Page 34 - eBook Audit Of Financial Statement Components

ii. Confirmation of balances

A written confirmation is sent to individual suppliers to

confirm the amount outstanding and payable to the

suppliers. However, the procedures are less frequently

performed because suppliers’ invoices and statements
are available to substantiate the balances.

In addition, the confirmation does not provide assurance

to uncover unrecorded liabilities, thus it does not

provide evidence or completeness. However, the
confirmation provides evidence as to the existence,

obligations and valuation of the account payables.

iii. Investigating for unrecorded liabilities

There are three procedures used to investigate

unrecorded liabilities:

• To examine subsequent period's purchase and payment
transactions.

• To perform analytical procedures on expenses to

determine any unusual reduction in expenses, as it

signifies the presence of unrecorded liabilities.

• To examine any contractual agreements or
commitments that raise the existence of liabilities not

yet provided for in the accounts, such as progress

payments on long term-contracts.

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