Auditing & Assurance Services A Systematic Approach 10th Edition By William – Test Bank

True / False Questions

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

TRUE

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

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

FALSE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Be familiar with the types of documents and records used in the purchasing process.
Topic: Types of Documents and Records

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

FALSE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Be familiar with the types of documents and records used in the purchasing process.
Topic: Types of Documents and Records

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

FALSE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Be familiar with the types of documents and records used in the purchasing process.
Topic: Types of Documents and Records

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

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Understand the functions in the purchasing process.
Topic: The Major Functions

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

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Understand the functions in the purchasing process.
Topic: The Major Functions

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

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-08 Know how to assess control risk for a purchasing process.
Topic: Control Risk Assessment

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

TRUE

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

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

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-11 Know the substantive analytical procedures used to audit accounts payable and accrued expenses.
Topic: Substantive Analytical Procedures

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

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-13 Understand the confirmation process for accounts payable.
Topic: Accounts Payable Confirmations