cpa audit review ch 12 review 2

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Joens1313
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283314
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cpa audit review ch 12 review 2
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2014-09-16 23:56:29
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cpa audit review 12
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cpa audit review ch 12 review 2
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  1. Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

    A.Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports.

    B.Examining unusual relationships between monthly accounts payable balances and recorded cash payments.

    C.Reconciling vendors’ statements to the file of receiving reports to identify items received just prior to the balance sheet date.

    D.Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.
    D.Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

    The greatest risk in the audit of payables is that unrecorded liabilities exist. Omission of an entry to record a payable is a misstatement that is more difficult to detect than an inaccurate or false entry. The search for unrecorded payables should (1) include examining cash disbursements made after the balance sheet date and comparing them with the accounts payable trial balance, (2) sending confirmations to vendors with small and zero balances, and (3) reconciling payable balances with vendors’ documentation.
  2. In auditing a manufacturing entity, which of the following procedures would an auditor least likely perform to determine whether slow-moving, defective, and obsolete items included in inventory are properly identified?

    A.Test the computation of standard overhead rates.
    B.Tour the manufacturing plant or production facility.

    C.Compare inventory balances to anticipated sales volume.

    D.Review inventory experience and trends.
    A.Test the computation of standard overhead rates.

    Testing the computation of standard overhead rates is relevant to the costing of inventory. It does not determine whether the underlying items are slow-moving, etc.
  3. If the perpetual inventory records show lower quantities of inventory than the physical count, an explanation of the difference might be unrecorded
    Purchases.

    In a perpetual system, purchases are debited directly to inventory at the time of the transaction rather than to a purchases account. A sale requires an immediate credit to inventory. Thus, failure to record a purchase would understate inventory.
  4. The primary audit procedure to determine whether accounts payable are valued properly is
    Vouching accounts payable to supporting documentation.

    Relatively few problems are encountered by the auditor in meeting the objective of determining the proper valuation of accounts payable. The auditor vouches the recorded accounts payable to the supporting documentation, the invoice and purchase order, to determine if the accounts are accurately valued.
  5. In auditing accounts payable, an auditor’s procedures most likely will focus primarily on the relevant assertion about
    Completeness.

    The primary audit risk for accounts payable is understatement of the liability. Thus, the auditor will most likely focus on the completeness assertion.

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