to &. Verify that cash disbursements were for goods actually received. b. Determine that purchases were properly recorded. c. Test whether payments were for goods actually ordered. d.. Identify unusually large Jperchases that should be investigated earlier. 8. Which of the iollowing procedures would an anditor most likely perform in searching for unrecorded payables? ; @, Compare cash payments occurring after the end of the reporting "period with the accounts payable trial balance. b. Reconcile receiving reports with related cash payments made just vrior to year-end. ¢. Contast the ratio of accounts payable to purchases with the prior year’s ratio. d. Vouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders, 9. When an auditor selects a satuple of items from the vouchers payable register for the last month of the period under audit and traces these items to underlying documents, the auditor is gathering evidence primarily in support of the assertion that . & Recorded obligations were paid. b. Incurred obligations were recorded in the correct period. Recorded obligations were valid. Cash disbursements were recorded as incurred obligations.10. In conducting a search for unrecorded liabilities, the auditor should do all but the following: . a. Examine prior year's audit workpapers to ascertain that adjustments for unrecorded liabilities have not been overlooked. b. Examine invoices paid a few days prior to the end of the reporting period. c. Examine paid invoices for a short period following the end of the reporting period and trace to client's year-end adjustment for unrecorded liabilities. d. Examine unpaid invoices for a short period following the end of the reporting period and trace to client's year-end adjustment for unrecorded liabilities. An audit procedure applicable to testing the year-end cutoff of Habilities is Reviewing the general journal for unusual entries recorded immediately after year-end. b. Examining vendor invoices received subsequent to year-end for shipment date and terms of shipment. c. Tracing recorded liabilities to supporting documents. d. Preparing an aging schedule for accounts payable. [Link] months before the year end, the bookkeeper erroneously recorded the receipt of a long-term bank loan by a debit to cash and 4 credit to sales. Which of the following is the most effective procedure for detecting this type of error? a Analyze the notes payable journal. Analyze bank confirmation information c. Prepare a year-end bank reconciliation. { Prepare a year-end bank transfer schedule. An auditor usually examines receiving reports to support entries in the a, Gales journal and sales returns journal. b. Check register and sales journal. c, Voucher register and sales journal. 4. Voucher register and sales returns journal. Which of the following is not used to test overstatements and understatements of accounts payable? a. Unmatched receiving reports, v. Canceled voucher packages.c. Cash receipts records. @. Cash disbursement secords., 15. During the course of an audit, an auditor observes that the recorded interest expense seems excessive in relation to the balance in long-term debt. This observation could lead the auditor to suspect that a. Long-term debt is overstated. b. Long-term debt is understated. c. Premium on bonds payable is understated. d. Discount on bonds payable is overstated. 16. An auditor's program to examine long-term debt most likely would include steps that require a. Correlating interest expense recorded for the period with outstanding debt. b. Inspecting. the accounts payable subsidiary ledger for unrecorded long-term debi c. Comparing the carrying ‘Peount of the debt to its year-end market value. d. Verifying the existence of the holders of the debt by direct confirmation. 17. A CPA analyzes the accrued interest payable accounts for the year, recomputes the amounts of payments and beginning and ending balances and reconciles to the interest expense account. Which error or questionable practice below has the best chance of being detected by this specific audit procedure? a. Interest paid on an open account was charged to the purchase account. b. Interest revenue of P120 on a note receivable was credited against miscellaneous expense. ©. A note payable had not been recorded. Interest of P300 on the note was properly paid and charged to the interest expense account. d. There was a violation of a term in the client's loan agreement prohibiting dividends on common stocks unless net income available for interest and dividends is at least three times interest, Tequiements,18. During the audit of a publicly held company, n confirmation ding long-te a regarding long-term a. Bond holders b. Internal auditors i us the auditor could obtain written: bond transactions ¢. Client's attorney d. Trustee 19. During. its fiscal year, a company 7 2 y issued, at a discount, a substantial amount of first-mortgage bonds. . When performing audit work, the independent auditor a. Confirms the existence of the bondholders. b. Reviews the minutes for authorization. ¢. Traces the net cash received from the issuance to the bonds payable account. ~d. Inspects the records maintained by the bond trustee. 20. An auditor’s purpose in reviewing the renewal of a note payable shortly after the end of the reporting period most likely is_to obtain evidence concerning management's assertion about a. Existence é _ b. Completeness c. Presentation and disclosure d. Valuation and allocation Answers: ; Lc 6. B 11.B 16.4 2B 7B 12.B 17.C 3.¢ 8. A 13.D 18.D cK ar 14. 19.B 5A 10.B 48, ae