12 -- Evidence—The Purchases-Payables-Inventory Cycle

12 -- Evidence—The Purchases-Payables-Inventory Cycle

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CPA AUDITING - STUDY UNIT 12 Evidence The Purchases-Payables-Inventory Cycle: Core Concepts A. Substantive Testing of Accounts Payable and Purchases 1. The Completeness assertion is tested by reconciling the accounts payable ledger with general ledger control account; calculating and comparing ratios for the current period with those of prior periods and industry norms; tracing subsequent payments to recorded payables; and searching the suspense files for unmatched documents. 2. The Accuracy assertion is tested by obtaining a management representation letter with assertions related to purchases and payables. 3. The Cutoff assertion is tested by evaluating receipts for goods shipped FOB shipping point for several days after year-end to determine whether the goods should be recorded in the current year; by tracing receiving documents for goods shipped FOB destination to the accounting records for several days prior to and after year-end to determine proper recognition of inventory and accounts payable; and by inspecting the last check written and
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This note was uploaded on 08/29/2010 for the course CBEAM AUD taught by Professor Gleim during the Spring '10 term at De La Salle Lipa.

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