4) The auditors may decide to confirm accounts payable on an audit engagement. a. Describe two...
4) The auditors may decide to confirm accounts payable on an audit engagement.
a. Describe two reasons why the confirmation of accounts payable is not a presumptively mandatory auditing procedure.
b. Describe the audit circumstances in which the auditors are likely to decide to confirm accounts payable.
c. Describe the types of accounts payable the auditors are likely to select for confirmation.
Homework Answers
a. 1) The auditor’s primary objective with respect to accounts payable is establishing completeness, and confirmation is primarily a test of existence. 2) There is a large amount of reliable evidence in the client’s possession supporting the amount of accounts payable, such as vendors’ statements.
b. The auditors are likely to decide to confirm accounts payable when the extent of the evidence available in the client’s possession is not sufficient.
c. The auditors select accounts that are more likely to be in error, such as accounts with a high degree of activity. Accounts with zero balances may also be selected.
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