An Entity's Procurement System Ends with the Assumption of a Liability

question 7

Multiple Choice

An entity's procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?

• A)Accounts payable are not materially understated.
• B)Authority to incur liabilities is restricted to one designated person.
• C)Acquisition of materials is not made from one vendor or one group of vendors.
• D)Commitments for all purchases are made only after established competitive bidding procedures are followed.

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Definitions:

Quasi-contract

An obligation imposed by law to prevent unjust enrichment, even in the absence of a formal contract.

Economic Harm

Refers to financial loss or damage suffered by a person or entity, often as a result of wrongful actions of another.

Implied-in-fact Condition

A legal term for a provision that, although not expressly stated, is presumed to be a part of an agreement based on the actions or circumstances of the parties.

Transaction

The act of conducting business or completing an exchange of goods, services, or funds between two or more parties.