Question 3. Below are examples of audit procedures related to accounts payable.

Question

Question 3. Below are examples of audit procedures related to accounts payable. Please identify the type of audit test each procedure represents and the corresponding audit objective. Please also clarify the account or the transaction related to the audit objective (for example, accuracy of the acquisition transactions, classification of accounts payable, etc.). Please provide only one type of audit test and one type of audit objective for each question below. Unrelated answers will result in a deduction of point (6 points)

1. Account for a sequence of purchase orders issued in selected months to ensure their continuity.

2. Select receiving reports issued by the warehouse in the second week of each month and check for proper approval of the warehouse manager.

3. Select receiving reports issued by the warehouse in the last week of December 2015 and compare the dates of receiving reports with the dates of the acquisition journal to ensure. proper recording.

Explanation / Answer

The primary focus while auditing accounts payable is to ensure that it is neither underor over stated.The different types of audits that are performed on accounts payable include:

1. Audit for completeness: These are verified by reconciliations, cutoff tests and audit trails.

2.Audit for validity: These are verified by transaction confirmation requests sent to vendors and suppliers or sometimes to business partners..

3. Audit for compliance: Random entries in end of year financial statements, balance sheet income statement, cash flow statement are traced back and verified.

4. Audit for disclosure: The management representation letter that attests the financial statement for the year is verified against the books for full disclosure.

Now look at the examples stated above.

1. is audit fo validity , 2 is audit for completeness and 3 is audit for compliance.

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