Chapter 11 – Auditing the Purchasing Process
68. Which of the following describes a temporary difference?
69. Which of the following describes a permanent difference?
Chapter 11 – Auditing the Purchasing Process
70. Describe three categories of expenses outlined in FASB Concept Statement No. 5.
Chapter 11 – Auditing the Purchasing Process
71. Listed below are six assertions regarding the financial presentations made in the purchasing
process. For each, give an example of how an auditor could use one of the typical documents in
the purchasing process to test the assertion.
Occurrence
Completeness
Authorization
Accuracy
Cutoff
Classification
Chapter 11 – Auditing the Purchasing Process
72. Identify the primary functions in the purchases cycle and describe each function.
Functions in the purchasing process include:
Chapter 11 – Auditing the Purchasing Process
73. Listed below are the major functions of the purchasing process.
1) Purchasing function.
2) General ledger function.
3) Invoice-processing function.
4) Disbursement function.
5) Accounts payable function.
6) Requisition and receiving function.
Chapter 11 – Auditing the Purchasing Process
74. The key inherent risk factors an auditor must consider when auditing the purchasing process
are industry factors. Which two are most important and why?
Chapter 11 – Auditing the Purchasing Process
11–38
75. Identify the types of substantive procedures used by the auditor to test accounts payable and
accrued expenses. Provide an example of how the auditor may use each substantive procedure.
Identify if any of the substantive procedures can be used as a test of controls or a dual-purpose
test.
Chapter 11 – Auditing the Purchasing Process
76. Identify whether the following tests are substantive analytical procedures, tests of details of
transactions or tests of details of account balances:
Chapter 11 – Auditing the Purchasing Process
77. There are several important disclosure items to consider when auditing the purchasing
process. Discuss what they are and why they are important.
Chapter 11 – Auditing the Purchasing Process
78. Which type of confirmation is used more frequently by auditors―accounts receivable
confirmations or accounts payable confirmations? Why?
79. The auditor can often obtain sufficient appropriate evidence in the audit of a tax provision
without the use of a specialist. However, several situations may indicate a need for the auditor
to involve a tax specialist. Identify three of these situations.
Chapter 11 – Auditing the Purchasing Process
80. Match the test of controls described below to the appropriate assertion it is used to test.
1. Compare the dates on the receiving reports with the dates of
4. Test a sample of vouchers for the presence of authorized
5. Trace a sample of receiving reports to their respective
6. Review the cash disbursements journal for reasonableness