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.}}