To Ensure the Completeness of Purchases Made During the Year

question 9

Multiple Choice

To ensure the completeness of purchases made during the year, the auditor should:

• A)select a sample of transactions from the accounts payable master file and vouch to related invoices.
• B)select a sample of invoices received before the year-end and ensure that they are appropriately recorded in the accounts payable master file.
• C)perform a bank reconciliation.
• D)select a sample of inventory from the inventory records and check that the inventory is held in stock.

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Definitions:

Estimated Activity

An approximation of the level of operational or production activity expected in a certain period, typically used for budgeting and costing.

Unused Capacity

The portion of a company's production or operational potential that is not currently being utilized.

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead costs to products based on a particular activity base, such as machine-hours or labor-hours.

Automated Lathe

A CNC (Computer Numerical Control) machine tool used to shape metal, wood, or other materials by rotating it rapidly along its axis while pressing a fixed cutting or abrading tool against it.