An Entity's Internal Control Requires That for Every Check Request

question 61

Multiple Choice

An entity's internal control requires that for every check request there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all:

• A)purchase orders.
• B)canceled checks.
• C)receiving reports.
• D)approved vouchers.

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Definitions:

Contract

An enforceable pact by law that involves two or more individuals or groups.

Legal Capacity

The capability recognized by law for a person to act in a particular role or enter into a contract, often related to age and mental soundness.

Express Authority

The power granted to an agent or representative explicitly stated by the principal in a written or oral form.

Actual Authority

The express and implied powers given by a principal to an agent for carrying out specific transactions.