CPA Auditing and Attestation (AUD) : Expenditure Cycle

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Example Questions

Example Question #4 : Cash Cycle, Revenue Cycle, And Expenditure Cycle

Proper segregation of duties requires that

Possible Answers:

The receiving clerk signs the purchase order

Bank reconciliations are not done by those in charge of disbursements

Purchase requests are generated by the purchasing agent

The purchasing agent does not prepare purchase orders

Correct answer:

Bank reconciliations are not done by those in charge of disbursements

Explanation:

Proper segregation of duties requires that bank reconciliations are prepared by those employees not associated with disbursing funds.

Example Question #5 : Cash Cycle, Revenue Cycle, And Expenditure Cycle

Physical control over those in charge of disbursement would be:

Possible Answers:

Proper authorization by a supervisor

Employees in charge of cash disbursements are bonded

Bank reconciliations are performed timely

Proper review of timecards are established

Correct answer:

Employees in charge of cash disbursements are bonded

Explanation:

Physical control is not associated with procedures.  The use methods to protect assets such as physical barriers and mitigating activities such as insurance.  The other examples are procedural internal control methods.

Example Question #6 : Cash Cycle, Revenue Cycle, And Expenditure Cycle

At the end of each month, the senior accountant compares a vendor statement to the accounts payable. This is an example of a

Possible Answers:

Authorization 

segregation of duty

review procedure

Physical control

Correct answer:

review procedure

Explanation:

Comparing independent documents with company records is a form of the review procedure. It doesn’t require authorization or physical control.

Example Question #1 : Cash Cycle, Revenue Cycle, And Expenditure Cycle

In auditing A/P, an auditor's procedures most likely would focus primarily on management's assertion of:

Possible Answers:

Existence

Valuation and allocation

Understandability and classification

Completeness

Correct answer:

Completeness

Explanation:

When testing liabilities, an auditor generally is concerned about understatement. Therefore, in auditing A/P, an auditor's procedures most likely would focus primarily on management's assertion of completeness.

Example Question #11 : Cash Cycle, Revenue Cycle, And Expenditure Cycle

The authority to accept incoming goods in receiving should be based on a(n):

Possible Answers:

Bill of lading

Vendor invoice

Materials requisition

Approved purchase order

Correct answer:

Approved purchase order

Explanation:

The authority to accept incoming goods in receiving should be based upon an approved purchase order.

Example Question #1 : Expenditure Cycle

Of the following, which is not a purchase transaction that should be segregated in the expenditure cycle?

Possible Answers:

Receipts of goods or services

Cash receipts

Purchase requisition

Purchase orders

Correct answer:

Cash receipts

Explanation:

Cash receipts would be involved in the revenue cycle so it could not be included in the expenditure cycle.

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