Question

Audit procedure

A. Vouch accounts payable credits to supporting vouchers, vendor invoices, receiving reports, and purchase orders and other supporting information.
B. Obtain an understanding of the business and industry and determine the significance of purchases and accounts payable to the entity.
C. Inquire of management about existence of undisclosed commitments or contingent liabilities.
D. Trace a sample of cash receipts transactions from cash receipts journal to the general ledger.
E. Vouch debit memos to underlying shipping reports and vendor's authorizations.
F. Obtain listing of accounts payable at balance sheet date and determine that it accurately represents the underlying accounting records by footing the listing and determining agreement with (1) the total of the unpaid voucher file, subsidiary ledger, or accounts payable master file, and (2) the general ledger control account balance.
G. Observe the number of the last receiving report issued on the last business day of the audit period and trace sample of lower and higher numbered receiving reports to related purchase documents and determine that transactions were recorded in the proper period.
H. Trace dates of "paid" checks returned with year-end cut-off bank statements to the dates recorded.
I. Determine that payables are properly identified and classified as to type and expected period of payment.
J. Examine subsequent payments between balance sheet date and end of field work, and when related documentation indicates payment was for obligation in existence at balance sheet date, trace to accounts payable listing.

Determine the audit procedure that best addresses the following risk.

1. Recorded purchases may not represent good received during the year. (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
2. Cash disbursements may not be recorded in the proper time period. (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
3. All purchases (and payables) during the period may not be recorded. (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
4. Accounts payable might be understated due to the recording of invalid purchase returns. (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
5. The auditor may not have complete information about individual accounts payable that make up the general ledger balance. (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)

Answer 1

1. G, By identifying the last date receipts whether entered by the entity or not can easily identifies whether the transactions are regularly posting by the entity and can come to conclusion that the all the purchases are entered

2. H, Verifying payments date with the transaction date will result in knowing whether the transactions are recorded in correct time period or not

3. A, Verifying all the vendor invoices received, payments made, purchase orders other supporting documents to verify whether all the payable entries are posted in the books

4. E, Verify all the debit notes raised along with vendor acceptance of the same and check the same was recorded or not

5. F, Observation of all account payable balance and categorizing them among the general ledger corresponding to the nature/ type of transaction with the vendor