Page |1
Audit Chapter 11 Questions and Answers with Complete
Solutions UPDATED!!!!
Which of the following activities is not an activity associated
with the acquisition and payment cycle?
a. Approval of items for payment.
b. Receipt of goods and services.
c. Receive a customer purchase order.
d. Purchase of goods and services. - ANSWER C
Which of the following tasks will an automated purchasing
system perform?
a. Apply preloaded specifications and materials lists to the
system to start the process.
b. Automatically flag invoices that do not reconcile with
purchase orders.
c. Create change orders and analyze variances from purchase
orders.
d. All of these - ANSWER D
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Which of the following is a common inherent risk relating to
accounts payable and related expenses?
a. Because of debt covenants requiring that the client maintain
a certain level of the current ratio, management may prefer to
understate accounts payable.
b. Ending inventory balances may be valued according to
various accounting valuation methods.
c. Management would generally prefer to record assets as
expenses.
d. Because of the lower of cost or market requirements, it may
be difficult to value accounts payable. - ANSWER A
Which of the following is not an inherent risk relating to
inventory?
a. Inventory accounts may be valued according to various
accounting valuation methods.
b. Identifying obsolete inventory and applying the lower of cost
or market principle to determine valuation are difficult.
c. Sales contracts may contain unusual terms, and revenue
recognition is often complex.
d. Inventory accounts typically experience a high volume of
activity. - ANSWER C
Audit Chapter 11 Questions and Answers with Complete
Solutions UPDATED!!!!
Which of the following activities is not an activity associated
with the acquisition and payment cycle?
a. Approval of items for payment.
b. Receipt of goods and services.
c. Receive a customer purchase order.
d. Purchase of goods and services. - ANSWER C
Which of the following tasks will an automated purchasing
system perform?
a. Apply preloaded specifications and materials lists to the
system to start the process.
b. Automatically flag invoices that do not reconcile with
purchase orders.
c. Create change orders and analyze variances from purchase
orders.
d. All of these - ANSWER D
, Page |2
Which of the following is a common inherent risk relating to
accounts payable and related expenses?
a. Because of debt covenants requiring that the client maintain
a certain level of the current ratio, management may prefer to
understate accounts payable.
b. Ending inventory balances may be valued according to
various accounting valuation methods.
c. Management would generally prefer to record assets as
expenses.
d. Because of the lower of cost or market requirements, it may
be difficult to value accounts payable. - ANSWER A
Which of the following is not an inherent risk relating to
inventory?
a. Inventory accounts may be valued according to various
accounting valuation methods.
b. Identifying obsolete inventory and applying the lower of cost
or market principle to determine valuation are difficult.
c. Sales contracts may contain unusual terms, and revenue
recognition is often complex.
d. Inventory accounts typically experience a high volume of
activity. - ANSWER C
