Auditing & Assurance Services 11th Edition By William – Test Bank

Chapter 11 Auditing the Purchasing Process

1) Product costs should be matched directly with specific transactions and are recognized upon recognition of revenue.

Answer: TRUE
Difficulty: 1 Easy
Topic: Expense and Liability Recognition
Learning Objective: 11-01 Understand why knowledge of an entity’s expense and liability recognition policies is important to the audit.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

2) A purchase transaction usually begins with the preparation of a purchase order.

Answer: FALSE
Difficulty: 1 Easy
Topic: Types of Documents and Records
Learning Objective: 11-04 Be familiar with the types of documents and records used in the purchasing process.; 11-02 Understand the purchasing process.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

3) A receiving report is used to document the ordering of goods.

Answer: FALSE
Difficulty: 1 Easy
Topic: Types of Documents and Records
Learning Objective: 11-04 Be familiar with the types of documents and records used in the purchasing process.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

4) The purchase journal is referred to as a check register.

Answer: FALSE
Difficulty: 1 Easy
Topic: Types of Documents and Records
Learning Objective: 11-04 Be familiar with the types of documents and records used in the purchasing process.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

5) The principal business objectives of the purchasing process are acquiring goods and services and paying for those goods and services.

Answer: TRUE
Difficulty: 1 Easy
Topic: The Major Functions
Learning Objective: 11-05 Understand the functions in the purchasing process.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

6) The accounts payable department is responsible for ensuring that all vendor invoices, cash disbursements, and adjustments are recorded in the accounts payable records.

Answer: TRUE
Difficulty: 1 Easy
Topic: The Major Functions
Learning Objective: 11-05 Understand the functions in the purchasing process.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

7) After the controls are tested, the auditor sets the achieved level of control risk.

Answer: TRUE
Difficulty: 1 Easy
Topic: Control Risk Assessment
Learning Objective: 11-08 Know how to assess control risk for a purchasing process.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

8) Because of the low volume of purchase return transactions, the auditor normally does not test the controls associated with these transactions.

Answer: TRUE
Difficulty: 1 Easy
Topic: Control Activities and Tests of Controls
Learning Objective: 11-09 Know the key internal controls and develop relevant tests of controls for purchasing, cash disbursements, and purchase return transactions.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

9) Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses.

Answer: TRUE
Difficulty: 1 Easy
Topic: Substantive Analytical Procedures
Learning Objective: 11-11 Know the substantive analytical procedures used to audit accounts payable and accrued expenses.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement

10) Accounts payable confirmations are used less frequently by auditors than accounts receivable confirmations.

Answer: TRUE
Difficulty: 1 Easy
Topic: Accounts Payable Confirmations
Learning Objective: 11-13 Understand the confirmation process for accounts payable.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement