ACCY 131 PI-4a Solutions

ACCY 131 PI-4a Solutions - IndividualProblemSet#4(PI4)...

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Individual Problem Set #4 (PI 4) Instructions: Please respond to the following (three) problems. This individual problem set must be completed in your own words , however you are encouraged to discuss these problems with your classmates to get varying perspectives and to ensure you are on the right track. Please be sure your responses are appropriately formatted and contain no obvious/glaring spelling and grammatical errors. Please attach your completed assignment in the submission dropbox by the beginning of class Wednesday December 8, 2010. 1. (3 points – Ch 14) A major concern of the auditors is obtaining evidence about the completeness of recorded accounts payable. a. Describe the reason that the auditors are concerns with the completeness of accounts payable. b. Name and describe two procedures the auditors may perform to establish completeness of accounts payable. Ans: a. Because completeness relates to an understatement of the corresponding account and understated liabilities (such as accounts payable) would lead to overstated earnings. Understatements in accounts payable due to either error and fraud are important inherent risks that must be addressed in an audit. b. An auditor can (1) confirm accounts payable (A/P) directly with third party vendors or (2) perform a search for unrecorded liabilities. Confirmation of A/P entails sending a direct mailing to third party vendors and having them reply with a confirmation of all outstanding payables due from the client. To address the completeness assertion, it is important that auditors consider sending confirmations to vendors that have been owed payments in the past even if no corresponding A/P is booked at year end. Doing so, helps to confirm that all A/P balances that are owed have been appropriate recorded. In
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ACCY 131 PI-4a Solutions - IndividualProblemSet#4(PI4)...

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