Page 69 - eBook Audit Of Financial Statement Components

TUTORIAL CHAPTER 6

1. Identify and explain FOUR assertions relevant to
accounts payable at the year-end date.

(i) Rights and obligations – Accounts payable represent amounts

due by the company, that is, there is an obligation, taking into
account:

– the actual performance of services for the company; or

– transfer of title in goods transferred to the company; and

– cash payments or other genuine debit entry.

(ii) Valuation and allocation – Accounts payable have been
correctly valued considering original transaction amounts and
such matters as trade discounts and local sales tax.

(iii) Existence – The original transaction amounts are valid and the
liability exists.

(iv) Completeness – All accounts payable are recorded in the
accounting records.

2. Describe substantive procedures the auditor should

perform to obtain sufficient and appropriate audit
evidence in relation to the COMPLETENESS of trade
payables and accruals.

– Compare the total trade payables and list of accruals against
prior year and investigate any significant differences.