TBChap008
Chapter 08
Acquisition and Expenditure Cycle
True / False Questions 1.
Acquisition and expenditure activities include (1) purchasing goods and services, (2) receiving the goods or services, (3) recording the asset or expense and related liability, and (4) depreciating assets purchased. True False 2.
Purchases are requisitioned by a purchasing department that seeks the best prices and quality. True False 3.
The accounts payable department reconciles the vendor invoice, purchase order, and receiving report prior to approving the payment to the vendor. True False 4.
Bill of ladings for goods shipped from a vendor to the purchasing company should always include the company's purchase order number. True False 5.
The receiving department receives a "blind" copy of the purchase order which does not include the vendor's name and address. True False 6.
The auditors' "search for unrecorded liabilities" should emphasize payments made shortly after the end of the year. True False 7.
Auditors should inspect the "unmatched receiving report" file to determine whether the liability for the receipt of goods has been recorded. True False 8.
Proper separation of duties involves the purchasing department as the recordkeeping function. True False 9.
If internal controls over the expenditure cycle are weak, auditors will need to design substantive procedures to try to detect whether control failures have produced misleading financial statement account balances. True False 10.
If the risk of material misstatement is assessed as high, it is likely that additional substantive procedures will be required. True False 11.
The emphasis is on the completeness assertion because financial statement users tend to be more concerned about understated expenses and liabilities than overstated. True False 12.
Unrecorded liabilities can be prevented if there is an appropriate segregation of duties in accounts
Acquisition and Expenditure Cycle
True / False Questions 1.
Acquisition and expenditure activities include (1) purchasing goods and services, (2) receiving the goods or services, (3) recording the asset or expense and related liability, and (4) depreciating assets purchased. True False 2.
Purchases are requisitioned by a purchasing department that seeks the best prices and quality. True False 3.
The accounts payable department reconciles the vendor invoice, purchase order, and receiving report prior to approving the payment to the vendor. True False 4.
Bill of ladings for goods shipped from a vendor to the purchasing company should always include the company's purchase order number. True False 5.
The receiving department receives a "blind" copy of the purchase order which does not include the vendor's name and address. True False 6.
The auditors' "search for unrecorded liabilities" should emphasize payments made shortly after the end of the year. True False 7.
Auditors should inspect the "unmatched receiving report" file to determine whether the liability for the receipt of goods has been recorded. True False 8.
Proper separation of duties involves the purchasing department as the recordkeeping function. True False 9.
If internal controls over the expenditure cycle are weak, auditors will need to design substantive procedures to try to detect whether control failures have produced misleading financial statement account balances. True False 10.
If the risk of material misstatement is assessed as high, it is likely that additional substantive procedures will be required. True False 11.
The emphasis is on the completeness assertion because financial statement users tend to be more concerned about understated expenses and liabilities than overstated. True False 12.
Unrecorded liabilities can be prevented if there is an appropriate segregation of duties in accounts