Exam 14: Accounts Payable and Other Liabilities

Assume that the auditors are concerned about disbursement transactions that have been recorded for improper amounts. Which procedure(s) would possibly identify these transactions? Item Trace fom source documents to journals Vouch from joumal to source documents A. No No B. No Yes C. Yes No D. Yes Yes

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable?

When an auditor finds a debit to accounts payable, which of the following accounts is most likely to be credited?

Which statement is correct with respect to accounts payable confirmations?

Auditors generally consider the evidence regarding accounts payable in the client's possession as more reliable than that for accounts receivable.

Accounts payable generally present the auditors with difficult valuation problems.

The confirmation of existing accounts payable does not prove the completeness of recorded accounts payable.

Overstatement of financial results can involve failure to record a transaction.

A major concern of the auditors is obtaining evidence about the completeness of recorded accounts payable. a. Describe the reason that the auditors are concerned with the completeness of accounts payable. b. Describe three ways in which the auditors establish the completeness of accounts payable.

The primary objective of the auditors' examination of accounts payable is to determine whether payments are made on a timely basis.

Based on the company and its environment, including its internal control, the auditors assessed the risk of material misstatements to the financial statements, whether due to error or fraud, and designed the nature, timing, and extent of further audit procedures to be performed. As a result of conducting the above risk assessment procedures, the audit plan for year 2 includes the following changes from the audit plan for year 1. The company has a calendar year-end and operates only on weekdays. In conducting the audit procedures for the search for unrecorded liabilities, the materiality/scope for this area was assessed by the auditors at $6,000. Adjustments are only recorded for items equal to, or exceeding materiality. The last day of fieldwork is estimated to be February 1, year 3. For the items reflected in the following check register, which are not recorded in the accounts payable subsidiary ledger at December 31, year 2, determine if each potential liability is recorded in the proper accounting period and also determine the amount that should be journalized, if any. If no action is required, you must enter $0. For each of the check numbers in the table below, double-click on each of the associated shaded cells and select from the lists provided if any action or adjustment is required, as well as the dollar value of the required adjustment. Each selection may be used once, more than once, or not at all. Check Register Check\# Adjustment Needed? Amount 1333 1334 1335 1336 1337 1338 1339 1340 1341 1342 Selection list for adjustment needed No\nobreakspaceaction\nobreakspacerequired Adjustment Selection list for amount \ 0 \ 4,413 \ 7,650 \ 12,750 \ 2,002 \ 6,000 \ 9,900 \ 25,500 \ 2,970 \ 6,500 \ 11,000 \ 41,188 \ 3,500 \ 6,800 \ 12,230 \ 45,601

It is more important to maintain effective internal control over accounts payable as it is to maintain effective internal control over accounts receivable.

The auditors may decide to confirm accounts payable on an audit engagement. a. Describe two reasons why the confirmation of accounts payable is not a presumptively mandatory auditing procedure. b. Describe the audit circumstances in which the auditors are likely to decide to confirm accounts payable. c. Describe the types of accounts payable the auditors are likely to select for confirmation.

With properly designed internal control, the same employee should not be permitted to:

Which of the following manipulations would understate accounts payable on the financial statements?

Auditors should be aware that a voucher system may result in which of the following at year-end:

Which of the following procedures is least likely to be completed before the balance sheet date?

Auditors may choose not to confirm accounts payable because:

Information regarding the proper cutoff of accounts payable is generally obtained in conjunction with the audit of inventories.

A likely analytical procedure to test the accuracy of purchase discounts would be to compute the ratio of cash discounts earned to: