Assertions - Accounts payable

Question 1

Completeness - Accounts Payable & Purchases

Answer 1

Reconcile A/P ledger with G/L control account.

A/P turnover ratio.

Examine vendor statements for amounts not reported as purchases.

Trace sample of purchase orders and related receiving reports to purchases / cash disbursements journal.

Trace subsequent payments to recorded payables.

Test receiving reports to determine if all merchandise received is recorded.

Auditor verifies A/P not materially understated.

Most likely to discover unrecorded liabilities during review of unpaid bills.

Question 2

Accuracy - Accounts Payable & Purchases

Answer 2

Obtain management representation letter.

Compare G/L balances with financial statements.

Question 3

Valuation/Allocation - Accounts Payable & Purchases

Answer 3

Vouch selected entries in A/P subsidiary ledger to purchase orders and receiving reports.

Vouch A/P to supporting documentation.

Question 4

Existence - Accounts Payable & Purchases

Answer 4

Vouch selected entries in A/P subsidiary ledger to purchase orders and receiving reports.

Question 5

Cutoff - Accounts Payable & Purchases

Answer 5

Purchases cut off test.

Test recording of cash disbursements and associated reduction in A/P.

Inspect last check written and trace to A/P subsidiary ledger will provide evidence of proper recording.

Question 6

Rights/Obligations - Accounts Payable & Purchases

Answer 6

Obtain management representation letter.

Question 7

Occurrence - Accounts Payable & Purchases

Answer 7

Vouch payables to documentation.

Question 8

Classification / Understandability - Accounts Payable & Purchases

Answer 8

Inspect financial statements.

Evaluate note disclosure.

Review renewal of note payable shortly after balance sheet date.