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Unformatted text preview: 14-28The monthly statements of the six creditors should be compared with the client's voucher register or accounts payable ledger, and any exceptions should be carefully noted. These exceptions should be investigated by reference to invoice, debit or credit memoranda, receiving records, correspondence files, or other supporting data.The auditors should also compare the cash payments to these creditors during the subsequent period with the items shown by the accounting records as liabilities at the balance sheet date. This comparison may show that some of the payments in the subsequent period are for liabilities which existed but were unrecorded at the balance sheet date.14-34 (a)(2)Because a significant portion of the search for unrecorded liabilities deals with transactions recorded after year-end, it is least likely to be completed before the balance sheet date.(b)(1)The auditors do not have as an objective the determination of whether accounts payable are past due.(c)(4)Examining selected cash disbursements in the period subsequent to the year-end is the best audit procedure for determining the existence of unrecorded liabilities. All liabilities must eventually be paid, and will therefore be reflected in the accounts when paid if not when incurred. By close study of payments made subsequent to the balance sheet date, the auditors may find items that should have appeared in the balance sheet.(d)(4)Auditors will usually find in the client's possession externally created evidence such as vendors' invoices and statements that substantiate the accounts payable. No such external evidence is on hand to support accounts receivable.(e)(2)The most efficient way in which the duplicate recording of a purchase transaction may be detected is by reconciling the related payable accounts with vendors' statements.(f)(1)Each vendor's invoice should be compared with the receiving report (to determine that it was received) and the purchase order (to determine that it was ordered). Answer (2) is incomplete because of the omission of the purchase order. Answers (3) and (4) are incorrect because the receiving report, prepared by the company itself, provides better evidence of what has been received than the vendor's packing slip.(g)(2)Accounts payable confirmations are ordinarily sent to suppliers with whom the client has done the most business. This is because the largest potential for an understatement may exist due to the client having established high levels of credit. A sample of other accounts will ordinarily also be selected.(h)(1)The best procedure to determine valuation of payables is confirmation. Examination of cash disbursements in the subsequent period is more directed towards completeness of payables. Analytical procedures may be useful but would not be as effective as confirmation with respect to the valuation assertion....
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- Spring '10