When assets are being verified auditors focus much of their attention on making

When assets are being verified auditors focus much of

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17) When assets are being verified, auditors focus much of their attention on making sure that theaccounts are not overstated. Alternatively, auditors focus their efforts on understatement when auditingliabilities. What is the primary reason for this difference in focus? A) Auditors' legal liability B) GAAP C) GAAS requirements D) All of the above Answer: A Terms: Basis for testing of asset accounts for overstatement and testing of liabilities for understatement Diff: Challenging Objective: LO 18 - 3 and LO 18 - 6 AACSB: Reflective thinking skills 18) Auditors examine supporting documentation for cash disbursements subsequent to the balance sheetdate in order to determine whether the cash disbursement was for a current period liability.Describe at least two audit procedures the auditor would perform to provide evidence that the cashdisbursement was made for a current period liability. 1. Trace vendor invoice to accounts payable subsidiary ledger and to the trial balance 2. Trace receiving report to vendor invoice and to accounts payable subsidiary ledger 3. Examine vendor invoices for inclusion in the proper period 4. Examine cash disbursements for several weeks after the company's year end Terms: Audit procedures for cash disbursements Diff: Challenging Objective: LO 18 - 6 AACSB: Reflective thinking skills 19) Describe the audit procedures typically used to test for out-of-period liabilities (also referred to as thesearch for unrecorded accounts payable). 20) The balance - related audit objective realizable value is not applicable when auditing Accounts payable. A) True B) False Answer: A Terms: Balance - related audit objective of realizable value Diff: Moderate Objective: LO 18 - 6 AACSB: Reflective thinking skills 21) When auditing Accounts payable, the auditor is more concerned about the possibility of
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understatements than overstatements. A) True B) False Answer: A Terms: Auditing accounts payable, auditor concerned with understatement Diff: Moderate Objective: LO 18 - 6 AACSB: Reflective thinking skills 22) To test for overstatement cutoff amounts when auditing Accounts payable, the auditor should trace receiving reports issued before year - end to related vendors' invoices to make sure they are not recorded as Accounts payable.
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