1. Most of Judge Lifland’s criticism of E&Y focused on the firm’s audit procedures for CBI’s accounts payable. Generally, what is the primary audit objective for accounts payable? Do you believe that E&Y’s two principal audit test for CBI’s accounts payable would have accomplished that objective if those tests had been properly applied? Why or Why not?

The audit objective for accounts payable are detail tie-in, existence, completeness, accuracy, and cut-off. Completeness is management assertions; auditors used this for material accuracy of a client’s accounts payable. The client’s financial controls for accounts payable are not comprehensive like the controls for accounts receivable. With a company keeping sufficient records to make sure that vendors are not overcharging them. Yes, because E&Y examine the books of CBI. The two principal audit test that E&Y used was one that they got evidence of the book on CBI to look over the reconciliations to the accounts payable balances for the vendors, and to check the five largest vendors to examine the vendor statements for the month of April 30, 1992. Another was starting with the date on April 30, 1992 through the end of the audit was to perform a search for unrecorded liabilities. This provides evidence to support the completeness assertions.

2. Do you believe that the E&Y auditors should have used confirmations in auditing CBI’s year-end accounts payable? Defend your answer. Briefly explain the differing audit objectives related to accounts receivable and accounts payable confirmation procedures and the key differences in how these procedures are applied.

Yes because confirmation is used as step to be performed in searching for unrecorded liabilities. It is used to gather evidence from the third parties. Also it is the generally accepted auditing standard Such as accounts receivable it confirms