Select the best answer for each of the following:

1. In auditing accounts payable, an auditor’s procedures most likely will focus primarily on
management’s assertion of

a. Existence or occurrence
b. Presentation and disclosure

c. Completeness

d. Valuation or allocation

2. 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

3. 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

4.Which of the following procedures is least likely to be performed before the balance sheet date?
a.Observation of inventory
b. Testing of internal control over cash

c. Search for unrecorded liabilities

d. Confirmation of receivables

5.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 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.

6.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.

7.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.

8. Only one of the following four statements, which compare confirmation of accounts payable with
suppliers and confirmation of accounts receivable with debtors is false. The false statement is that

a. Confirmation of accounts receivable with debtors is a more widely accepted auditing procedures than
is confirmation of accounts payable with suppliers.

b. Statistical sampling techniques are more widely accepted in the confirmation of accounts payable
than in the confirmation of accounts receivable.
c. As compared with the confirmation of accounts receivable, the confirmation of accounts payable will
tend to emphasize accounts with zero balances at the balance sheet date.

d. It is less likely that the confirmation request sent to the supplier will show the amount owed than that
request sent to the debtor will show the amount due.

9. When title to merchandise in transit has passed to the audit client the auditor engaged in the
performance of a purchase cut-off will encounter the greatest difficulty in gaining assurance with
respect to the

a.Quantity
b. Quality
c. Price
d. Terms

10. Which of the following audit procedures is least likely to detect an unrecorded liability?
a. Analysis and recomputation of interest expense.
b.Analysis and recomputation of depreciation expense.
c. Mailing of standard bank confirmation forms.
d. Reading of the minutes of meetings of the board directors.

11. 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

12. 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.
13. In verifying debits to perpetual inventory records of a nonmanufacturing firm, the auditor is most
interested in examining the purchase
a. Journal
b. Requisitions
c. Orders
d. Invoices

14. 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

15. An auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date
most likely is to obtain evidence concerning management’s assertions about
a. Existence or occurrence
b. Presentation and disclosure

c. Completeness
d. Valuation or allocation.

16. An auditor’s program to audit long term debt 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 the bondholders.

17. In an audit of bonds payable, an auditor expects the trust indenture to include the
a. Auditee’s debt-to-equity ratio at the time of issuance.
b. Effective yield of the bonds issued.
c. Subscription list.
d. Description of the collateral

18. In auditing long-term bonds payable, an auditor most likely will

a. Perform analytical procedures on the bond premium and discount accounts.
b. Examine documentation of assets purchased with bond proceeds or liens
c. Compare interest with the bond payable amount for reasonableness.
d. Confirm the existence of individual bondholders at year-end.

19. The audit procedures used to verify accrued liabilities differ from those employed for the verification
of accounts payable because
a. Accrued liabilities usually pertain to services of a continuing nature while accounts payable are the
result of completed transactions
b. Accrued liability balances are less material than accounts payable balances.
c. Evidence supporting accrued liabilities in nonexistence while evidence supporting accounts payable is
readily available.

d. Accrued liabilities at year-end will become accounts payable during the following year.

20. The auditor is most likely to verify accrued commissions payable in conjunction with the
a. Sales cutoff test
b. Verification of contingent liabilities
c. Review of post balance sheet date disbursements
d. Examination of trade accounts payable

Select the best answer for each of the following:

1. In auditing accounts payable, an auditor’s procedures most likely will focus primarily on

management’s assertion of
a. Existence or occurrence

b. Presentation and disclosure

c. Completeness

d. Valuation or allocation

2. 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

3. 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

4.Which of the following procedures is least likely to be performed before the balance sheet date?

a.Observation of inventory

b. Testing of internal control over cash

c. Search for unrecorded liabilities

d. Confirmation of receivables

5.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
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.

6.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.

7.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.

8. Only one of the following four statements, which compare confirmation of accounts payable with
suppliers and confirmation of accounts receivable with debtors is false. The false statement is that
a. Confirmation of accounts receivable with debtors is a more widely accepted auditing procedures than
is confirmation of accounts payable with suppliers.

b. Statistical sampling techniques are more widely accepted in the confirmation of accounts payable
than in the confirmation of accounts receivable.

c. As compared with the confirmation of accounts receivable, the confirmation of accounts payable will
tend to emphasize accounts with zero balances at the balance sheet date.

d. It is less likely that the confirmation request sent to the supplier will show the amount owed than that
request sent to the debtor will show the amount due.

9. When title to merchandise in transit has passed to the audit client the auditor engaged in the
performance of a purchase cut-off will encounter the greatest difficulty in gaining assurance with
respect to the

a. Quantity

b. Quality

c. Price

d. Terms

10. Which of the following audit procedures is least likely to detect an unrecorded liability?

a. Analysis and recomputation of interest expense.

b.Analysis and recomputation of depreciation expense.

c. Mailing of standard bank confirmation forms.

d. Reading of the minutes of meetings of the board directors.

11. 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

12. 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.

13. In verifying debits to perpetual inventory records of a nonmanufacturing firm, the auditor is most
interested in examining the purchase

a. Journal

b. Requisitions

c. Orders

d. Invoices

14. 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

15. An auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date
most likely is to obtain evidence concerning management’s assertions about

a. Existence or occurrence

b. Presentation and disclosure

c. Completeness

d. Valuation or allocation.

16. An auditor’s program to audit long term debt 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 the bondholders.

17. In an audit of bonds payable, an auditor expects the trust indenture to include the

a. Auditee’s debt-to-equity ratio at the time of issuance.

b. Effective yield of the bonds issued.

c. Subscription list.

d. Description of the collateral

18. In auditing long-term bonds payable, an auditor most likely will

a. Perform analytical procedures on the bond premium and discount accounts.

b. Examine documentation of assets purchased with bond proceeds or liens

c. Compare interest with the bond payable amount for reasonableness.

d. Confirm the existence of individual bondholders at year-end.

19. The audit procedures used to verify accrued liabilities differ from those employed for the verification
of accounts payable because

a. Accrued liabilities usually pertain to services of a continuing nature while accounts payable are the
result of completed transactions

b. Accrued liability balances are less material than accounts payable balances.

c. Evidence supporting accrued liabilities in nonexistence while evidence supporting accounts payable is
readily available.

d. Accrued liabilities at year-end will become accounts payable during the following year.

20. The auditor is most likely to verify accrued commissions payable in conjunction with the

a. Sales cutoff test

b. Verification of contingent liabilities

c. Review of post balance sheet date disbursements

d. Examination of trade accounts payable