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Macbeth

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Submitted By kylekomar
Words 282
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Project `8 Name:_Kyle Komarnicki__
Due date: 4/14/16

Debra, CPA, is engaged in the audit of Company for the year ended December 31. Debra obtained an understanding of internal control relating to the purchasing, receiving, trade accounts payable, and cash disbursement cycles and has decided not to proceed with tests of controls. Based upon analytical procedures, Debra believes that the trade accounts payable on the balance sheet as of December 31 may be understated.
Debra requested and obtained a client-prepared trade accounts payable schedule listing the total amount owed to each vendor.

What additional substantive audit procedures should Debra apply in examining the trade accounts payable?

The audit objectives that should be addressed when auditing assertions are verifying the valuation of liabilities as often there is a specific risk that payables arn’t completely recorded in the accounts. There is doubt about the entity’s ability to continue trading.
Addressing the completeness objective should be approached by assessing whether the list of creditor. Assesing whether each creditor balance recorded is complete in respect of all transactions up to the end of the year.
An effective procedure is reconciling a sample of accounts payables with suppliers’ statements. Many suppliers provide monthly statements to their customers and these may therefore be available for examination. Statements are documentary evidence originating from outside the entity. The use of direct confirmation using a payables circularisation is also an option to confirm completeness and valuation..
Analytical procedures can also be very relevant for the objective of verifying completeness and valuation, The auditor may therefore compare the list of balances with those outstanding at the previous year end and also consider the main suppliers during the year.

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