Peprah Company Pays Its Accounts Payable 45 Days After Receipt

question 76

Multiple Choice

Peprah Company pays its accounts payable 45 days after receipt of the goods or services. In this case which audit procedure should be used to detect any unrecorded liabilities?

• A) examine cash disbursements for several weeks after the balance sheet date
• B) reconcile purchase orders to requisition orders
• C) reconcile purchase orders to receiving reports
• D) reconcile purchase orders to vendor invoices

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Definitions:

Sunk Costs

Sunk costs are expenses that have already been incurred and cannot be recovered.

Opportunity Costs

The forfeiture of possible benefits from different options when selecting one option over the others.

Terminal Cash Flow

The net cash flow received or paid at the end of a project's life, including salvage value and net working capital recovery.

Straight Line

A method of calculating depreciation or amortization by spreading the cost evenly over the useful life of an asset.