AP-5902 Liabilities

Course:

Bachelor Science in Accounting Technology (ACCTG 004)

Page 10 of 10 AP-5902 12. Which of the following audit procedures is best for identifying unrecorded
trade accounts payable? a. Reviewing cash disbursements recorded subsequent to the balance sheet
date to determine whether the related payables apply to the prior period. b. Investigating payables
recorded just prior to and just subsequent to the balance sheet date to determine whether they are
supported by receiving reports. c. Examining unusual relationships between monthly accounts payable
balances and recorded cash payments. d. Reconciling vendors’ statement to the file of receiving reports
to identify items received just prior to the balance sheet date. 13. In verifying debits to perpetual
inventory records of a nonmanufacturing firm, the auditor is most interested in examining the purchase
a. Journal b. Requisitions c. Orders d. Invoices 14. Which of the following procedures relating to
the examination of accounts payable could the auditor delegate entirely to the client’s employees? a.
Test footings in the accounts payable ledger b. Reconcile unpaid invoices to vendors statements c.
Prepare a schedule of accounts payable d. Mail confirmations for selected account balances 15. An
auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date most
likely is to obtain evidence concerning management’s assertions about a. Existence or occurrence c.
Completeness b. Presentation and disclosure d. Valuation or allocation. 16. An auditor’s program to
audit long term debt should include steps that require a. Examining bond trust indentures b. Inspecting
the accounts payable subsidiary ledger. c. Investigating credits to the bond interest income account. d.
Verifying the existence of the bondholders. 17. In an audit of bonds payable, an auditor expects the
trust indenture to include the a. Auditee’s debt-to-equity ratio at the time of issuance. b. Effective yield
of the bonds issued. c. Subscription list. d. Description of the collateral 18. In auditing long-term bonds
payable, an auditor most likely will a. Perform analytical procedures on the bond premium and discount
accounts. b. Examine documentation of assets purchased with bond proceeds or liens c. Compare
interest with the bond payable amount for reasonableness. d. Confirm the existence of individual
bondholders at year-end. 19. The audit procedures used to verify accrued liabilities differ from those
employed for the verification of accounts payable because a. Accrued liabilities usually pertain to
services of a continuing nature while accounts payable are the result of completed transactions b.
Accrued liability balances are less material than accounts payable balances. c. Evidence supporting
accrued liabilities in nonexistence while evidence supporting accounts payable is readily available. d.
Accrued liabilities at year-end will become accounts payable during the following year. 20. The auditor
is most likely to verify accrued commissions payable in conjunction with the a. Sales cutoff test b.
Verification of contingent liabilities c. Review of post balance sheet date disbursements d. Examination
of trade accounts payable – End of AP-5902 –