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13 Cards in this Set
- Front
- Back
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What are the three classes of transactions included in the acquisition and payment cycle? |
1) Acquisitions of goods and services 2) Cash disbursements 3) Purchases returns and allowances and purchase discounts |
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Purchase requisition |
Is used to request goods and services by an authorized employee. |
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3 business functions for the acquisition portion of the payment cycle. |
1) Processing purchase orders 2) Receiving goods and services 3) Recognizing the liability |
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Most time-consuming accounts to verify by tests of details of balances are? |
1) accounts receivable 2) Inventory 3) fixed assets 4) accounts payable 5) expense accounts [four of these are directly related to the acquisition and payment cycle |
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four of the six transaction-related audit objectives should be examined more closely |
1) Recorded acquisitions are for goods and services received, consistent with the est interests of the client (occurrence) 2) Existing acquisitions are recorded (completeness) 3) Acquisitions are accurately recorded (Accuracy) 4)Acquisitions are correctly classified (Classification) |
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What is more superior vendor invoice or vendor statement? |
Vendor statement is superior for verifying accounts payable because it includes the ending balance. (slide 18-11) |
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What do vendor invoices provide reliable evidence of? |
Individual transactions |
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What are four key controls for business functions in the acquisition and payment cycle? |
1) Authorization of purchases 2) Separation of asset custody from other functions 3) Timely recording and independent review of transactions 4) Authorization of payments. |
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What are 5 key internal controls for transaction related audit objective of occurrence |
1) Voucher package 2) Acquisitions are pre-approved 3)computer only accepts entry of purchases from authorized vendors 4) Documents are cancelled to prevent their reuse 5)Vendors invoices, receiving reports, purchase orders, and requisitions are internally verified. |
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What are 3 key internal controls for transaction related audit objective of completeness |
1) Purchase orders are pre-numbered and accounted for. 2) Receiving report are pre-numbered and accounted for. 3)Vouchers are pre-numbered and accounted for |
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What are the 8 out of period liability tests aka search for unrecorded accouters payable |
1)Examine underlying documentation for subsequent cash disbursements 2)Examine underlying documentation for bills not paid several weeks after year-end 3) Trace receiving reports issued before year-ed to related vendor's invoices 4)Trace vendor's statements that show a balance due to the accounts payable trail balance 5) Send confirmations to vendors with which the client does business 6) Cutoff tests-To determine whether transactions recorded a few days before and after the balance sheet date are recorded in the correct period 7) Relationship of cutoff to physical observation of inventory--Cutoff tests must be coordinated with the physical observation of inventory to determine that both the asset and liability are recorded in the proper period. 8) Inventory in transit--determine whether inventory in transit at year end was FOB destination or FOB origin. |
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What are the 4 substantive analytical procedures for Acquisition and payment cycle |
1) compare acquisition-related expense account balances with prior years 2) Review list of accounts payable for unusual, non-vendor, and interest bearing payable s 3) Compare individual accounts payable with previous years 4) Calculate ratios, such as purchases divided by accounts payable, and accounts payable divided by current liabilities. |
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What Possible misstatements due the sub analytical procedures test for |
1) Misstatement of accounts payable and expenses 2) Classification misstatement for non-trade liabilities 3) Unrecorded or non-existent accounts, or misstatements 4) Unrecorded or nonexistent accounts, or misstatements. |
