As part of the June 30,2002 audit of accounts payable of Milner Products Ltd., the auditor sent 22 confirmations of accounts payable to vendors in the form of requests for statements. Four of the statements were not returned by the vendors, and five vendors reported balances different from the amounts recorded on Milner's vendor transaction file. The auditor made duplicate copies of the five vendors' state¬ ments to maintain control of the independent information and turned the originals over to the client's accounts payable clerk to reconcile the differences. Two days later, the clerk returned the five statements to the auditor with the information on the working papers as follows:

Required

a. Evaluate the acceptability of having the client perform the reconciliations, assuming the auditor intends to per¬ form adequate additional tests.

b. Describe the additional tests that should be performed for each of the five statements that included differences.

c. What audit procedures should be performed for the nonresponses to the confirmation requests?

Transcribed Image Text:

Statement 1 Balance per vendor's statement Payment by Milner June 30, 2002 Balante per transaction file Statement 2 Balance per vendor's statement Invoices not received by Milner Payment by Milner June 15, 2002 Balance per transaction file $ 6,618.01 (4.601.01) $ 2.017.00 $9,618.93 (2,733.18) (1,000.00) $5,885,75 $26,251.80 $20,516.11 Difference cannot be located due to the Statement 3 Balance per vendor's statement Balance per transaction file vendor's failure to provide details of its account balance Statement 4 Balance per vendor's statement $5.735.69 $6,170.15 Credit memo issued by vendor on July 15, 2002 (2.360.15) Balance per transaction file Statement 5 Balance per vendor's statement Payment by Milner July 3, 2002 Unlocated difference not followed up due to minor amount Balance per transaction file $ 3.810.00 $8,619.21 (3,000.00) 215.06 $5,834,27