Ch 18 Arens Audit

Front 1

13. A document indicating a reduction in the amount owed to a vendor because of returned goods is:
a. a debit memo.
b. a credit memo.
c. a receiving room report.
d. a shipping room report

Back 1

a. a debit memo.

Front 2

14. A vendor’s statement is unreliable and auditors rarely use it.
a. True
b. False

Back 2

False

Front 3

15. To test for cutoff errors which overstate liabilities, the auditor should trace, to vendors’ invoices, the receiving reports issued:
a. before year-end.
b. the last day of the fiscal year.
c. both before and after year-end.
d. after year-end.

Back 3

after year-end.

Front 4

16. Most companies recognize a liability when the goods are received by the company.
a. True
b. False

Back 4

True

Front 5

17. A company failed to record an acquisition of merchandise and its related liability, but the merchandise was included in ending inventory. The effect on the financial statements was to:
a. understate both assets and liabilities.
b. understate net income and owners’ equity.
c. understate assets and owners’ equity.
d. understate liabilities, and overstate both net income and owners’ equity.

Back 5

d. understate liabilities, and overstate both net income and owners’ equity.

Front 6

18. A bill of lading is normally prepared at the time tangible goods are received and indicates the description of goods, the quantity received, the date received, and other relevant data.
a. True
b. False

Back 6

False

Front 7

19. Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received?
a. Count goods upon receipt in storeroom.
b. Match purchase order, receiving report, and vendor’s invoice for each voucher in accounts payable department.
c. Compare goods received with goods requisitioned in receiving department.
d. Verify vouchers for accuracy and approval in internal audit department.

Back 7

b. Match purchase order, receiving report, and vendor’s invoice for each voucher in accounts payable department.

Front 8

20. A document received from the vendor indicating such things as the description and quantity of goods and services received, price including freight, cash discount terms, and date of billing is called the voucher.
a. True
b. False

Back 8

False

Front 9

21. Cutoff information for inventory acquisitions should be obtained during:
a. the interim period prior to year-end.
b. the interim period immediately following year-end.
c. the physical observation of inventory.
d. either the interim period prior to or immediately following year-end.

Back 9

c. the physical observation of inventory.

Front 10

22. The balance-related audit objective realizable value is not applicable when auditing Accounts payable.
a. True
b. False

Back 10

True

Front 11

23. The main focus taken by the auditor in verifying liability balances is on the discovery of:
a. understated liabilities.
b. overstated liabilities.
c. understated or omitted liabilities.
d. overstated or extraneous liabilities

Back 11

c. understated or omitted liabilities.

Front 12

24. The audit procedure “Test clerical accuracy by footing the journals and tracing postings to general ledger and to accounts payable and inventory master files” is used to test the posting and summarization objective for acquisitions.
a. True
b. False

Back 12

True

Front 13

25. The test of details of balances procedure to “trace from account payable list to vendors’ invoices and statements” satisfies the objective of:
a. occurrence.
b. completeness.
c. classification.
d. detail tie-in.

Back 13

a. occurrence.

Front 14

A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted.
g. Debit memo
h. Voucher
i. Accounts payable master file
j. Accounts payable trial balance

Back 14

g. Debit memo

Front 15

A document that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquisition.
d. Acquisitions journal
e. Summary acquisitions report
f. Vendor’s invoice
g. Debit memo

Back 15

f. Vendor’s invoice

Front 16

A document prepared by the purchasing department indicating the description, quantity, and related information for goods and services that the company intends to purchase.
a. Purchase requisition
b. Purchase order
c. Receiving report
d. Acquisitions journal

Back 16

Purchase order

Front 17

A listing of the amount owed to each vendor at a point in time.
i. Accounts payable master file
j. Accounts payable trial balance
k. Vendor’s statement
l. Check

Back 17

j. Accounts payable trial balance

Front 18

A document used to establish a formal means of recording and controlling acquisitions; it includes a cover sheet and a package of relevant documents.
f. Vendor’s invoice
g. Debit memo
h. Voucher
i. Accounts payable master file

Back 18

Voucher

Front 19

A document used to request goods and services by an authorized employee
a. Purchase requisition
b. Purchase order
c. Receiving report
d. Acquisitions journal

Back 19

a. Purchase requisition

Front 20

The listing or report that includes all cash payments for a given period
j. Accounts payable trial balance
k. Vendor’s statement
l. Check
m. Cash disbursements journal

Back 20

m. Cash disbursements journal