PROBLEM NO.

8
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 c. Completeness
b. Presentation and disclosure 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 c. Canceled checks
b. Vendors’ invoices 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
sheet.

4. Which of the following procedures is least likely to be performed before the balance sheet
date?
a. Observation of inventory c. Search for unrecorded liabilities
b. Testing of internal control over cash 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.
Reading of the minutes of meetings of the board directors.