CMPC 321 - Auditing and Assurance: Concepts and

Applications 2
I. THEORIES
IA. MULTIPLE CHOICE
Instructions: Choose the answer that corresponds to the best answer for each of the following
questions.
1. An examination of the balance in the accounts payable account is ordinarily not
designed to *
1 point

Verify that accounts payable were properly authorized

Detect accounts payable which are substantially past due
Ascertain the reasonableness of recorded liabilities
Determine that all existing liabilities at the reporting date have been recorded.
2. In auditing accounts payable, an auditor's procedures most likely would focus
primarily on management's assertion of *
1 point

Existence or occurrence
Presentation and disclosure
Completeness
Valuation or allocation
3. A client's procurement system ends with the assumption of a liability and the
eventual payment of the liability. Which of the following best describes the auditor's
primary concern with respect to liabilities resulting from the procurement system? *
1 point

Acquisition of materials is not made from one vendor or one group of vendor
Accounts payable are not materially understated
Commitments for all purchases are made only after established competitive bidding
procedures are followed.
Authority to incur liabilities is restricted to one designed person
4. Which of the following audit procedures is least likely to detect an unrecorded
liability? *
1 point

Mailing of standard bank confirmation form.

Analysis and recomputation of interest expense.
Analysis and recomputation of depreciation expense.
Reading of the minutes of meetings of the board of direction.
5. Which of the following is the best audit procedure for determining the existence
of unrecorded liabilities? *
1 point

Examine a sample of cash disbursements in the period subsequent to year-end.

Examination of confirmation requests returned by creditors whose accounts appear on a
subsidiary trial balance of accounts payable
Examine unusual relationship between monthly accounts payable balances and
recorded purchases
Examination a sample of invoices a few days prior to and subsequent to year-end to
ascertain whether they have been properly recorded.
6. Which of the following procedures would an auditor most likely perform in
searching for unrecorded payables? *
1 point

Reconcile receiving reports with related cash payments made just prior to year-end
Contrast the ratio of accounts payable to purchases with the prior year's ratio
Vouch a sample of creditor balances to supporting invoices, receiving reports, and
purchase orders
Compare cash payments occurring after the balance sheet date with the accounts
payable trial balance
7. Which of the following procedures relating to the examination of accounts
payable could the auditor delegate entirely to the client's employees? *
1 point

Prepare a schedule of accounts payable.

Mail confirmation for selected account balances
Test footings in the accounts payable ledger.
Reconcile unpaid invoices to vendors' statements
8. In order to efficiently establish the correctness of the accounts payable cutoff, an
auditor will be most likely to *
1 point

Compare cutoff reports with purchase orders

Coordinate mailing of confirmations with cutoff tests
Compare vendors' invoices with vendors' statements.
Coordinate cutoff test with physical inventory observation
9. Which of the following would detect an understatement of a purchase discount? *
1 point

Verify footings and cross footings of purchase and disbursement records

Compare approved purchase orders to receiving reports
Compare purchase invoice terms with disbursement records and checks
Verify the receipts of items ordered and invoiced
10. Auditor confirmation of accounts payable balances at the reporting date may be
unnecessary because *
1 point

Correspondence with the audit client's attorney will reveal all legal action by vendor for
nonpayment.
This is a duplication of cutoff tests
There is likely to be other reliable external evidence to support the balances
Accounts payable balances at the reporting date may not be paid before the audit is
completed
11. In a properly designed accounts payable system, a voucher is prepared after the
invoice, purchase order, requisition, and receiving report have been verified. The
next step in the system is to *
1 point
Post the voucher amount to the expense ledger.
Approve the voucher for payment.
Cancel the supporting documents.
Enter the check amount in the check register.
12. You are auditing the December 31, 2018, accounts payable balance of one of
your firm’s divisions. The division controller’s office has provided you with a
schedule listing the creditors and the amount owed to each at December 31, 2018.
Which of the following audit procedures would be your best choice for determining
that no individual account payable has been omitted from the schedule? *
1 point

Send confirmation requests to a randomly selected sample of creditors listed on the

schedule.
Examine support for selected January 2019 payments to creditors, ascertaining that
those relating to 2018 are not on the schedule.
Examine support for selected January 2019 payments to creditors, ascertaining that
those relating to 2018 are on this schedule.
Send confirmation requests to creditors that are listed on the schedule but not listed on
the corresponding December 31, 2017, schedule.
13. One possible fault of this system is that *
1 point

Payment can be made for supplies received but not ordered by the purchasing
department.
Unnecessary supplies can be purchased by department managers.
Payment can be made for supplies not received.
Purchases can be made at prices higher than normal from a vendor controlled by a
buyer.
14. The treasurer makes disbursements by check and reconciles the monthly banks
statement to accounting records. Which of the following best describes the control
impact of this arrangement? *
1 point

Controls will be enhanced because the treasurer will have two opportunities to discover
inappropriate disbursements.
The treasurer will be in position to make and conceal unauthorized payments.
Internal control will be enhanced because these are duties a treasurer should perform.
The treasurer will be able to make unauthorized adjustments to the cash account.
15. In assessing control risk for purchases, an auditor vouches a sample of entries in
the voucher register to the supporting documents. Which assertion would this test
of controls most likely support? *
1 point

Completeness
Rights and obligations.
Existence or occurrence
Valuation or allocation.

II. PROBLEMS
2A - MULTIPLE CHOICE
Instructions: Choose the answer that corresponds to the best answer for each of the following
questions.
FULL CREDIT of the score is given only upon attaching in the google classroom images (converted to
pdf and create only one file LABEL it in this format: "Family Name-Class code-M1A" example: BARRY-
1278-M1A) of your solutions presented in good form written in any clean WORKSHEET. Please follow
instructions strictly.

Points distribution: 1 point for the answer in the google form; 3 points for the solution as to be seen in
the submitted attachment.

1. On December 31, 2021, what total amount should be reported as current

liabilities? *
4 points

₱1,066,000
₱1,077,000
₱1,004,000
₱1,146,000
NONE OF THEM
2. What total amount should be reported as current liabilities on December 31,
2021? *
4 points

₱6,000,000
₱2,000,000
₱9,000,000
₱5,000,000
None of them

3. What should be the balance of the Discount on Notes Payable account on the
books of Better Company at December 31, 2021 after adjusting entries are made
assuming that the effective interest method is used? *
4 points

₱0
₱241,840
₱166,024
₱141,840
none of them

4. What is the amount of bonus for the president during 2021? *

4 points

₱ 91,000
₱127,273
₱132,847
₱143,874
None of them
5. What is the correct accrued salaries from unused compensated absences as of
December 31 2018? *
4 points

₱ 244,000
₱ 224,000
None of them
₱ 220,000
₱ 240,000
III. PROBLEMS
2B - COMPREHENSIVE PROBLEM
Provide the FINAL ANSWERS to the problems below. In writing your numerical figures, DO NOT use any
peso signs, commas, or leave spaces in between figures. Negative answers are done by putting a
negative symbol (-) to the number (Example: "-8000") Round off answers to the nearest whole number.

FULL CREDIT of the score is given only upon attaching in the google classroom images (converted to
pdf and create only one file LABEL it in this format: "Family Name-Class code-M1B" example: BARRY-
1278-M1B) of your solutions presented in good form written in any clean WORKSHEET. DOUBLE RULE
and ENCIRCLE final answers in your worksheet.

Points distribution: 1 point for the answer in the google form; 4 points for the solution as to be seen in
the submitted attachment.

1. What is the correct balance of Accounts payable? *

5 points

Your answer
2. What is the correct balance of the accrued salaries expense for the compensated
absences as of December 31, 2020? *
5 points

Your answer
3. What is the correct balance of the warranties liability? *
5 points

Your answer
4. How much is the correct additional accruals to be included in the company's total
current liabilities? *
5 points

Your answer
5. Give one compounded ADJUSTING ENTRY to adjust the recording of bond
retirement based on your audit. ( The amount you are to place on the space below
is the total of your DEBITS) *
5 points

Your answer

6. Based on your audit, what is the correct amount of estimated liability that should
be presented in the statement of financial position at year end? *
5 points

Your answer

7. Based on your audit, how much should the carrying value of the bond be adjusted
to reflect its correct balance at December 31, 2021? (If the adjustment is a
decrease, put a negative (-) sign before the numerical answer; if the adjustment is
an increase, leave the numerical figure as positive) *
5 points

Your answer
End of Midterm Quiz 1 😊😊😊
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