With Respect to a Small Company's System of Purchasing Supplies

question 15

Multiple Choice

With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

• A) Requested and approved by authorized individuals who have no incompatible duties.
• B) Received, counted, and checked to quantities and amounts on purchase orders and invoices.
• C) Properly recorded as assets and systematically amortized over the estimated useful life of the supplies.
• D) Used in the course of business and solely for business purposes during the year under audit.

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Definitions:

Adjusting Entry

Adjusting entry refers to a journal entry made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred, ensuring the accounts reflect these amounts accurately.

Supplies

Materials and items used in the daily operations of a business that often have a short life span.

Salaries Payable

A liability account that represents the amount owed to employees for work done but not yet paid.

Fiscal Period

A specific time period used for accounting purposes and preparing financial statements, usually twelve months.