Ch18

School: Central Piedmont Community College - Course: MKT 320 - Subject: Accounting

Ch. 18 Problems •Multiple Choice Questions from CPA Examinations 18-16a.(3)b.(4)c.(3) 18-17a.(3)b.(3)c.(3) •Multiple Choice Questions From Becker CPA Exam Review 18-18a.(4)b.(2)c.(2) 18-19 QUESTIONa.TRANSACTION- RELATED AUDITOBJECTIVE(S)b.TEST OFCONTROLc.POTENTIALMISSTATEMENT(S)d. SUBSTANTIVE PROCEDURE 1Recordedacquisitionsand paymentsare for goodsand servicesreceived,consistent withthe bestinterests of theclient (occurrence). Observe andinquire aboutpersonnelperformingpurchasing,shipping,payables, anddisbursingfunctions. Goods receivedand not recordedor recorded andnot received. Disbursementsmade for goodsnot received.Vendor statement reconciliation. Review of physical inventory shortages. 2Existingacquisitionsare recorded(completeness).Account fornumericalsequence ofreceivingreports and determine that all were recorded. Receiving reportsare misplacedand acquisitionsnot recorded. Vendor statement reconciliation. 3Acquisitions arerecorded onthe correctdates (timing).Existingacquisitionsare recorded(completeness).Observe andinquire aboutthe procedureperformed bymail clerk.Compare datemail is receivedto date accounting received invoices.Late recording ornon-recording ofliabilities tosuppliers. Vendor statement reconciliation. Search for unrecorded liabilities.

18-19 (continued) QUESTIONa.TRANSACTION- RELATED AUDITOBJECTIVE(S)b.TEST OFCONTROLc.POTENTIALMISSTATEMENT(S)d. SUBSTANTIVE PROCEDURE 4Acquisitionsare recordedat the properamounts(accuracy).Examineindication ofinternalverificationof quantities.Acquisitionsfrom vendorsare recordedat improperamounts.Verify that quantities invoiced agree with quantities received and ordered. 5Acquisitiontransactionsare properlyclassified(classification).Examineindication ofapproval.Acquisitions arerecorded in thewrongaccount.Examine supporting invoice for reasonableness of accounting distribution. 6Acquisitionsare recordedat the properamounts(accuracy).Examinecancelledinvoices forindication ofchecking forclericalaccuracy. Acquisitionsfrom vendorsare recordedat improperamounts.Test extensions, footings, discounts, and freight terms on vendors' invoices. 7Payments arerecorded onthe correctdates(timing).Existingpayments arerecorded(completeness).Observewhether thesystemautomaticallyposts checkswhen theyareprepared.Checks aredisbursed andnot recordedor they arerecorded in thewrong timeperiod.Examine checks clearing the bank prior to year-end to determine that they were recorded in the cash disbursements journal prior to year-end. 8Acquisitionsare for goodsand servicesreceived,consistentwith the bestinterests ofthe client(occurrence).Examineinvoices forwhichchecks havebeendisbursed todeterminethat they have been cancelled. Invoices arerecorded andpaid more thanonce.Examine vendor statements, noting any unrecorded payments appearing on the statement. 9Recorded cashdisbursements are forObserve andinquire aboutthe handlingChecks aredisbursed andnoTrace checks to supporting invoice and

goods andservicesactuallyreceived(occurrence).of checksfrom the timethey aremailed tosuppliers.merchandise isreceived.Checks arereceived bysomeone otherthan thesupplier for whom they are intended.determine reasonableness of expenditure. Reconcile vendors' statements.