3710300552 - CHAPTER 14 Accounts Payable and Other...

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CHAPTER 14 Accounts Payable and Other Liabilities Review Questions 14-5 The auditors are concerned about possible understatement of liabilities, whereas their concern in the audit of assets is the possibility of overstatements . Also, in the audit of liabilities, the auditors seldom have problems with respect to valuation; while much of the work in the audit of assets deals with the propriety of asset valuations. 14-15 By vouching entries in selected creditors' accounts back through the journals to original documents, the auditors acquire a firsthand knowledge of internal control in use. They may find that recording practices and internal control procedures differ significantly from those described by officials or specified in company manuals. Multiple Choice Questions 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)
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3710300552 - CHAPTER 14 Accounts Payable and Other...

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