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14-35 Simulation The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the various accounts and documentation requirements. Parts (a)
14-35
Simulation
The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the various accounts and documentation requirements. Parts (a) through (d) of this question relate to objectives, while part (e) addresses documentation. |
The auditors have established the objectives listed below as a part of the audit. For each objective, select a substantive procedure (from the list of substantive procedures) that will help achieve that objective. Each of the procedures may be used once, more than once, or not at all. |
Audit Objectives |
a. Determine the existence of year-end recorded accounts payable and that the client has obligations to pay these liabilities. |
b. Establish the completeness of recorded accounts payable . |
c. Determine that the presentation and disclosure of accounts payable are appropriate. |
d. Determine that the valuation of warranty loss reserves is measured in ccordance with GAAP |
Substantive Procedures |
I. Obtain a trial balance of payables and reconcile with the accounts payable subsidiary ledger. |
2. Vouch sales from throughout the year. |
3. Vouch purchases recorded after year-end. |
4. Vouch sales recorded shortly before year-end. |
5. Vouch major warranty expenses paid during 20X8. |
6. Inquire of management concerning the ellistence of related party transactions. |
7. Test the computations made by the client to set up the accrual. |
8. Test the reasonableness of general and administrative labor rates. |
9. Confirm outstanding year-end balances of payables. |
10. Confirm warranty expenses payable as of year-end. |
Note: Part (e) is possible to work in a meaningful way only if you have the professional standards available preferably in electronic form. |
e. The auditors believe that it will be necessary to depan from a requirement relating to accounts payable that is considered presumptively mandatory. Provide the AU-C section and paragraph(s) that address documentation requiremen ts i n this situation. You need only present the requirement, not the application and other explanatory material. |
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