8.44 Search for Unrecorded Liabilities. C. Marsh, CPA, is the independent audito

Question

8.44 Search for Unrecorded Liabilities. C. Marsh, CPA, is the independent auditor for Compufast Corporation (Compufast), which sells personal computers, peripheral equipment (printers, data storage), and a wide variety of programs for business and games. From experience on Compufast's previous audits, Marsh knew that the company's accountants were very much concerned with timely recording of revenues and receivables and somewhat less concerned with keeping up-to-date records of accounts payable and other liabilities. Marsh knew that the control environment was strong in the asset area and weak in the liability area.

Required: List substantive procedures that Marsh and the audit staff can perform to obtain reasonable assurance that Compufast's unrecorded liabilities are discovered and adjusted in the financial statements currently under audit.

Please cite it using sources apa style

Explanation / Answer

Substantive Procedure for audit of Unrecorded liabilities

1. Look through unpaid invoices - look at the description of the services provided, and invoices date, Delivery Order date

2. Look at payment voucher after year end to find out the expenses that should be recorded in prior period, if any

3. Sent confirmation to suppliers to confirm the amount outstanding as at year end

4. Look at the expenses account, for potential indication of services which should be accrued in current year Profit & Loss

5. Perform cut off test.

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