Day 24 CH 14 Accounts Payable and Other Liabilities.ppt - ACCY 415 \u2013 Auditing Stds Practice Auditing Accounts Payable Other Liabilities 1

Day 24 CH 14 Accounts Payable and Other Liabilities.ppt -...

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1 ACCY 415 – Auditing Stds. & Practice Auditing Accounts Payable & Other Liabilities
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Announcements Review of the Souper Bowl case assignment and Mid-term Exam #2 is on-going Will have grades after the Fall Break Will also discuss an updated grade curve after break as well Complete the two Souper Bowl related items due today and Tuesday ( see November 12 email ) Watch Souper Bowl video of another team and comment on it Submit evaluation of your teammates
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Trading Styles Case Assignment Case assignment is posted to Compass – Due December 9 at 11:59pm Case involves assessing whether or not to include a going concern emphasis of a matter paragraph in the auditors’ report Use the Professional Judgment Framework in completing the assignment Remember to consider & evaluate alternatives (as discussed in the Framework) There are 3 parts to the case: An Excel-based analytical procedures exercise A memo documenting your conclusion on whether or not to include a going concern paragraph Drafting an audit report Answer case requirements per Compass assignment (not what the case says) 3
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Learning Objectives Understand the nature of accounts payable and other liabilities Identify the fundamental controls around A/P Discuss auditor objectives related to A/P Assess the risks of material misstatement related to A/P Review the types of procedures the auditor can perform related to A/P Discuss types of accrued liabilities Discuss contingent liabilities with a focus on legal liabilities
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Liability Recognition FASB: Statement of FAC #5 FASB: Statement of FAC #5 Probable future sacrifice of future benefits arising from present obligations To transfer assets or provide services to others in the future as result of past transactions
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A/P and Accrued Liabilities Accrued Liabilities - Accumulate over time and must be estimated and recorded when f/s prepared. Accrued Liabilities - Accumulate over time and must be estimated and recorded when f/s prepared. Transaction-based Examples: Accrued salaries, accrued utilities, warranty liabilities, etc. Time-based Examples: Interest payable, rent payable, etc. Accounts Payable (A/P) – Short term obligations arising from purchases of goods and services in the ordinary course of business. Accounts Payable (A/P) – Short term obligations arising from purchases of goods and services in the ordinary course of business.
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Primary Concern Possibility of understatement or omission of liabilities Exaggerates the financial strength of company Conceals fraud as effectively as overstatement of assets Accompanied by understatement of expenses and overstatement of net income
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Auditing Objectives 1.Existence – Substantiate the existence of A/P, the client’s obligation to pay the liability and the occurrence of a purchase transaction.
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